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FT: Wash away management's verbal germs

Wash away management’s verbal germs

By Lucy Kellaway

Published: September 6 2009 20:10 | Last updated: September 6 2009 20:10

Hygiene at work is in. In office toilets, grown-up employees are being told how to wash their hands in the hope of preventing everyone passing swine flu to everyone else. First you wet your hands, the notices say, then you apply soap, then rub them together for 15-40 seconds (different companies require employees to do this for different lengths of time) and finally, you dry them with a paper towel.

But now businesses are being urged to keep metaphorically clean, too. Arthur D Little has devoted much of its current journal to urging companies to be “hygienic” and attend more meticulously to their working capital levels and procurement methods. Good hygiene, it says, is what sorts out winners and losers at this point in the cycle.

I’m not keen on this new metaphor, partly because I’m a grubby Brit. In my book, cleanliness is not next to godliness. It’s next to dreariness. Necessary up to a point, but quite dull, and not something that deserves a place in management literature.

However, on returning to work after a long summer break I find that hygiene is just what we need, after all. With hands that still had traces of Cornwall’s soil under the finger nails, I picked up a proof copy of Top Talent, the hot new business book by Sylvia Ann Hewlett. Hewlett made her name seven years ago with a book saying working life was a complete nightmare for successful women. Now she’s saying that in a recession it’s even worse: successful people of both sexes are getting totally cheesed off.

I had expected the recession to kill off the global epidemic of Waffle Flu. Instead it continues to infect increasing numbers of the business population

This wasn’t terribly cheering to read after a break. Neither was it interesting. The very phrase “top talent” should have been a warning sign that what followed would not be up to much. Top talent as opposed to what? Bottom talent?

As well as calling good employees “top talent”, she uses an impressive number of other synonyms. “High echelon employees”, “high potential talent”, “high octane brainpower” and even “the delta force of the workplace”.

As I studied these terms, I had an epiphany. What is called for is a great clean-up, but what needs to be washed away is not the H1N1 virus from our hands or excess working capital from our balance sheets. It’s these verbal germs that must be flushed down the lavatory with a large glug of bleach poured in afterwards to prevent further infection.

I had expected the recession to kill off the global epidemic of Waffle Flu. Instead it continues to infect increasing numbers of the business population, interfering with the functioning of the brain, and sometimes leaving the patient unable to communicate at all.

Hewlett’s book is riddled with signs of infection. She talks of “ramping up touch points” by which she means “ talk to each other more”. Even more worryingly, she writes, “Talent is a gift that keeps on giving”, by which she means nothing at all.

Everyone who works in a company is still at grave risk of infection from Waffle Flu and tragically, once an individual has the condition, they can no longer recognise it in others. Hewlett starts her book quoting Jeffrey Kindler, the chief executive of Pfizer. “Reaching out to support, sustain and fully engage top talent is central to our strategy”, he says. Poor Kindler is evidently sick with the flu, too. “Reaching out” is an early symptom. A more serious one is sticking a trinity of dreary verbs before the word “talent”.

I have just subjected this quote to cleaning with an antiseptic wipe and there is little true meaning left. All that remains is the statement: we try to look after our good employees. Which is fair enough, but not much of a basis for a book.

Happily, there is an antidote, and it is selling in almost as large quantities to corporations and individuals in the US and the UK as Tamiflu. It is a motivational poster from the start of the second world war. Its message is soothing and uplifting and bracing all at once, and is seen as the thing to help us through recession. KEEP CALM AND CARRY ON, it says.

Non-execs of Me Inc

Hewlett’s book does, however, contain one exciting idea. Each of us, she says, should appoint a personal board of non-executive directors. Though the idea is excellent, it’s not entirely new: in fact, I think she has stolen it from me. I once wrote a column saying that I considered my husband to be my non-executive director, as he issued instructions, ate a hearty board lunch, but was exempt from doing any heavy lifting.

It was Tom Peters who pointed out that we’re all CEOs of Me Inc, but he missed a trick in not seeing that Me Inc needs some decent corporate governance.

The first snag, however, is the composition of the boards. Hewlett imagines we all have armies of “loyal protagonists”, but I can’t say I do. Even my closest friends aren’t necessarily protagonists – friendship being rather a complex thing. And that leaves only husbands and assorted family members, who aren’t exactly independent.

There are other difficulties, too. Does one’s board have to be diverse? And can one sack them if they get on one’s nerves and start interfering over pay? And how many personal boards can one sit on? And do they get to oversee succession planning? A Walker report into personal corporate governance is clearly needed.

lucy.kellaway@ft.com

Read and post comments at www.ft.com/kellaway

Copyright The Financial Times Limited 2009

BusinessWeek: How 3M Forged a Culture of Collaboration

How to Innovate September 2, 2009, 2:19PM EST text size: TT

How 3M Forged a Culture of Collaboration

The Post-it company built and nurtured a system in which employees across divisions are encouraged—even expected—to collaborate

By Jessie Scanlon

By 1999, Sumita Mitra, a corporate scientist in the research lab of 3M ESPE, the giant's dental products division, had been working on new dental materials for more than two decades. She'd helped develop coatings that prevent plaque, and innovative cements that could be set by light. As she'd watched the cosmetic dentistry business emerge in the late 1990s—a market the American Academy of Cosmetic Dentistry estimates at $2.75 billion according to a 2007 survey, its most recent—she saw an opportunity: No existing composite material delivered the strength and natural appearance that dentists needed to create long-lasting, good-looking restorations. Dentists using composites were having to choose between strength and polishability, and Mitra wanted to develop a product that delivered both. To do so, she would have to venture outside the realm of traditional dental materials.

Three years later, 3M ESPE introduced Filtek Supreme Plus, a strong, polishable dental material and the first to include nanoparticles. More than a technological breakthrough, Filtek Supreme Plus is an example of successful collaboration—in this case, between Mitra and a scientist working in one of the company's four corporate labs. The product wouldn't have come to life if the company hadn't created the organizational systems and culture needed to encourage and support collaboration. Taking Filtek as an example, here's a look at how 3M (MMM) has done both.

Established Internal Networking Channels

When Mitra decided she needed to look into nontraditional materials, she turned to 3M's database of technical reports written by the more than 7,000 scientists at the company. Those scientists are spread between a corporate lab devoted to basic research, 40 division labs that essentially form a bridge between that basic science and the market, and 35 international labs. When Mitra searched the database, she found a promising article about nanoparticles written by William Schultz, a scientist in the company's corporate labs right there in St. Paul, Minn., near her own office within 3M ESPE.

For spreading knowledge across the company, the database is invaluable, but the real work of collaboration happens face-to-face, often at events organized by TechForum, an employee-run organization designed to foster communications between scientists in different labs or divisions. Such networking, says Larry Wendling, vice-president of 3M's corporate research labs, "is 3M's secret weapon." Indeed, soon after reading the paper, Mitra ran into Schultz at a TechForum gathering and described her problem. (Three years ago, 3M also created the "R&D Workcenter" networking Web site, which Mitra describes as a "LinkedIn for 3M scientists.")

Schultz was happy to help, giving Mitra a primer in nanoparticles and eventually lending her two of his researchers. "One literally moved into our lab for a few months," she says. Such sharing of resources is almost impossible when different units of a company feel they are competing against each other to deliver better financial results or the next breakthrough technology. But at 3M, employees are expected to collaborate—and are evaluated on their success. So for a basic scientist like Schultz, patents are nice but what his manager really wants to see is his research leading to new products for the business units. "Bill needs a Sumita to take his work, link it with a consumer need, and turn it into something of value," says Wendling.

Such collaborations can also involve the business units. When 3M's automotive aftermarket division asked the corporate research lab to help it develop a better system for mixing and applying the putty used to repair dents, for instance, one lab scientist immediately thought of work he'd seen at a TechForum event: a technology developed by the 3M ESPE's German lab to efficiently mix and apply the material used to make dental impressions. The lab adapted the dental technology for use in body shops. (In cases involving business units, there are more formal processes—one unit might buy a technology from another unit, for instance.)

Collaboration's Dividends

The company launched Filtek Supreme Plus in 2002, and it is now the industry's leading composite for restorative work. "Bringing nanotechnology into dental materials was a great breakthrough," says Andrew Spector, a founder of Gentle Dentistry, a private practice in Haworth, N.J. And 3M wouldn't have made that breakthrough if it didn't recognize collaboration as an essential element of innovation and create the systems to support it.

What can executives learn from 3M's approach to collaboration?

Support networks. Build Web-based social networks that help employees with a problem find those with an answer. Support grassroots networking initiatives such as 3M's TechForum—an employee-run group that organizes speaker events to stimulate thinking and also serves as a kind of mixer, where scientists from different labs or divisions can connect in person.

Build collaboration into your employee evaluation system. Reward employees not just for developing an innovative technology, idea, or process, but for spreading it. No company reaps the benefits of collaboration if their employees or managers are hoarding innovation in order to look good at the next quarterly meeting.

Encourage curiosity. 3M allows employees to spend 15% of their time on projects of their choosing, giving them permission to develop ideas or technologies that may be outside of their regular work focus. Such policies increase the odds of collaboration, as the path of curiosity often leads employees beyond their knowledge base, to a place where they need the advice and insight of others.

Create innovation funds. Group or department managers focused on core-related projects often don't want to spend money exploring or developing innovative ideas. To overcome this common roadblock, companies should create an alternative source—3M calls these Genesis Grants—that employees can go to for funding of innovation projects that don't fit neatly into existing departments.

Don't underestimate the value of physical proximity. When 3M's Post-it Note team wanted to accelerate product development, it had the team's marketing, financial, and other nonmembers move into the same building with the tech folks. If different functions have to be housed in different buildings, pay for a shuttle service that makes it easy for employees in different departments to visit each other.

Jessie Scanlon is the senior writer for Innovation & Design at BusinessWeek, where she covers the intersection of design and business.

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

BusinessWeek: How to Build a Culture of Innovation

How to Innovate August 19, 2009, 1:11PM EST text size: TT

How to Build a Culture of Innovation

India's Tata Group has made innovation part of its DNA, setting up a way for handling new ideas and making creative thinking a performance criterion

By Jessie Scanlon

It's not that there had been no innovation inside Tata Group, the 117-year-old Indian powerhouse responsible for that nation's first steel mill, power plant, and airline, among other achievements. But when India's long protected economy was opened in 1991, Chairman Ratan Tata decided that for his companies to survive and thrive in a global economy he had to make innovation a priority—and build it into the DNA of the Tata group so that every employee at every company might think and act like an innovator.

Today those 15 companies have produced such innovative products as the $2,000 Tata Nano car, and includes firms such as Tata Consultancy Services (TCS), the Mumbai-based IT services and outsourcing power, which earned almost $6 billion in revenues in 2008.

The TCS Strategy

Cultural transformation is impossible without the leadership of top executives, so Tata created the Tata Group Innovation Forum (TGIF), a 12-member panel of senior Tata Group executives and some CEOs of the independently run companies. "TGIF's main objective is to inspire and share best practices" says Sunil Sinha, CEO of Tata Quality Management Services and a member of the forum. But executives also have employed other strategies to build a culture of innovation. Here's how they did so within TCS.

First, leaders approached the challenge both top down and bottom up. TCS Chief Technology Officer Ananth Krishnan says this involved establishing formal systems for encouraging innovative thinking and processing of ideas. "If I come up with an innovation, whether it's an incremental or a disruptive idea, I need to know whom to go to with it, and there needs to be an organizational process for moving it forward," says Krishnan.

TCS created multiple channels, and managers are trained how to direct an employee's idea: incremental innovations are handled and funded by the business unit in which the idea originated; platform-level innovations that might extend an existing offering are directed to one of the company's 19 global innovation labs, leading-edge research centers focused on specific technology areas or business sectors. Disruptive ideas tend to originate in the labs, but if one emerged from a business unit it would be directed to a lab or funded through an incubator fund run by the CTO's office. How all of the ideas are evaluated and funded is almost less important than the fact that TCS employees know ideas are welcome—and that good ones won't die in a pile on someone's desk.

TCS has also incorporated innovation into its formal annual review process, making it one of the nine categories on which employees are evaluated. If an employee wins the company's Young Innovator Award, he or she will see more than a salary bump. "It certainly accelerates your career track," says Krishnan. "I might pluck you up and put you in one of our innovation labs."

"Creative Dissatisfaction"

In addition to formal systems, TCS takes steps to stimulate innovative thinking. "We train people to think about improvement all of the time, to have what I call a culture of creative dissatisfaction with the status quo," says Krishnan. TCS has made innovation a component of training programs, from its leadership institute, to which 50 senior managers are sent every year, to its four-day "Technovator" workshop, at which its programmers are taught to think creatively.

Five hours of an employee's 45-hour week can be used for personal projects, such as learning a skill or developing an idea. To better capture nascent ideas, the company launched IdeaMax, a Digg-like social network that lets any employee submit, comment, and vote on ideas. Since it was launched last year, IdeaMax has collected 12,000 ideas, several hundred of which have become projects. "Every quarter, I review the top 10 most popular ideas," says Krishnan. "The wisdom of crowds works for us."

The company says it has been steadily meeting its innovation goals. Last year 10% of revenues were directly traceable to innovation activity, says Krishnan. TCS also has set goals for customer recognition of their innovations. "When we launched our innovation initiative three years ago, we said one third of customers must be able to recount an innovative element of their project," he says. "Now we've raised that to one half. Is that enough? I don't know. Maybe we should raise it again."

What can executives learn from TCS about building a culture of innovation?

Leadership Lays the Foundation

The CEO is the cornerstone of any effort to build a culture of innovation. He or she needs to communicate the importance of innovation directly to managers and to celebrate innovative efforts, including those that failed but were valiant attempts.

Hire the Right People. But…

In a targeted effort to build its capacity for breakthrough innovations, TCS hired more PhD graduates. But broadly speaking, the processes are as important as the people when it comes to building a culture of innovation.

Build Innovation Into the Organization

A culture of innovation won't take root if you don't have clear systems for approving and funding ideas, for example, or an employee review process that includes innovation criteria.

Use Social Media to Tap Ideas and Encourage Collaboration

In addition to IdeaMax, which will roll out to all Tata companies in September, TCS created Just Ask, a platform that allows employees to post and answer questions internally. Ten thousand questions were asked and answered within the first months of its launch.

Celebrate Innovators

In addition to the Tata Group-wide Innovista innovation competition, TCS runs its own Young Innovator Awards to reward and recognize successful innovators.

Jessie Scanlon is the senior writer for Innovation & Design at BusinessWeek, where she covers the intersection of design and business.

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

FT: Straight path to a superior business

Straight path to a superior business

By Luke Johnson

Published: July 28 2009 23:30 | Last updated: July 28 2009 23:30

Just as you meet few truly great individuals in the journey through life, so there are a tiny handful of companies that have outstanding management. And the reason so few organisations are really well run is not that it is a complicated matter; it is that managing well takes discipline and effort.

The principles followed by superior businesses are straightforward – but executing them consistently and over extended periods is very hard.

All the best companies have bottom-up management. That means those staff who actually meet customers, or run operations, tell the boss what works, rather than vice versa. It means delegating responsibility in order to empower staff. Imperious, dictatorial leaders who are out of touch with the shop floor do not achieve sustained success.

I was told of the chief executive of a large publisher who, when the fire alarm went off accidentally, would summon his chauffeur to pick him up so he could circle the building ensconced in his limousine rather than stand on the pavement and mingle with the troops. Not surprisingly, the business underperformed and he was replaced.

Another characteristic of winners is that they manage for the long term. Sudden strategic moves to suit quarterly targets or shorter-term bonus measures are damaging. Family stewardship often beats publicly traded or private equity as a form of ownership for this reason. Germany’s Mittelstand companies are the backbone of their economy: they are principally family-owned, often world-class operations that adopt prudent financing, and invest in capital expenditure and research and development. Incentives at all levels tend to be long term.

The best leaders possess domain knowledge. This means they understand their industry and are experts in their field. It allows them to command the respect of their colleagues, and means they have genuine insight into the vital economics of their profession or niche.

When I interview managers, I ask them about their customers and competitors. The high achievers will know them intimately, and can talk for hours about the strengths and weaknesses of their rivals. Generic managers, who claim they can turn their skills to any sector and deliver impressive results, are mostly a clever illusion. That is why I tend to respect actual experience in a line of work, or a specific trade qualification, over an MBA.

Companies I’ve most admired have usually been run by teams. While every business needs an ultimate boss, larger 21st-century organisations are too complex to permit an individual to call all the shots. The enduring successes have several high-quality people at the top working as a collegiate group, co-operating and sharing responsibilities across divisions and disciplines.

The most able chief executives find, nurture and retain talent, and they delegate and congratulate in large doses. They never promote sycophants; instead they hire ambitious challengers who can one day replace them. As ever, this sounds easy to do, but it takes genuine willpower and self-confidence.

A further characteristic of outperformers is that they adopt the Japanese philosophy of kaizen: constant improvement through small but material steps. This is the belief that things are never perfect and could always be better. It is the acceptance that dramatic changes are unlikely to yield the best returns; relentless, incremental progress should be the objective.

Adopting these practices – many of which are common sense – should produce better business outcomes. The inspiration for noting them down came from one of the best management books I have read in years: The Puritan Gift by Kenneth and William Hopper. It is a work of history and a study of how the Anglo-American financial system has gone wrong. It has its flaws but, overall, it is a magnificent and original text. Moreover, it offers redemption and useful rules about how the best organisations are run. It should be required reading for everyone who cares about the capitalist system and those in high office in the business world.

lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

Copyright The Financial Times Limited 2009

BusinessWeek: Innovation Calls For I-Shaped People

Insight July 13, 2009, 2:37PM EST text size: TT

Innovation Calls For I-Shaped People

These thinkers have their feet firmly planted in the practical world, can stretch their heads to the clouds—and simultaneously span all of the space in between

By Bill Buxton

It has become almost a cliché to say that cross-disciplinary teams are a key component for successful innovation. If certain problems are beyond the scope of any individual—and most of them are—the way to address them is with a team with complementary skills and a common language in which they can all communicate. So far so good. But useful guidance starts to dry up rather quickly beyond that. Since there is no reliable secret formula that can be used by a hiring manager or someone trying to build up appropriate skill sets, I thought that I would share a way of thinking that I have found really useful.

There may be no "I" in team, but every team needs to be made up of "I-shaped" people.

First of all, I should acknowledge the influence of my friend, the co-founder of IDEO, Bill Moggridge. He came up with the wonderful formulation of "T-shaped people". The vertical aspect of the T represents depth, and the horizontal bar is breadth. So a T-shaped person has basic literacy in a relatively broad domain of relevant knowledge along with real depth of competence in a much narrower domain.

Three Pillars

When you slide multiple Ts together, their cross bars all overlap, indicating that the various Ts have a common language, and, ideally, their combined base can be broad enough to cover the domain of the problem that you are addressing. At Microsoft (MSFT), we try to make sure that in looking at new product or services ideas, we have at least three Ts, which we call BXT, reflecting equal levels of competence and creativity in three domains: business, experience (in design), and technology. These are three interdependent and interwoven pillars we see as the foundation for what we do.

But while I love Bill's notion of T-shaped people, things are just not that simple. So as both compliment and complement, I propose I-shaped people. These have their feet firmly planted in the mud of the practical world, and yet stretch far enough to stick their head in the clouds when they need to. Furthermore, they simultaneously span all of the space in between.

This idea was crystallized in my mind thanks to another Englishman, one of the early pioneers of human-centered design, Brian Shackel. I once asked him if he had noticed any particular attributes that distinguished the students that went on to do remarkable things compared with the rest.

His answer was as immediate as it was insightful. He said: "The outstanding students all had an outstanding capacity for abstract thinking, yet they also had a really strong grounding in physical materials and tools." By this, he meant that they could rise above the specifics of a particular problem to think about them in a more abstract, and in some ways, more general way.

Getting Their Hands Dirty

At the same time, as they were growing up, all had been deeply involved in things such as fixing bicycles or cars. In fact, it didn't matter how this was manifest. What was important that they had a "can do" and "have done" competence in some aspect of the messy, dirty, and fascinating world of physical materials and tools. In short, they were firmly grounded in reality.

These attributes have been at the core of all of the best teams that I have ever had the pleasure to work with.

Is this all there is to know about staffing for innovation? Of course not. But to summarize and synthesise, let me leave you with a few rules of thumb for building a cross-disciplinary team:

• The last thing a team needs is someone else like you. You already have the best in the world: you. What you need is people who fill in the gaps that you left in your own skill set as you built up competence in your specialty. That goes for everyone else on the team. (The only exceptions might be when you are staffing another team, or the problem that you are working on is sufficiently hairy that you need to divide in order to conquer.)

• Know the difference between solid breadth of literacy and deep competence, and test for both in considering candidates. You do not need jacks-of-all-trades.

• If you think you know the core competencies needed for a team, list them on a bunch of Post-it notes, and have each person on the team write the name of the "go-to" person on the team who has the most depth in that area. If you do not have strong consistency in the responses, Houston, you probably have a problem.

• T-shaped is highly desired, but not sufficient. In staffing up teams, interview and test for I-shapedness. I don't care how good someone is either at the pragmatic or abstract level, there is someone out there who is equally good and who has strength at both ends. Find that person. If you doubt such people exist, just look at the profile of a reasonable sample of Nobel Prize winners. What I suggest you will find —based on having done so myself—is that a very high number share these combined T and I attributes.

• Hire people who do not require predictability and stability in order to be effective. Typically, each problem that confronts you is going to be different and will require different skills. Hence, teams will be constantly reconfigured to meet the demands in front of them.

• Hire people with strong interpersonal skills. Remember, I come from the computer industry and have seen my fair share of brilliant software engineers who have the social skills of an oyster. All that I can say is that I have also seen those with the same skills that know how to communicate, back down, listen, question, and compromise. A Renaissance team of T and I-shaped thinkers is a potentially volatile cocktail. Its value is too precious to be put at risk by even a single individual, regardless of how otherwise talented.

With that, all that I can leave you with is the imperative that you should always cross your Ts, but never dot your Is.

Bill Buxton is Principal Scientist at Microsoft Research and the author of Sketching User Experiences: Getting the Design Right and the Right Design. Previously, he was a researcher at Xerox PARC, a professor at the University of Toronto, and Chief Scientist of Alias Research and SGI Inc.

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

FT: The undercover boss

The undercover boss

By Stefan Stern

Published: June 8 2009 23:18 | Last updated: June 8 2009 23:18

Employee attitude surveys, brown bag lunches, focus groups, informal chats: managers try quite hard to find out what their staff are thinking. But the results are mixed at best. What are your staff thinking? Admit it – you don’t really know.

Is there any way of finding out? Electronic surveillance would be a bad idea. Cloaks of invisibility work for Harry Potter, but are not available to the rest of us. One chief executive has done the next best thing. He went undercover in his own business for two weeks, disguised as an office worker, completing shifts on 10 different sites. He has heard for himself what his people really think. It has been a revelatory experience.

Stephen Martin is the 43-year-old CEO of the Clugston Group, a medium-sized civil engineering and logistics company based in the north of England. But for two weeks earlier this year, as far as his colleagues were concerned he was “Martin Walker”, an ordinary co-worker trying to earn a living like everybody else.

Ordinary, that is, except for the film crew that was following him around. The cover story was that this documentary team wanted to record how a clerical worker would cope with the demands of a physical labouring job. In truth they were making a programme, called Undercover Boss, which will air on British television (Channel 4) in two weeks’ time and then in a US version (CBS) this year.

How did Mr Martin avoid being found out? He is still a relatively new CEO, having started in December 2006. He grew a beard and turned up to work in protective clothing rather than a suit. His down-to-earth, approachable style does not mark him out immediately as “boss class”.

Stephen Martin found that an apparently sensible idea was taken to mean that a break had been cut

“This was a once-in-a-lifetime opportunity to hear unfiltered what my employees were really thinking,” Mr Martin told me when he came in to the Financial Times office – clean-shaven and in a suit and tie – last week. “They said things to me that they would never have told their managers.”

What lessons has he learnt? “Our key messages were just not getting through to people,” Mr Martin says. “People working a shift on a large site do not have time to read newsletters or log on to websites. You have to communicate with people on their terms, and it is different for every location. One size does not fit all.”

For example, Mr Martin found that an apparently sensible idea – encouraging his workers to take a tea-break where they were working rather than coming back to a canteen – was taken to mean that the break had been cut.

What is more, having worked these physically demanding shifts, which involved pouring concrete, laying kerbs and clearing drains, the boss now has a better informed view of the job. His conclusion: “We were asking the impossible of some of them.”

This TV-inspired experiment has highlighted a classic management problem. Leaders may know exactly what they want to see happening. They send out messages down the management line. Employees ought to understand. But between the top table and the shop-floor something goes wrong. Leadership teams can be scarily ignorant of how badly their wishes have been distorted, and how much unhappiness there is among those on the receiving end.

And right now there is a bigger, more urgent point. In a recession it is even harder to have an effective, open dialogue with an anxious workforce. Mr Martin shared what he had learnt with his team of managers after filming was over. It provoked a (frequently repeated) response: “They’ve never told us that!” But “Martin Walker” had seemed like someone it was safe to talk to, a regular guy, working night-shifts and staying at a £27-a-night ($43) bed and breakfast hotel called the Cocked Hat. “Even we wouldn’t stay there,” his co-workers had told him.

Mr Martin feels he needs to “over-communicate” to reassure staff who have seen big redundancies in recent months. “If you don’t pass on enough information, even if it is bad news, they will fill the gap with something else, probably worse than the truth.”

That view is supported by Robert Sutton, professor of management science and engineering at Stanford University in California, and author of the cover story in the June issue of the Harvard Business Review: “How to be a good boss in a bad economy”.

Prof Sutton says there are four things in particular that managers need to provide if they want to avoid this false anxiety syndrome: predictability (over-communicate); understanding (keep it “Sesame Street simple”, advises Procter & Gamble’s AG Lafley); control (break down big challenges into manageable ones); and compassion (show that you care).

Having had a chance to eavesdrop on his employees’ hitherto private conversations, Clugston’s Mr Martin has been forced to rethink much of what he thought he knew about management.

Convincing employees that the company has their best interests at heart is hard work. Key messages to staff should never go undercover, even if one boss had to don a disguise to find this out.

stefan.stern@ft.com

For the latest thinking on management and strategy, go to www.ft.com/managementblog

Copyright The Financial Times Limited 2009

FT: Box-tickers should not be the ones making decisions

Box-tickers should not be the ones making decisions

Published: April 28 2009 20:16 | Last updated: April 28 2009 20:16

I once served as a director of the scheme that compensated investors who had lost money through the actions of crooked or negligent financial advisers. The board began its activities with zest and esprit de corps. Its task was to strike a balance by sustaining confidence in the financial services industry without removing incentives to behave prudently or imposing excessive burdens on those who did.

But matters soon went downhill. Ambulance-chasing solicitors gathered groups of aggrieved investors. They made lengthy submissions and threatened judicial review of decisions. The submissions usually had little merit. Few threats came to anything and fewer still survived even cursory scrutiny by the courts. But to respond was time-consuming and the effect on our activities was dramatic. It was soon impossible to hold any meeting without a lawyer present to ensure strict attention to procedure.

You might think that this care and attention would lead to better decisions. It did not. Increasingly, we became concerned not to find the right answer but to find an answer that would stand up to external challenge. The best argument was usually an appeal to precedent. The existence of a previous decision did not, of course, imply that either the current or the earlier decision was a good one.

But the long-term consequences were more complex, and more serious. People came to the activity with a genuine desire to deploy their skill and judgment in public service. But the emphasis on procedure over substance meant that the opportunity to exercise skill and judgment drained away and the proceedings became mind-numbingly boring. Imagine an afternoon spent sitting through a one-sided submission from a second-rate firm of solicitors, lawyer by one’s side, minuting reasons for rejecting each preposterous argument, and returning a month later to review predictable counter-assertions. People, including me, discovered that they had more interesting things to do.

Issues of process never end. There is always someone else who might be consulted, always some additional consideration that might be taken into account, always some other document that might be relevant. Most people who complain about the process of decision are not really complaining about the process; they are complaining that its result is one they dislike. That means no amount of effort to make the process fairer can ever satisfy them. The matter will be disputed until all legal options, or the financial resources of those who support them, are exhausted. Or until the opposition is bored into submission. Frequently this happens.

There are some people who have a genuine interest in procedure for its own sake. The sort of people who write letters to newspapers pointing out errors of syntax. Society needs such people, and they usefully occupy mid-level positions in the judiciary or compliance departments. Others are obsessive about particular subjects – diversity and the environment are frequent choices. Some people have convinced themselves, beyond reason, that others should give them money. These groups will pursue their argument with tenacity in every possible forum. Society needs them less, although they remind us, if much too frequently, of the importance of the causes they espouse. But the capacity of all these people not just to waste time and delay decisions but also to damage the process of decision-making is huge.

The arguments that reasons should be given for all decisions, that consultation should be undertaken, that people should be accountable, are superficially compelling. But the big bureaucracies, public and private, whose processes fulfil these requirements are not known for the quality of their decisions but for their ineptitude. Typically the reasons given for judgment are rationalisations after the event, the consultation is a formality rather than a sincere search for opinions, and the accountability is a matter of extensive paperwork rather than a genuine appraisal of performance.

But the real downside of box-ticking is not that it is hypocritical, although it often is. It is that the people who find it endurable are often people who should not be making decisions at all.

johnkay@johnkay.com

Post and read comments at www.ft.com/kay

Copyright The Financial Times Limited 2009

FT: Invigorating slide from star to survivor

Invigorating slide from star to survivor

By Luke Johnson

Published: April 7 2009 22:21 | Last updated: April 7 2009 22:21

Even in the Hollywood Hills they are feeling the pain of the downturn.

Traditionally, “winner takes all” economics dictated that no matter how bad things got, the top talent in every sector always did well. Be it in sport, films, music or business, the stars could still command huge rewards in spite of generally tough times. But that model is breaking down.

The illusion that certain smart executives and bankers deserve remuneration perhaps 100 times the earnings of junior staff has also been shattered. They are not a scarce resource. There are probably hundreds – perhaps thousands – who could do their job.

The havoc across the media industry means that businesses can no longer afford the cost of big names. Either they are taking large cuts or parting with the corporates that have paid them so well in the past.

At Channel 4 we are tackling the high cost of programmes head on and negotiating reductions in the packages of television presenters and performers. The BBC, Five and ITV are doing the same. The advertising slump is forcing operators to trim their expenses, and this time there is no choice – even celebrities are taking a hit.

In book publishing, author advances in general are down. Best-selling names have not really felt the pinch yet, but agents will find bidding wars for exciting manuscripts are increasingly rare. The trade is under growing pressure from the power of Amazon and faces the medium-term threat of e-books. Blockbuster advances will become unaffordable across the board.

The music trade has been in disarray for years. Artists now rely on live performance for the bulk of their earnings because illegal downloading has devastated sales of full-price CDs. The music labels simply cannot afford to fund so many acts, nor such generous deals – including for proven musicians.

This deflation in pay for human talent is healthy. The world of entertainment perpetuates a myth that there is a very small number of brilliant actors, writers, singers and so on. The rot accelerated when Gulf+Western allowed Paramount studio executives to copy the stars and pay themselves ridiculous amounts of money. So managers aped the on-screen names and the flames were fanned. But the web has helped democratise showbiz. Even if breakthrough names can go global more easily than ever before, stars are also much more easily dislodged.

The illusion that certain smart executives and bankers deserve remuneration perhaps 100 times the earnings of junior staff has also been shattered. They are not a scarce resource. There are probably hundreds – perhaps thousands – who could do their job. Headhunters, boards, talent scouts, agents, pay consultants and everyone else who benefited from the reward merry-go-round are having to adjust rapidly.

But all this sudden adaptation is having some positive effects from top to bottom. Hard times can toughen you up. Like the mythological wrestler Antaeus, who regained strength when thrown to the ground, companies coping with the current turmoil are all the fitter for the workout. Several companies in which I am an investor have gone through painful rounds of cost-cutting – but have said afterwards that much of what went was superfluous.

During boom times we all get a bit too comfy and complacent. Now every organisation is required to be lean and efficient. Such a process is never pleasant, but there is something invigorating about having to do more with less. This is the time to lose unprofitable customers, tackle overpaid talent, finish unproductive working habits and sell or close unprofitable divisions. This is an era of corporate frugality. The survivors will emerge with increased market share and a stronger position.

Carrying out such changes when things are going well is heavily resisted, so now is the moment. We all know that no company can sit still – it must constantly evolve. Certain multinationals have such huge scale and riches that senior executives can spend almost their entire working lives in office politics.

No longer, because almost no part of the economy is unscathed – we are seeing a true reckoning.

In most companies I know there is just one overriding priority in 2009: cash. This startling simplicity can be refreshing. All the fluff has disappeared. It is now about making sales, getting paid and staying in the game.

The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

lukej@riskcapitalpartners.co.uk

Copyright The Financial Times Limited 2009

FT: Who's been sleeping in your bed

Who’s been sleeping in your bed?

By Rhymer Rigby

Published: April 6 2009 22:34 | Last updated: April 6 2009 22:34

When Julia Richards and Luke Purser, a pair of creatives at the advertising agency Iris, switched roles recently they went further than most job-swaps: they “life-swapped” too. For two months, Ms Richards moved into Mr Purser’s flat in London’s Shepherd’s Bush while he moved into her flat in Greenwich Village, New York. They also exchanged neighbourhood tips and friends’ contact details.

Of course, much of the value of the experience came from swapping jobs. The company is based in London, where it has 300 employees, compared with 30 in its New York office. Ms Richards therefore gained experience of being part of a far larger operation and working under a senior designer, while Mr Purser says he was able to work more independently and worked with different clients.

An Australian scheme lets firefighters swap countries

However, swapping flats as well as roles definitely enhanced the experience. “It really gives you a taste of living overseas,” says Mr Purser.

Ian Millner, chief executive of Iris, says there are a number of reasons the agency likes to “life-swap” rather than merely job-swap its employees. “Most ad agencies are pretty similar – the only real difference is culture,” he says. “It’s our competitive advantage and it’s very important. So initiatives like the life swap are very powerful tools in making our culture consistent around the world.”

Moreover, he adds: “Clients are very mobile too and we need our people to be at least as mobile as our clients. In a global world we need to be less Brit-centric.”

Iris’s programme is aimed at young high-flyers who are easier to swap. The company has organised 10 swaps, with another six to follow this summer.

A number of different businesses have embraced the practice of job swapping across locations and even with other companies. For example, Google job-swaps with Procter & Gamble in order to deepen both companies’ understanding of the advertising market. John Lewis job swaps with the distribution business Keystone UK to share best practice in logistics. Meanwhile, the Whitehall in Industry Group organises job swaps as part of its efforts to forge closer links between the public and private sector.

However, while job-swapping is relatively common, the practice of swapping both jobs and homes is still rare – especially in the corporate world where employees are often put up in serviced apartments or hotels for months.

In the public sector, by contrast, dozens of programmes across the world have long allowed the likes of teachers, doctors and nurses to swap both jobs and homes with their counterparts in other countries.

One reason such schemes are more entrenched in the public sector is the more relaxed attitude to sharing skills, information and techniques that for private companies might be considered commercially confidential.

One of the oldest examples of these public sector programmes is the Fulbright Exchange, which swaps US teachers with those in other countries for between a term and a year. It has been operating for 60 years.

“Most people get a lot out of it,” says Isabelle Martin, who works for the British Council (which manages the programme in the UK).

“It’s great professionally and personally. For younger teachers it can give a great burst of confidence in their teaching abilities and for older teachers it can be a jolt and give them new perspectives.”

Another programme that swaps jobs and homes is the International Firefighter Fellowship, which started in Australia. Chris Tomes, the IFF co-ordinator for the state of Tasmania, says the main point of the programme is professional but adds: “We get a lot of families applying to do it as it’s such a great experience for them to travel the world.”

Mr Tomes swapped jobs and homes with a firefighter in Canada in 1996 and says one of the big non-professional attractions for an Australian was temperatures that dropped to -30ºC.

However, Ms Martin warns that life-swapping is not necessarily easy. “In any new environment some people can feel de-skilled. It can be like starting out all over again and you don’t have your support network there . . . One teacher said it’s like putting your life in a blender and seeing what happens.”

Copyright The Financial Times Limited 2009

FT: Career counsellors should find a new job

Career counsellors should find a new job

By Lucy Kellaway

Published: March 29 2009 20:25 | Last updated: March 29 2009 20:25

When I was 16, a careers adviser came to my school. She made me do various tests and then told me to avoid any job that involved words. I would be better off, she said, doing something technical; however, if I fancied a bookish career, then I might be able to make it as a librarian.

This didn’t appeal to me – all the less so as my dad was a librarian – and so, with a 16-year-old’s contempt, I dismissed her, her pathetic tests and her even more pathetic recommendations. What a shower, I thought.

Alain de Botton has recently had a similar experience and reached a similar conclusion. When researching his new book, The Pleasures and Sorrows of Work, the populist philosopher took himself off to be assessed by a career counsellor, who told him that he would be okay at most middle-ranking managerial jobs, and then suggested medical diagnostics – or leisure.

De Botton thought the whole thing pretty pathetic too. Indeed, he was not only dismissive of this advice and adviser – whose office apparently smelt of cabbage – but has condemned the entire industry on the strength of it. He argues that, given that we spend most of our lives working, it is extraordinary so little effort goes into making sure round pegs are in round holes.

Now that I’m no longer 16, I feel much more philosophical about it than this philosopher. It isn’t the fault of counsellors that the advice is almost always miles off the mark. It is because the whole idea of career advice is hopeless. Even the best tests in the world would not help as there is no formula for matching round pegs to round holes. Finding the right job is as subjective as finding the right spouse. Whether or not our job suits us depends not on our aptitudes – most people with a reasonable education are capable of doing most white-collar jobs – but more on whether or not we fit in, which is something we can’t know until we try.

‘Whether or not our job suits us depends not on our aptitudes but more on whether or not we fit in’

Not only is career advice hopeless at telling us what is the right career but it can’t even tell us what is the wrong one. My counsellor urged me to avoid words on the perfectly sensible grounds that my reading speed was painfully slow, my spelling terrible and I confused “there” and “their”. However, not being obviously good at something doesn’t mean that you shouldn’t make a career of it. You just need to want to succeed at it enough.

De Botton claims that, in the absence of better advice, most adults end up stuck in jobs chosen by their 16-year-old selves. This is nonsense. Most people who don’t like their jobs don’t stick in them for a lifetime – they try something else. The process is like dating. You go out with someone and, if it doesn’t work, you dump them and move on.

In any case, I think 16-year-olds can be quite good judges of what will suit them. From time to time, I go to career evenings at my children’s schools and talk to teenagers about journalism. The first time I did this, I was horrified at how gormless the pupils seemed. I asked them why they wanted to be journalists and they shrugged and said they liked the idea of it. But then I realised that, as they have no notion of what working life is like, they base their choices on looking at people they know who do that particular job and seeing if they can imagine themselves being that person. This strikes me as the best test there is. Why I eventually opted for journalism wasn’t because I wanted to write but because friends of mine were journalists and I wanted to be just like them.

Modern 16-year-olds seem far wiser about their careers than most of my school friends. We were too busy rebelling to think straight. My husband, the son of a Tory MP, spent his late teens and early 20s wanting to be a Marxist revolutionary. My first stumbling career move was into banking – equally shocking in the eyes of my leftwing parents and an equally bad choice for me.

Could this be why de Botton wanted  to be a philosopher? His father is a wildly wealthy Swiss financier. The only philosopher among my friends is the son of a shipping tycoon and I wonder if there is a pattern here. If your father has devoted his life to adding to his stock of wealth, surely the most rebellious thing one can do is not only to find money meaningless but also to make a career of finding meaning in meaning itself.

More songs

Last week’s column remarked on how few pop songs there were about office life. This prompted a heroic search by FT readers for further examples. Thanks to their efforts, I’ve been able to put together a white-collar Top 10. It goes like this.
1. “Daysleeper” – REM
2. “Frankly Mr Shankly” – The Smiths
3. “The Day Before You Came” – Abba
4. “Working for the Man” – Roy Orbison
5. “Matthew and Son” – Cat Stevens
6. “Sick Day” – Fountains of Wayne
7. “I Need a Holiday” – Scouting for Girls
8. “Step Into My Office, Baby” – Belle & Sebastian
9. “Manic Monday” – the Bangles
10. “Money for Nothing” – Dire Straits.

This last song is a slight cheat as it is about a nine-to-five worker envying the job of the rock star: “That ain’t workin’/ that’s the way you do it/ get your money for nothin’/ get your chicks for free.”

lucy.kellaway@ft.com

Read and post comments at www.ft.com/kellaway

Copyright The Financial Times Limited 2009

BusinessWeek: Innovation - Singapore is No. 1, Well Ahead of the U.S.

Global March 16, 2009, 8:02AM EST text size: TT

Innovation: Singapore Is No. 1, Well Ahead of the U.S.

Singapore's emphasis on science education and a highly talented workforce puts it well ahead of the U.S. in a new global ranking of innovation leaders

By Bruce Einhorn

For anyone interested in working in an innovative environment, the U.S. has long been the top destination. The U.S. has the culture to support innovation: the best universities, the biggest venture capital funds, the most supportive financial markets. American companies from Silicon Valley are among the world's most inspiring success stories for entrepreneurs in China china, India india, and other emerging markets, with startup business leaders looking for inspiration to the likes of Hewlett Packard (HPQ), Intel (INTC), Apple (AAPL), and Google (GOOG).

According to a new report by Boston Consulting Group, though, the center of innovation nnovation is not in the U.S. BCG, working with the Manufacturing Institute of the Washington-based National Association of Manufacturers, last week released a survey of 110 countries worldwide looking at the ones with government policies and corporate performance most encouraging to innovation. The U.S. came in No. 8, ahead of Japan (No. 9) and Germany (No. 19) but well behind the two leaders, both of them so-called tiger economies from Asia: Singapore at No. 1 and South Korea at No. 2. (For more on how BCG conducted the survey, and the ranking of the top-performing countries, see the accompanying slide show.)

What accounts for the relatively lackluster performance of the U.S. compared to the Asian tigers? James P. Andrew, the leader of BCG's global innovation practice and co-author of the report, says "the quality of the workforce" in the U.S. is the biggest problem that many respondents had. As part of the survey, BCG questioned some 800 high-level executives at U.S. companies, and many put concerns about human resources at the top of the list of concerns. "Are we developing the skills at the high school level?" asks Andrew, explaining the responses researchers often encountered. "Are we making it easy for the best and brightest to study and stay in the U.S.?"

Lagging U.S. Workforce

The questions are becoming more urgent now as debate heats up surrounding U.S. immigration policy. American multinationals have been among the most vocal in calling for the government to allow highly-skilled people from other countries to work in the U.S. However, data released last month showed that many of the 65,000 H-1B visas went to Indian outsourcing companies that have used the program to send low-cost engineers from India to the U.S. With the U.S. economy worsening and the unemployment rate rising, lawmakers in Washington are calling for more restrictions on H-1B visas. That's leading to a potential backlash in India, where anger at the U.S.is growing at the same time a growing number of Asian graduates of U.S. schools are returning to India and China.

The top-performing country in BCG's list, Singapore, has long focused on trying to attract foreign workers—and encourage locals to go abroad in order to boost their skills. It has little choice: The city-state has a population of just 4 million, and without importing top talent it would be hard-pressed to achieve bureaucrats' outsized plans to make Singapore a hub for the electronics, semiconductor, pharmaceutical, and biotech industries. For instance, every year Singapore gives 100 scholarships to science and engineering students, funding their doctorate programs in foreign universities. "In order to do well, you need people trained abroad," says Beh Kian Teik, director of biomedical sciences at the Singapore government's Economic Development Board. The $650 million program, launched in 2000, is now seeing its first PhDs return to Singapore, where they work in government research labs or local universities for several years.

Singapore's Excellent Science Education

Government commitment to education is one reason many large drugmakers have made Singapore a base for their manufacturing and research. In January, GlaxoSmithKline (GSK) announced plans to invest $65 million to expand its Singapore operations. Schering-Plough (SGP) is opening a center to conduct research and clinical trials in the country, and Novartis has made Singapore the center for company researchers investigating treatments for malaria, tuberculosis, and dengue fever. "Science education is very good here," says Thierry Diagana, project manager for Novartis' malaria research team. "There's a nice constant flow of young graduates."

The global recession threatens to halt the flow of talent. The Singapore economy, which relies heavily on exports, is suffering badly. The country's gross domestic product is likely to fall 4.9% this year, according to a government survey of economists released on Mar. 16, and the unemployment rate is likely to double from that of a year ago, to 4.4%. Credit Suisse (CS) predicted last month that Singapore would see an outflow of foreign workers, with the population declining by 160,000. The pharma and biotech industries, two of the few industries expected to create jobs in the city-state, are now facing renewed uncertainty following the announcement of several large mergers, including Merck's (MRK) proposed acquisition of Schering-Plough.

Still, BCG's Andrew believes governments and companies are not going to retreat on their commitment to innovation. The crisis, he argues, makes it even more apparent that there's no turning back. "There is always somebody out there who can make the same thing cheaper," he says. In hard times, he adds, "the imperative is to become more innovative, not less." For companies, that means "doing anything humanly possible to avoid scaling back on innovation budgets," says Andrew. "Governments are going to be in much the same situation. If you want to attract and position companies in your countries, you have to continue to do the things that make you an attractive destination."

Reports about an exodus of foreign workers from Singapore don't worry Andrew. With the economy contracting, many low-skilled workers are leaving, he says, but that doesn't mean Singapore's attractiveness as an innovation hub is declining. "If I'm losing my PhDs, scientists, technologists, that's one thing," he says. "For other types of foreign workers, that's something different."

Einhorn is Asia regional editor in BusinessWeek's Hong Kong bureau.

FT: Book scheme set for overseas chapters

Book scheme set for overseas chapters

By Danuta Kean

Published: March 1 2009 20:09 | Last updated: March 1 2009 20:09

Mick Neville had not read a book in 10 years. Now, three years after joining a workplace reading movement, he cannot get enough of books.

Last Thursday he was welcomed at 10 Downing Street as one of a handful of Reading Heroes honoured by Gordon Brown, the British prime minister. And the scheme he is involved with is soon about to spread overseas.

Backed by his employer and in his role as a union learning representative in a government-backed scheme at Fletchers Bakery in the northern English town of Sheffield, Mr Neville turned the company’s redundant smoking room into a library and learning centre where colleagues could improve numeracy and literacy skills.

Central to the initiative at Fletchers are Quick Reads – short, fast-paced books by bestselling authors such as Ian Rankin or the business angels from BBC Television’s Dragons’ Den. Six titles, including one by Kate Mosse, are being published for World Book Day next Thursday.

British publishers launched the Quick Reads series in 2006, and their success at helping adults with reading problems has spawned plans for similar schemes in Canada and mainland Europe.

“Quick Reads have been so popular here that we couldn’t keep up with demand and we had to get Sheffield City Library to bring a mobile library here once a month,” Mr Neville says. As to the benefits for Fletchers Bakery, he says the scheme raised morale among the 200 employees and strengthened relationships between management and staff.

In workplaces across the UK, Quick Reads are being used to raise literacy standards as part of a collaboration between trade unions and companies as diverse as Boots, Tesco and VT Shipbuilders under the government’s Skills for Life scheme. At First UK Bus, which employs 20,300 drivers, Quick Reads are central to literacy programmes operated in 51 learning centres based in bus depots. The centres represent a considerable investment for First UK Bus. As well as giving 100 union learning representatives time to operate the scheme, the centres employ 36 trainers from a vocational training scheme.

Costs for employers in the UK are mitigated by government subsidy.

Dave Kaye, First UK Bus chief operating officer, says the centres opened five years ago to raise literacy and numeracy from low levels among drivers, many of whom had few qualifications. Such has been the success of the centres that they now offer 1,500 courses, which can go up to training at director level.

“Four years ago, our staff turnover among drivers was 32 per cent. Now it is 19.6 per cent,” Mr Kaye says, ascribing part of that to the literacy and numeracy scheme. He also attributes a reduction in collisions to better literacy among drivers.

At VT Shipbuilding, which employs 1,000 people building warships in Portsmouth on the south coast, the total outlay for its workplace learning programme was £109,000. The return on investment, calculated on improvements attributable to training, was 140 per cent, or £153,000, it says.

Part of the literacy scheme’s success derives from its being administered by union learning representatives rather than, say, the human resources department. Employees are reluctant to admit failings in literacy to HR in case it puts their jobs at risk.

In Canada, the ABC Canada Literacy Foundation, Grass Roots Press, a publisher, and the government are commissioning 12 Quick Reads from Canadian authors, although they have not yet been named. Six will be published in about 18 months’ time. “We are just beginning the programme but have secured a few authors and will begin in earnest in April 2009,” says Margaret Eaton, president of ABC Canada Literacy Foundations. Talks with employers are at a very early stage, however, she says.

Government-backed alliances of librarians and publishers in Portugal, the Netherlands and Belgium have held talks with Quick Reads in the UK with a view to launching similar schemes. So far, they seem to be surviving recession-induced cuts. For good reason, says First UK Bus’s Mr Kaye. “Everything comes at a cost, but you have to look at whether it is a cost or an investment and with this so far we are getting a good return on investment.”

Copyright The Financial Times Limited 2009

FT: Bosses hang out at fast-food joints for invaluable tips

Bosses hang out at fast-food joints for invaluable tips

By Rhymer Rigby

Published: February 17 2009 02:00 | Last updated: February 17 2009 02:00

'My intention," says Nigel David, "was to work as a member of staff, and I wanted as real an experience as possible."

So the chief executive of the online room-booking business Eviivo went to work in a 15th-century bed and breakfast for a couple of days.

"I got up at a ridiculous hour and did breakfast," Mr David recalls of his time at Strand House in Winchelsea, near Rye on the south coast.

Then the reality of daily life for his customers - managers of hotels and B&Bs - dawned on him. "While I'm [cooking] the phone rings and I take a booking and write it down in a diary; then it needs entering on the system. Next, I had to do the checking out, so you have to prepare bills and check bars. Then you have to clean rooms. It just goes on and on."

He finished, he says, "at the end of dinner service, absolutely knackered" and went straight to bed.

Mr David's reason for toiling at a B&B was simple - he wanted to see how his company's frontdesk product worked in a real-life environment.

Many executives have spent time working with their own employees at the sharp end. But it's unusual for managers to spend time on a customer's shop floor to see how they grapple with their products and services.

Such arrangements are, however, routine at Summersault Communications, the contract publishers. Sam Tame, managing editor, says: "Before any of the team work on a publication, we go and do three days at the coal face. The key thing is to be able to put yourself in the reader's shoes."

One of her more memorable stints was working in a McDonald's, where she flipped burgers, cleaned surfaces and worked the tills.

Her time working in the restaurant taught her a number of things. First, it showed her the kind of person she was aiming at. "Your target audience are busy 15-to-24-year-olds who eat their lunch in under 45 minutes and will be chatting to their mates. That's the environment the magazines have to work in."

Second, it helps when writing the actual articles. "You really understand that when you call a restaurant and they have a huge queue of customers at the tills and the drive-through, answering your questions may not be the top priority."

Kuljit Kaur, head of business development at P&MM, an employee incentives company, agrees that there's no substitute for immersion. She has worked undercover in call centres and car dealerships and values the experience because it reinforces the fact that the shop floor and company headquarters are often miles apart.

"You can say that you're going to incentivise call centre operatives to give 100 per cent information. But if you're on the phone to a [customer] who is really shouting at you and won't listen to a word you say, you really have to ask yourself how you manage the quality of that call. And if you've been called everything under the sun is a £5 reward worth it?"

She adds that the experience can curb the tendency to stereotype professions. "In the automotive industry, people live and breathe their jobs and have some amazing stories. You need to get out and see that.

"If you just sit around a boardroom table, you don't have a clue. In fact, we often find that many of our clients don't really understand what motivates people at the sharp end."

And this, perhaps, is the real point. "It's always different to how you imagine it will be," says Ms Tame. "Working there brings home just how different."

Mr David says that seeing how the system worked on the ground prompted him to make a number of changes at his booking business.

Apart from this, there is something to be said for getting out of the day-to-day routine and having a bit of fun, says Ms Tame. She found working for her clients exhilarating, while Ms Kaur says it was exciting.

"I love meeting people and I want to do it more often," she says.

Those who spend their working lives at the sharp end have no complaints about their visitors. Mary Sullivan, the owner of Strand House, says she asked Mr David to try the experiment when they met at an awards dinner: "He couldn't get his head around us still having a paper reservations book.

"Now he understands why I carry it everywhere and sleep with it under my pillow," she says.

It has been good for their working relationship, she adds: "I know I can call him any time and he can sound me out on ideas. Besides, he looked very nice in an apron with a feather duster."

Copyright The Financial Times Limited 2009

FT: A foot in the office door

A foot in the office door

By Ian Wylie

Published: January 15 2009 20:39 | Last updated: January 15 2009 20:39

If you work in politics, publishing, charity or the media, internships probably mean exploitation of ambitious university graduates who will do anything from making tea to researching your high-level report – yet are invisible on the payroll.

But the creation of internships of the kind proposed by the UK government last week for some of the 400,000 students ex­pec­ted to graduate from British universities this year could earn the term great­er res­pect. In an attempt to improve graduates’ work skills, it wants emp­loy­ers to offer intern­ships of up to three months to this year’s graduates.

“Internship” is a US export, spread by banks that used the term to describe structured, fixed-term work experience placements for students. Most banking internships resemble scaled-down graduate schemes, with the intern assigned a mentor and given work similar to that ex­pected of a graduate recruit. In other sectors, internships can mean any kind of work experience for graduates or postgraduates.

According to the Association of Graduate Recruiters, which represents mostly big UK emp­loy­ers, a quarter of its members use internships, some taking on up to 190 at a time. Most pay interns a weekly wage – on average £200-£300 ($292-$439, €222-€333).

Interns’ experiences vary, ac­cording to reports filed online to RateMyPlacement, a website that publishes students’ reviews of their time with named employers. “For most of the internship there was hardly any work to do,” laments one, “then in the last week I racked up about 70 hours and was in the office until 3am.” But another reports: “I have learnt so much from this job, from organisational skills and technical IT skills to presenting to senior clientele. I was fully integrated from day one.”

For employers, intern schemes can be run at a fraction of the usual cost of finding, re­cruiting and training a new graduate so it is increasingly common for UK companies and public sector bodies to recruit a significant proportion of their graduate intake from among their interns.

Professional services firm PwC says it made job offers to 92 per cent of its interns in the UK last year, with the vast majority ac­cepting. It is the UK’s biggest graduate recruiter, taking on 1,000 graduates this year and another 200 students and graduates for summer and sandwich placements.

“It is a great way to identify talented people who could work with us long-term, including those who might not otherwise have considered a career with us,” says Sonja Stockton, PwC’s head of graduate recruitment, who was among recruiters invited by the UK’s Department for Innovation, Universities & Skills for discussions ahead of its announcement.

The DIUS itself has the UK-China graduate work experience programme, which has for the past couple of years offered Chinese students 12- to 52-week salaried internships in the UK. Managed by graduate recruitment firm GTI, the programme has placed 250 Chinese students in businesses and organisations.

Recruiter’s guide to internships

●Choose between internship and a longer-term placement. Internships are good for specific projects and give students an insight into working life. Year-long placements allow more time to develop students, and give them opportunities to make more of a contribution.

●Consider university term dates and factor in exam timetables when recruiting.

●Be as robust as you would when hiring permanent staff.

●Have realistic expectations and clear goals. This may be a student’s first experience of the work environment; don’t expect him or her to slot straight in.

●Give them a proper induction, and a buddy or coach.

●Find them real work. The most productive internships or placements allow interns to make a real contribution and to experience responsibility.

Source: PwC and RateMyPlacement

But, in general, the UK has a poor record of work experience for university students. According to the careers advice body ACET, only 29 per cent of UK students take up a work placement, compared with a European average of 55 per cent.

“Europeans go into higher education expecting to complete an internship as part of their further studies, whereas in the UK the traditional universities tend to focus on the academic side,” says Alastair Lindsay, a director of RateMyPlacement. Mr Lindsay himself completed a 12-month placement at the Bank of England and a summer internship at Deutsche Bank: “Work experience is the most important thing I did at university, and is arguably more influential in getting a graduate job than your degree.”

Details of the DIUS’s plan are still sketchy but any nat­ional internship scheme will be popular among students contemplating the shrinking opportunities for graduates. Competition for placements has already intensified as students see the value of having completed an internship when applying for a job.

“There is a whole host of issues that need to be considered,” says Ms Stockton about the government’s proposals. “What are the objectives and benefits for the business taking part alongside their own well-established programmes? What work will graduates do? How will the recruiting work, and what qualification will be required? How will they get feedback? How can we make the most of their skills?”

Carl Gilleard, AGR chief executive, advises businesses to continue to provide graduate jobs alongside internships. “Times may be tough but a stop-start approach to graduate recruitment almost always creates succession planning problems in the future,” he says.

“The worst thing the companies could do is fill a scheme de­signed for undergraduates with the graduate interns, just to fill a quota,” agrees Mr Lindsay. “That would be extremely short-termist and only serve to rob a future generation of students of valuable work experience.”

Copyright The Financial Times Limited 2009

FT: When managers say suit yourself

When managers say suit yourself

By Alison Maitland

Published: December 22 2008 20:07 | Last updated: December 22 2008 20:07

When a case was made for Chubb employees to choose the hours that suit them, John Finnegan, chief executive of the US insurance group, was unconvinced.

“To be honest, I initially viewed the reported benefits of flexible work hours with some scepticism,” he says. “As most CEOs would, I saw it as an employee accommodation programme with a cost. I didn’t know you could at the same time maintain or increase productivity.”

He was persuaded to back a trial of a programme devised by the Bold Initiative, a New York non-profit organisation, because it incorporated targets for improving performance and held teams and their managers accountable for achieving these.

The results convinced him the approach could work even in tough times, because of its positive impact on productivity and employee engagement. Under the programme, managers set the parameters and approve the work plan, but team members collectively determine “leaner” ways of working that accommodate individual flexibility.

The impact of flexible working in a downturn is the subject of fierce debate. When the UK government announced this month it would press on with extending the right to request flexible working to parents of children up to 16, some business lobbies protested that the measure would impose additional costs. The EEF manufacturers’ body called it “a bad message to business”. A government official countered that the benefits outweighed the costs and would help the economy through recession.

Since its first pilot with 17 people in 2004, Chubb has brought 400 of its 10,000 workforce into the programme and now plans to extend it further.

“It’s a business initiative first and foremost,” says Rolando Orama (pictured left), a senior vice-president who heads Chubb’s Chicago operation, handling claims across the Midwest. Of his team of 163 people, 120 work non-standard schedules. The others stick to a regular 8am-5pm routine by choice.

One team member starts at 6am and finishes at 2.30pm so she can complete her college studies. Another spends Fridays in summer working from his boat on Lake Michigan, using a laptop, mobile phone and instant messaging. A third has cut eight hours of commuting by working at home twice a week, which gives him more time for his young family and essentials such as doctors’ appointments.

Everyone’s schedule is available to view on a shared calendar, so the team knows whom to call in an emergency. The programme is suspended for business presentations that everyone must attend and during holiday peaks.

Mr Orama, who works a day a week from home, reels off a list of improvements in the team’s productivity: an increase from 82 per cent to 91 per cent in customers contacted within 24 hours; a jump from 90 per cent to 100 per cent in timely benefit payments to claimants; and business cover extended by three hours a day thanks to some employees starting earlier and others finishing later.

Team members have also become more adaptable to change – useful in today’s economic turbulence – and more willing to act on their own initiative. “If there’s an unexpected absence, they jump in,” he says.

In the US, Barack Obama, the president-elect, has spoken positively about flexibility. The Washington Post last month cited a letter he wrote to Department of Labor employees, saying: “I believe that it’s time we stopped talking about family values and start pursuing policies that truly value families, such as paid family leave, flexible work schedules and telework, with the federal government leading by example.”

Appraisals prove that system measures up on productivity

What is the payback from flexible working? Benefits such as retention of key staff, reduced absenteeism and increased loyalty have long been associated with flexible working. Now its potential for improving productivity is becoming clearer as evaluations are made available.

● The Bold programme sets measurable goals for teams introducing flexible schedules. Chubb, the insurance group, has seen teams improve productivity by 5 per cent. It has also recorded higher employee engagement.

● A big majority of flexible workers, and their managers and colleagues, in seven large companies surveyed by Cranfield School of Management reported that flexible work had either a positive impact on individual performance or none at all.

● BT, the UK telecommunications group, says its 14,500 homeworkers are 20 per cent more efficient than their office-based peers. Flexible and remote working practices have reduced its annual office running costs by £500m.

●As a Hay Group survey finds companies still concerned about keeping skills, experts say flexible work is an effective retention tool in a downturn. “Leading companies are seeing flexibility as one way they can keep talented employees,” says Ellen Galinsky, president of the US Families and Work Institute. “Flexibility has to work for employer and employee, and there have to be metrics to show this.”

Paul Volcker, former chairman of the US Federal Reserve and head of Mr Obama’s economic recovery advisory board, is also a board director of the Bold organisation. Bea Fitzpatrick, Bold’s chief executive, believes its emphasis on business benefits, as well as individual employees’ needs, makes it a tool for the downturn. “We’re finding the more constrained companies are financially, the more interested they are in spreading this approach,” she says.

Employees have come up with more efficient ways of working at the headquarters of Costco, says John Matthews, head of human resources at the warehouse club chain. Traditionally, for example, people in the accounting department worked overtime during peak periods and were underemployed at slacker times. “When we turned the issue over to our employees, they designed a schedule to eliminate all overtime, speed up the [book] closing process and maintain the high level of accuracy in the reports,” he says.

Productivity has improved, and overtime has fallen by 42 per cent year on year. About 10 per cent of the 3,000 staff at the Seattle HQ are enlisted in a Bold programme, and more will join them next year. “People generally appreciate us listening to them and not wasting their time,” Mr Matthews says.

Flexible schedules offer another business benefit in difficult economic times, according to Patty Dudek, vice-president of IBM’s WebSphere development, which develops software for customers’ e-business applications. The company recently introduced round-the-clock software development, with work passing between 1,000 developers in different time zones. The global team can update a product in four to six months, versus 18-24 months five years ago.

Rather like the Bold initiative, IBM’s approach combines a focus on productivity with individual flexibility. Many developers split their working day into chunks around their personal duties and this makes the team more responsive, Ms Dudek says.

“Customers need something different than they said they needed three months ago, and they need it in days to respond to new business priorities,” she says. “If we did not support flexibility, I’d be so constrained by how quickly I could react.”

As a senior executive, she also works a flexible schedule and believes it is a way of retaining and motivating good people. “If we want top talent to work on something and we give them all the flexibility they need to balance their lives, they’re then more willing and able to step up to the challenge when we need them to drop everything.”

At Chubb, Mr Finnegan does not easily envisage flexibility applying to top executives such as himself, on the grounds that “it’s tough to measure what I do every day in terms of output”.

But he is convinced of the advantages of a performance-driven approach. He likens it to the way Toyota gained competitive advantage in the global motor industry in the 1980s with its “lean” manufacturing methods.

“It’s making people more responsible and accountable for what they do, like the Toyota breakthrough in the way cars are made,” he says. “The test is that they can do it better than they’ve done it before.”

Copyright The Financial Times Limited 2008

BusinessWeek: See You in the Funny Pages

BTW

8 March 2008

See You In The Funny Pages

By Jill Hamburg Coplan

Dave Steward, 50, lost his job at the Catfish Bend Casino in Burlington, Iowa, last fall after surveillance cameras caught him sticking up a Dilbert cartoon that compared managers to “drunken lemurs.” So the strip’s creator, Scott Adams, has posted Steward’s résumé on his blog (dilbertblog.typepad.com) to help out the longtime security guard. It’s the first documented case of Dilbert as grounds for dismissal, according to Adams, who last month recapped Steward’s story in his Dilbert comic strip—­using Wally, a regular character, as the fired employee. 

Catfish Bend Casino says it “doesn’t comment about personnel matters,” citing “the privacy of the person involved.” Meanwhile, Steward’s posted résumé has drawn two interview offers. Both, however, involve work located far from his home in Fort Madison, Iowa, where his wife has a good job. He’s open to other lines of work, he says, adding that two Dilbert blog readers have pitched in by polishing his résumé. “I got it all set up,” he says.

Source: http://images.businessweek.com/ss/08/03/0320_btw/source/6.htm

ST: Cultural barriers harder to break in Asia

Oct 25, 2008

Cultural barriers harder to break in Asia

By Lee Siew Hua

CULTURAL barriers do not come down easily in Asia, and for this reason, Minister Mentor Lee Kuan Yew believes talent will not flow smoothly across borders any time soon. To illustrate, MM Lee shared his long-time observations of China and India, saying: 'You can take a Chinese or an Indian, bring them to America and, as a minority in the American milieu, he will begin to absorb the American ethos. 'But you bring a few Americans to China or India and you think you can spread this ethos into India and China, you're dead wrong.' He was speaking at an hour-long dialogue yesterday that capped the three-day Singapore Human Capital Summit. It was attended by about 700 international business leaders and human resource specialists. Moderator Narayan Pant, Insead's dean of executive education, had brought up a lingering concern that Asia's cultural differences are a challenge to incoming top talent, who need to behave differently in diverse parts of Asia to succeed. 'Do you see that changing?' Professor Pant asked. 'Is talent going to become even more fungible than before because cultural barriers to success go down?' Mr Lee's reply: 'I don't think that's possible because our group of people do not change so readily.' The theme at the dialogue was Building Competitiveness: Harnessing Strategic People Trends In Asia. Nine questions were posed by Prof Pant and the audience, ranging from leadership to the depth of the recession. MM Lee also noted that missionaries sent to China and India in the past converted an 'infinitesimal' number in China and India - both ancient civilisations with their own beliefs. Cultural barriers are a 'constant concern' for Singapore, which has opened its doors to foreigners. 'We have a population that's already attuned to the Singapore way of doing things. They don't rush. They accept certain norms of behaviour. 'If we've more foreigners than Singaporeans, then the Singaporeans will become like the foreigners, and we lose our basic attributes. We'll be down the spiral.' That is why a core of Singaporeans is needed - a case he had made in July when he disclosed his own comfort level is for 65 per cent of the population to be born-and-bred Singaporeans. Yesterday, he pointed out that the Republic will have to bring in foreigners at a rate where 'they imbibe our values'. At the very top tier of migrants and Singaporeans, it does not matter. 'People lead different lives...They've got their own pleasure centres.' But at the mid-level, where Singaporeans and foreigners live and work cheek by jowl, 'it is important the Singaporeans outnumber the migrants'. MM Lee said that the Chinese will never become non-Chinese, and neither will the Indians be non-Indians. The same goes for the Malays, Thais or other groups. But put small groups of them in America, scatter them, and they become like the Americans, he observed.

Copyright © 2007 Singapore Press Holdings. All rights reserved. Privacy Statement & Condition of Access

ST: Only an A-Team will do: MM Lee

Home > Singapore > Story

 

Oct 25, 2008

Only an A-Team will do: MM Lee

 

First-class leaders needed to face challenges ahead

By Kor Kian Beng
		MM Lee Kuan Yew giving his views at the Human Capital Summit held at the Shangri-La Hotel yesterday. -- ST PHOTO: AZIZ HUSSIN

IS THERE a need for a new type of leadership to steer Singapore into the future? Or will what has worked in the past continue to work in the future?

These questions flitted through 41-year-old Jonas Ang's mind as he sat through a dialogue at the Human Capital Summit with Minister Mentor Lee Kuan Yew yesterday.

The human resource director decided to pose them to the man most responsible for building modern Singapore.

Mr Lee's immediate response: 'That's a very pertinent and deep question which I've asked myself.'

He said the Singaporeans of today have higher aspirations and are better educated than in the past, but that has also led some to believe that they know better than the Cabinet ministers.

'You can see it in the letters to the press, which isn't a bad thing provided they understand that they may not be right, because the ministers aren't stupid,' he said.

Changing times notwithstanding, Singapore must continue to have an A-Team of leaders in place, he added.

He said: 'If we field a B-Team, we are in trouble. We've got to have an A-Team. I don't care whether it's the PAP (People's Action Party) or any other party.

'You need first-class people with good minds, a sense of obligation to do a good job for the people and the ability to execute. That's an A-Team.'

How is an A-Team picked? MM Lee gave a peek into the process.

First, potential leaders undergo rigorous selection tests. They are then put through at least two five-year terms before they get to higher office, he said. 'So we know that they got what it takes.'

A type of leader that Singaporeans must guard against is the glib speaker who cannot perform.

Said MM Lee: 'That you can talk plausibly doesn't mean you can perform effectively. They're two different qualities. A good politician must be able to do both.'

One reason for the stringent criteria for future Singaporean leaders is the competition the country faces from up-and-coming economies like China and India, he said.

Still, there is something very much on the side of future Singapore leaders.

This is the Singapore system, characterised by traits like the rule of law, transparency, fair play and meritocracy, he said.

India and China will take at least 20 to 50 years to catch up with Singapore in this aspect, he believes.

Canadian and Singapore PR Edouard Merette, who has lived here for 12 years, agreed with MM Lee.

The peaceful, safe and efficient environment here is one reason why his company, Aon Consulting, decided to set up its regional headquarters and a research centre here.

Said Mr Merette, Aon Consulting's CEO for Asia-Pacific: 'Singapore is a modern society in a Third World area. You can give compliments only to Mr Lee's leadership.'

kianbeng@sph.com.sg

===

MM'S Worry

'WHAT do I think of where we are? I worry about it.

I've got a younger generation that thinks this is a natural state of affairs, not knowing how we got here, not knowing the base on which the superstructure is resting, that it is organisation, training, discipline and tough-minded leadership.

Without that, it will spiral downwards within five to 10 years, and we'll be back to square one and we can never rise again.

That first rise was a stroke of destiny. I had a brilliant team. We did not plan this.

But we knew that if we did not connect to the world, we'll never get anywhere. So we made the world our hinterland and we made ourselves useful to that world. How? By building First World conditions in a Third World region.

We trained our people to live and behave like First World citizens, not to spit, not to litter, not to make too much noise, be educated.

The Western media made fun of us. But we've got here.

Will we always stay here? Not at all. The moment you have a weak leadership, the moment people lose their sense of endeavour, their effort, their discipline, you'll just peter out.'

===

Not so egalitarian

'Look at China. The bright come from anywhere. You can be the son of a farmer, worker. If you pass the Imperial Examinations... you're a xiu cai (county scholar) or a jun shi (military strategist) or a zhuang yuan (top imperial scholar). If you come top of the examination, chances are the emperor will want you to marry his daughter.

'And when these scholars retire, they go to a place with a milder climate along the Yangtze. There's one town called Suzhou which had the Zhuang Yuan Jie (Imperial Scholars' Street). They had multiple wives, so multiple children. That street produced many zhuang yuan and that's why it's called Zhuang Yuan Jie.

'And that's why we chose Suzhou. It succeeded. We were dealing with extremely smart and bright people, brighter than the people we sent. Our people had the knowledge, they didn't, but they had a fine IQ.'

MM Lee, giving an example from China of how societies may eventually become less egalitarian as new generations benefit from the preceding ones. The Singapore-Suzhou Industrial Park was a collaboration with the Suzhou authorities.

===

HR development: Talent v Grades

'(In Japan), before you become a landscape architect... by the primary school stage they have already decided whether you've got that aesthetic sense of colours, shapes, forms... If you have it in a high degree, then you become a sculptor or a painter, architect, interior decorator, landscape artist...

'(Here in Singapore), we just pick them by their O levels and A levels, what they scored for mathematics, science, languages, not...how well they did in aesthetics.

'We've had the same problem with architecture. We have stereotype buildings... I wonder why. Because we employ or rather we train people who scored well in engineering....

'...my son had a schoolmate who won a scholarship to Cambridge and wanted to do architecture. They were not interested in his A levels. They said: 'Give me a portfolio of all your drawings.' And on the basis of his portfolio, they said: 'Right, we'll take you for architecture.'

'So that's human resource development... you got to identify early... is he a musician, a dancer, a swimmer, a sportsman? So now we have specialised schools for sports, for music, for the arts, physical education.'

MM Lee, on the importance of developing people according to their innate talents rather than exam grades.

===

Knowledge, not connections, gets you a good life

'You've got to make it quite clear that knowledge, learning, application of knowledge are what will gain you a good life. If they come to the conclusion that the system depends on good connections, skiving, cheating, then you are in trouble because he sees no reason in acquiring all this knowledge.

'So...we set out to create this system where the more you learn, the more skilful you are, the better the jobs you will get, and the better the homes you would own. It has worked out that way.'

MM Lee, on how to motivate people

Copyright © 2007 Singapore Press Holdings.

All rights reserved. Privacy Statement & Condition of Access

FT: Remember the little ones at the bottom

Remember the little ones at the bottom

By Michael Skapinker

Published: October 13 2008 17:56 | Last updated: October 13 2008 17:56

The great Dr Seuss once wrote a little book called Yertle the Turtle about the construction of a turtle pyramid so high that Yertle, the top turtle, could see everything for miles around. No sooner was the final turtle added to this vertiginous structure than Mack, a little chap at the bottom, burped, bringing the edifice crashing down. The top turtle found it humiliating, but the others lived happily ever after.

Our story today is very similar, except that the little chap who burped was called Ninja. The top turtle, while humiliated, still ended up pretty rich, but it will be a long time before we know whether everyone else lives happily ever after.

Amid the bail-outs and recapitalisations, let us not forget how the Great Meltdown of 2008 started: with the little people at the bottom, the ones with the Ninja mortgages (no income, no job or assets). The brokers and banks who lent them the money were not bothered whether they could pay it back. The bankers thought the value of the houses purchased with the mortgages would rise forever and, anyway, they were planning to package those loans and sell them.

Underneath the great meltdown lay the great disconnection between banks and their customers. The UK may not have gone for Ninja loans, but it did have its cousins, the self-certified mortgages.

Banks once knew their borrowers. When I took out my first mortgage in the mid-1980s, I was called into the branch manager’s office for an interview. The letter from my employer detailing my salary was on his desk. No self-certification then.

It was not just borrowers that banks knew better. They used to see their savers, until that began to seem unnecessary trouble.

Once, as part of my bank’s sporadic effort to market itself, I was asked in for a chat. The manager was pleasant, although not many years from his first shave. He called up my details on his screen. I do not think they had been updated since I first opened the account as a student. I could see that that long-ago page about me was headed “high potential”. When, I felt like asking, do you replace that with “unfulfilled potential”? The manager promised to keep in touch. I never heard from him again.

It is not just banks who lost contact with their customers. So did water companies, airlines and internet service providers. Speak to people about their dealings with companies and they often talk as if they are at war with them – or they would be if they could speak to them.

The technology that has done so much to cut companies’ costs has created a gulf between them and their customers.

There are the telephone barriers, the demands to key in one number after another before you can speak to anyone, usually in a call centre.

Many call centre workers do not seem bothered when you do speak to them. When my internet connection kept stalling, the call centre operatives told me the problem was my own computer. In desperation, I paid a computer engineer to check it. He could find nothing wrong. I telephoned the call centre and triumphantly informed the person I spoke to of the engineer’s verdict. “Your engineer is a liar,” he said.

I do not blame the employees. Underlying the disconnection between companies and their customers is a breakdown of trust between companies and their staff.

Much of it is about pay. The growing gap between senior management and staff salaries, the sense that the top people were in it for themselves, led many employees to ask why they should bother. The closure of their pension schemes persuaded them that they shouldn’t.

How did companies get this way? Underlying it all, in banking and everywhere else, was an obsession with “making the numbers”. The pressure for double-digit earnings increases led to the frantic cost-cutting, the stripping away of employee benefits and the disappearance of front-line staff who knew the customers and cared enough to look after them.

It was because chief executives made the numbers that boards and shareholders were happy for them to earn unheard of sums. And it was desperation to keep on making the numbers that led financial institutions to securitise bad loans as frenetically as the bank next door.

No one knows how this fiasco is going to end. But when it does, companies will return to doing business. Numbers will still matter. Without profit, there is no business. Without cost control, there is no profit. And investors need a better return than they could get elsewhere. (Remember when we used to say they needed a better return than they could get by putting their money in the bank?)

But while numbers matter, they are worth nothing in a business that is not sustainable. What makes a business sustainable? Customers, served by motivated staff. Unlike credit default swaps, it is not complicated.

Send your comments to michael.skapinker@ft.com

Copyright The Financial Times Limited 2008

===

Important to note that Yertle was the turtle on top

Published: October 16 2008 03:00 | Last updated: October 16 2008 03:00

From Mr Xavier Leonard.

Sir, My dad read an article in the FT by a man called Michael Skapinker (‘Remember the little ones at the bottom’, October 14) and thought that there was a mistake. When he got home he asked me to check it.

When I was little, I loved Dr Seuss books, particularly Yertle the Turtle . However, I would like to correct you and say that the turtle at the bottom of the pyramid that Mr Skapinker mentions was actually called Mack – Yertle was the king and the one at the top.

My dad keeps saying that in these difficult times, getting information right is very important. I hope this is helpful.

Xavier Leonard (Aged 9),
Oakwood School,
Purley, Surrey, UK

Copyright The Financial Times Limited 2008

FT: Why public ownership is a failed model

Why public ownership is a failed model

By Luke Johnson

Published: October 14 2008 22:16 | Last updated: October 14 2008 22:16

There is another victim of the credit crunch: the publicly traded model of ownership. The near-collapse of many of the large banks in perhaps a dozen countries shows that such corporate structures do not work.

I have served on the boards of various public companies for more than 20 years and most such constructs were dysfunctional. Interests were not aligned and there was more focus on pointless, ritual corporate activity than underlying profitability and productivity. Everyone tries hard, but the disconnect between management and ultimate ownership leads to the profound issues our economy now faces.

Large public companies are mostly owned by a hugely fragmented shareholder base. Most of us have pension and insurance policies, through which we all invest in equities; everyone owns them and yet no one does. No owner has control, so the hired hands rule the roost. Fund managers meet executive directors twice a year for an hour and expect to understand what is going on. Too often they judge management based on their ability to carry off a presentation rather than their true skills as leaders. Professional investors have stakes in 100 companies or more and expect to have real insight into all of them: a fantasy. Meanwhile, the top directors of a large public company can spend a fifth of their time visiting hundreds of actual or would-be shareholders.

If things fall apart at a company, asset managers cling to a naive faith in the non-executives, as if they are really able to change matters. But on most occasions institutional investors find it easier to run from the battlefield by selling their shares. So who has any incentive to fix the cock-ups?

After all, how can the non-execs really understand what goes on? They meet less than once a month for a few hours. These days they are appointed more on politically correct criteria than anything else. Mostly, they are paid to conform. No one dares challenge the executive directors because the executives have all the information.

Under corporate governance guidelines, non-executives are not meant to have material shareholdings. Why on earth anyone of calibre bothers to go on a large public company board is a bit of a mystery. Can it only be vanity or boredom? No wonder the headhunters come up with the same tired list of names, most of whom are already chums.

On stock markets the mad gyrations of a share price during a few days can determine the destiny of an institution that has been going for 200 years. If their shares had not imploded, would the government have stepped in to save RBS and the others?

I always thought it was a terrible sign when a chief executive had a screen in the office showing the company share price – but perhaps they were the clever ones. How can anyone run a business when hedge funds trade big chunks of their equity every day? Because hedge funds comprise up to 50 per cent of all broking commission and a fair portion of trading volumes, even though they only hold 2 per cent of all shares, they have a hugely disproportionate effect on market behaviour. One benefit of these troublesome times is that hedge funds are likely to be much less influential in future, since their resources will be greatly diminished.

I believe private ownership allows a more stable, long-term approach to wealth creation. Highly geared leveraged buy-outs may suffer in the coming downturn, but family or employee ownership offers advantages over the volatility of quoted companies. There is less minute-by-minute exposure to external scrutiny, and less obsession with immediate valuation. Organising such ownership structures for banks would not be easy, but it might lead to a healthy state of affairs.

Last week I spoke at the launch of Tomorrow’s Owners, a report prepared by the think-tank Tomorrow’s Company to investigate the future of corporate stewardship. While I don’t agree with all its contents, the study is a worthwhile exploration of how businesses are owned. Anyone who wants to understand the issues and help provide solutions should get hold of a copy and contribute to the debate.

www.tomorrowscompany.com

lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm