Thursday, October 30, 2003
*
D is for:
Directors
The function and purpose of the board of directors is a mystery to most who have never reached such heights (and, for that matter, to some directors themselves).
For many managers, elevation to the board is seen as promotion to a kind of super-manager status, providing recognition, extra pay and perks, and entry to the charmed circle.
They're wrong – and if they're not, they should be.
The idea that directors are superior managers is a complete misconception.
Like so many of the world's problems, it seems to have been caused by American investment bankers, with their habit of calling anyone who doesn't have to make his own tea a vice president or an associate director or whatever else they think sounds important.
Alongside the proliferation of complex corporate structures with numerous subsidiaries (each with its own board) and faceless offshore entities with directors whose sole purpose is to insulate the real controlling interests from any tax liabilities, this trend has devalued and muddied the whole concept of directorship.
In fact, the board has two purposes.
The first is rather tedious, making sure the company complies with all the legal requirements – fiddly details like filing moderately accurate accounts. Most modern boards decided long ago that they had little interest in this, and have delegated the duties and abdicated as much responsibility as possible. [1]
The second purpose, providing strategic direction, remains. But good managers don't necessarily make good directors.
The successful sales manager, focused on driving his team on to beat quarterly targets, may be the last person you need in a discussion about five-year goals.
Equally, a good director might be quite incapable of dealing with the nitty-gritty of awkward customers and demoralised sales forces.
As for the financial rewards of being a director, they are often very real – and thoroughly undeserved.
There may be little wrong with giving valuable employees increasingly outlandish remuneration and benefits. [2] But simply becoming a director does little to increase your value. [3]
The old justification – that directors need recompense for the potential liabilities they assume – has been insured away.
The true explanation is the charmed circle of directors, the last surviving specimen of the closed shop that '80s politicians attacked so vigorously.
But why is it a closed shop?
Because a myth has grown up that you can't be a good director unless you've been one already, a classic chicken-and-egg Catch-22 that keeps the supply of potential directors to a minimum.
The exceptions are those key managers, the ones who manage to negotiate a first-time directorship as a condition of loyalty, and then find out just how easy the job is.
Provided the chairman knows how to run a meeting, almost anyone can survive and thrive on the board.
Plan your own directorship career in three phases:
1. As a new director, make sure you are thoroughly briefed on your area of responsibility – but don't worry about it. Remember, the other directors know far less about what's going on than the colleagues you face every day. As far as other agenda items are concerned, keep your head down. When asked, just say you agree with whoever is coming out on top. Outside the boardroom, use your directorship to win arguments, explaining to those who disagree with you that there are strategic issues involved that you cannot reveal and they can't hope to understand.
2. As your confidence grows, look to take on a more activist role. Your aim is to build recognition, particularly among the non-executive directors, so that when headhunters ring and invite them to suggest candidates for other posts, your name comes up. A good strategy is to identify the weakest director and find opportunities to interrupt him. [4] Take an interest in every topic, not just your specialist area, to show how your strategic grasp has developed. Try to get appointed to the audit committee.
3. Recognise when you have reached your executive peak, and plan for a gentle decline (in activity, rather than remuneration). Build a reputation as the kind of director the chief executive can trust not to raise awkward questions or support dissidents. Look to chair remuneration committees – and ensure that generous incentive schemes are approved. Choose roles that require minimal preparation and input for maximum reward. Develop your taste in fine dining.
[1] Legally, directors can be held responsible for failings in corporate governance. So the experienced director insists the company insures him against the consequences of his own incompetence. This abdication of responsibility is becoming more explicit. Audit committees, responsible for overseeing the accounts, now like to preface their reports with increasingly candid disclaimers making it clear they have no idea what's going on.
[2] But see 'Remuneration'.
[3] A similar bizarre approach was apparent during the wave of privatisations in the '80s and '90s, when directors of newly privatised companies saw their pay shoot up to reflect their increased value in the private sector. How the privatisation process suddenly boosted the value and talents of a generation of jumped-up civil servants was never explained.
[4] You may think this will make you seem irritating. It doesn't matter. Research shows that people who interrupt are far more successful than those who don't. It's a nice example of the way business self-regulates, ensuring that those who listen and learn never gain too much influence.
D is for:
Directors
The function and purpose of the board of directors is a mystery to most who have never reached such heights (and, for that matter, to some directors themselves).
For many managers, elevation to the board is seen as promotion to a kind of super-manager status, providing recognition, extra pay and perks, and entry to the charmed circle.
They're wrong – and if they're not, they should be.
The idea that directors are superior managers is a complete misconception.
Like so many of the world's problems, it seems to have been caused by American investment bankers, with their habit of calling anyone who doesn't have to make his own tea a vice president or an associate director or whatever else they think sounds important.
Alongside the proliferation of complex corporate structures with numerous subsidiaries (each with its own board) and faceless offshore entities with directors whose sole purpose is to insulate the real controlling interests from any tax liabilities, this trend has devalued and muddied the whole concept of directorship.
In fact, the board has two purposes.
The first is rather tedious, making sure the company complies with all the legal requirements – fiddly details like filing moderately accurate accounts. Most modern boards decided long ago that they had little interest in this, and have delegated the duties and abdicated as much responsibility as possible. [1]
The second purpose, providing strategic direction, remains. But good managers don't necessarily make good directors.
The successful sales manager, focused on driving his team on to beat quarterly targets, may be the last person you need in a discussion about five-year goals.
Equally, a good director might be quite incapable of dealing with the nitty-gritty of awkward customers and demoralised sales forces.
As for the financial rewards of being a director, they are often very real – and thoroughly undeserved.
There may be little wrong with giving valuable employees increasingly outlandish remuneration and benefits. [2] But simply becoming a director does little to increase your value. [3]
The old justification – that directors need recompense for the potential liabilities they assume – has been insured away.
The true explanation is the charmed circle of directors, the last surviving specimen of the closed shop that '80s politicians attacked so vigorously.
But why is it a closed shop?
Because a myth has grown up that you can't be a good director unless you've been one already, a classic chicken-and-egg Catch-22 that keeps the supply of potential directors to a minimum.
The exceptions are those key managers, the ones who manage to negotiate a first-time directorship as a condition of loyalty, and then find out just how easy the job is.
Provided the chairman knows how to run a meeting, almost anyone can survive and thrive on the board.
Plan your own directorship career in three phases:
1. As a new director, make sure you are thoroughly briefed on your area of responsibility – but don't worry about it. Remember, the other directors know far less about what's going on than the colleagues you face every day. As far as other agenda items are concerned, keep your head down. When asked, just say you agree with whoever is coming out on top. Outside the boardroom, use your directorship to win arguments, explaining to those who disagree with you that there are strategic issues involved that you cannot reveal and they can't hope to understand.
2. As your confidence grows, look to take on a more activist role. Your aim is to build recognition, particularly among the non-executive directors, so that when headhunters ring and invite them to suggest candidates for other posts, your name comes up. A good strategy is to identify the weakest director and find opportunities to interrupt him. [4] Take an interest in every topic, not just your specialist area, to show how your strategic grasp has developed. Try to get appointed to the audit committee.
3. Recognise when you have reached your executive peak, and plan for a gentle decline (in activity, rather than remuneration). Build a reputation as the kind of director the chief executive can trust not to raise awkward questions or support dissidents. Look to chair remuneration committees – and ensure that generous incentive schemes are approved. Choose roles that require minimal preparation and input for maximum reward. Develop your taste in fine dining.
[1] Legally, directors can be held responsible for failings in corporate governance. So the experienced director insists the company insures him against the consequences of his own incompetence. This abdication of responsibility is becoming more explicit. Audit committees, responsible for overseeing the accounts, now like to preface their reports with increasingly candid disclaimers making it clear they have no idea what's going on.
[2] But see 'Remuneration'.
[3] A similar bizarre approach was apparent during the wave of privatisations in the '80s and '90s, when directors of newly privatised companies saw their pay shoot up to reflect their increased value in the private sector. How the privatisation process suddenly boosted the value and talents of a generation of jumped-up civil servants was never explained.
[4] You may think this will make you seem irritating. It doesn't matter. Research shows that people who interrupt are far more successful than those who don't. It's a nice example of the way business self-regulates, ensuring that those who listen and learn never gain too much influence.
Tuesday, October 21, 2003
*
D is for:
Design
The first time you realise design is important, it can hit you like a revelation.
You see yet another red sports car, and you laugh about how the colour is more important than the performance … and then you begin to wonder whether something similar could work for your products.
Or you’re flicking through the ads in the local paper, and one of them just seems to jump out at you, even though it’s not for anything you’re interested in … and you suddenly think how nice it would be if your own marketing was as eye-catching as that.
Or you go shopping for a sofa, and you find one that doesn’t just look good but feels comfortable as well … almost as if it had been designed to work with your body.
So you make the bold step of investing in design, explaining to your colleagues that you know it’s worth doing, even if they don’t quite get it yet.
You hire a graphic designer to rework your marketing material, choosing a new typeface that not only makes your brochures legible (a good start) but somehow seems to tie in with the image of your company.
And you share the new wisdom with your production people, telling them how important product aesthetics and ergonomics are (and using those words to show you know what you’re talking about).
You even think about recruiting an art school graduate, instantly creating your own in-house design department.
You feel pretty pleased with yourself.
You’ve cracked design, and you’re another step ahead of the competition.
Wrong.
You haven’t cracked design. You’ve scratched the surface.
If you think design is nothing more than creating products that look good and function well, you understand it about as well as the man who thinks branding is just a matter of choosing a logo. [1]
But that’s not your only mistake. You made a bigger mistake some time ago, when you failed to think about design right from the start.
For a one-off brochure, you can just about get away with hiring someone to tack on a bit of design at the end to make it look nice.
But without a solid foundation of good design, the chances of producing a single, coherent image for your business are slim to vanishing.
That kind of image – one that speaks to your customers across all your marketing (and through all those other little clues, like the appearance of your premises and staff) and ties in plausibly with the products you are selling – doesn’t just happen.
Product design, too, is about far more than just a look. Image and aesthetics are a small part of the story. What about boosting product performance, making good use of the latest technologies and materials, cutting component costs, improving production efficiency, meeting legal standards, or reducing waste?
Leave all that to some ‘creative’ you find in Yellow Pages and you might as well give up altogether.
The truth is, design is fundamental and pervasive.
Unfortunately, the word ‘design’ itself conjures up all the wrong images.
The designers who promote design have made a poor job of it. Perhaps they should have spent more time trying to communicate just how far-reaching the effects of design can be.
Design isn’t just dreaming up pretty shapes and images. It’s thinking about what your customers want, and how you can plan your products and processes to help satisfy them. [2]
Design is making the right choices, on purpose.
Ultimately, you have a choice. Do things by design, or do things by mistake. You know which is more likely to get you where you need to go.
[1] See Branding.
[2] William Miller of the Consummate Design Center defined design in its broadest sense when he said it was ‘the thought process comprising the creation of an entity’. Like all business pundits’ definitions, this has its drawbacks, but at least it beats the old favourite that defines marketing as ‘satisfying customers’ needs profitably’. You could just about get away with hiring someone to take charge of design and telling him his job is to think through everything you are trying to create. Take on a new marketing manager and tell him to satisfy customers’ needs profitably, and he will either sink into a deep depression or resign on the spot.
D is for:
Design
The first time you realise design is important, it can hit you like a revelation.
You see yet another red sports car, and you laugh about how the colour is more important than the performance … and then you begin to wonder whether something similar could work for your products.
Or you’re flicking through the ads in the local paper, and one of them just seems to jump out at you, even though it’s not for anything you’re interested in … and you suddenly think how nice it would be if your own marketing was as eye-catching as that.
Or you go shopping for a sofa, and you find one that doesn’t just look good but feels comfortable as well … almost as if it had been designed to work with your body.
So you make the bold step of investing in design, explaining to your colleagues that you know it’s worth doing, even if they don’t quite get it yet.
You hire a graphic designer to rework your marketing material, choosing a new typeface that not only makes your brochures legible (a good start) but somehow seems to tie in with the image of your company.
And you share the new wisdom with your production people, telling them how important product aesthetics and ergonomics are (and using those words to show you know what you’re talking about).
You even think about recruiting an art school graduate, instantly creating your own in-house design department.
You feel pretty pleased with yourself.
You’ve cracked design, and you’re another step ahead of the competition.
Wrong.
You haven’t cracked design. You’ve scratched the surface.
If you think design is nothing more than creating products that look good and function well, you understand it about as well as the man who thinks branding is just a matter of choosing a logo. [1]
But that’s not your only mistake. You made a bigger mistake some time ago, when you failed to think about design right from the start.
For a one-off brochure, you can just about get away with hiring someone to tack on a bit of design at the end to make it look nice.
But without a solid foundation of good design, the chances of producing a single, coherent image for your business are slim to vanishing.
That kind of image – one that speaks to your customers across all your marketing (and through all those other little clues, like the appearance of your premises and staff) and ties in plausibly with the products you are selling – doesn’t just happen.
Product design, too, is about far more than just a look. Image and aesthetics are a small part of the story. What about boosting product performance, making good use of the latest technologies and materials, cutting component costs, improving production efficiency, meeting legal standards, or reducing waste?
Leave all that to some ‘creative’ you find in Yellow Pages and you might as well give up altogether.
The truth is, design is fundamental and pervasive.
Unfortunately, the word ‘design’ itself conjures up all the wrong images.
The designers who promote design have made a poor job of it. Perhaps they should have spent more time trying to communicate just how far-reaching the effects of design can be.
Design isn’t just dreaming up pretty shapes and images. It’s thinking about what your customers want, and how you can plan your products and processes to help satisfy them. [2]
Design is making the right choices, on purpose.
Ultimately, you have a choice. Do things by design, or do things by mistake. You know which is more likely to get you where you need to go.
[1] See Branding.
[2] William Miller of the Consummate Design Center defined design in its broadest sense when he said it was ‘the thought process comprising the creation of an entity’. Like all business pundits’ definitions, this has its drawbacks, but at least it beats the old favourite that defines marketing as ‘satisfying customers’ needs profitably’. You could just about get away with hiring someone to take charge of design and telling him his job is to think through everything you are trying to create. Take on a new marketing manager and tell him to satisfy customers’ needs profitably, and he will either sink into a deep depression or resign on the spot.
Sunday, October 12, 2003
*
D is for:
Delegation
Modern management theory likes to talk about delegation in the most enlightened terms.
Gone are the days when you simply dumped unpleasant chores on your subordinates.
Instead, delegation now is all supposed to be about looking for opportunities to develop your employees, designing suitable tasks, selling the benefits, and providing ample support and backup.
What rubbish.
The theorists have missed the point.
It’s a simple and profound principle of business – before you do anything, work out what you are trying to achieve.
When you delegate, the primary objective isn’t to develop your employees: it’s to get rid of some work.
That’s not to say that developing your employees isn’t a worthwhile goal. It’s laudable, and there are all sorts of opportunities to provide training and experiences that will help them.
As it happens, dumping work on employees is a valuable development exercise. It helps them get used to doing boring tasks and develop a healthy sense of resentment towards you – an essential attitude if they are to fit in with their colleagues. And you get all this value for no cost.
You don’t need to go out of your way to design suitable tasks. As long as you delegate work the employee can do, you have got it out of the way.
You don’t need to make a great effort to sell the benefits. The employee probably realises that he can do the work faster and better than you in any case. If there is any confusion over this point, remind the employee how much more you earn than him – and hence how much more valuable your time is.
You don’t need to worry too much about support and back-up. A suitably motivated employee (‘I need this by Friday. And, by the way, it’s your performance review on Monday.’) will come to you with any difficulties. Better still, he will find a way round the problem by drawing on the experience of colleagues who are far more likely to help him out of a hole than they are to respond to a direct request from you.
All you need to do is keep an eye on progress to make sure there are no unpleasant surprises.
Then, when the work is completed, a quick thank you and … the next little job.
D is for:
Delegation
Modern management theory likes to talk about delegation in the most enlightened terms.
Gone are the days when you simply dumped unpleasant chores on your subordinates.
Instead, delegation now is all supposed to be about looking for opportunities to develop your employees, designing suitable tasks, selling the benefits, and providing ample support and backup.
What rubbish.
The theorists have missed the point.
It’s a simple and profound principle of business – before you do anything, work out what you are trying to achieve.
When you delegate, the primary objective isn’t to develop your employees: it’s to get rid of some work.
That’s not to say that developing your employees isn’t a worthwhile goal. It’s laudable, and there are all sorts of opportunities to provide training and experiences that will help them.
As it happens, dumping work on employees is a valuable development exercise. It helps them get used to doing boring tasks and develop a healthy sense of resentment towards you – an essential attitude if they are to fit in with their colleagues. And you get all this value for no cost.
You don’t need to go out of your way to design suitable tasks. As long as you delegate work the employee can do, you have got it out of the way.
You don’t need to make a great effort to sell the benefits. The employee probably realises that he can do the work faster and better than you in any case. If there is any confusion over this point, remind the employee how much more you earn than him – and hence how much more valuable your time is.
You don’t need to worry too much about support and back-up. A suitably motivated employee (‘I need this by Friday. And, by the way, it’s your performance review on Monday.’) will come to you with any difficulties. Better still, he will find a way round the problem by drawing on the experience of colleagues who are far more likely to help him out of a hole than they are to respond to a direct request from you.
All you need to do is keep an eye on progress to make sure there are no unpleasant surprises.
Then, when the work is completed, a quick thank you and … the next little job.
