Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Corporates need to address new realities

153 views

Published on

Published in: Business
  • Be the first to comment

  • Be the first to like this

Corporates need to address new realities

  1. 1. Corporates need to address new realitiesGregg BarrettINTOXICATING euphoria - and no I am not referring to Japan’s finance minister,Shoichi Nakagawa, who resigned recently after being accused of being drunk at a G7conference. It’s rather a reference to the level of management incompetence during timesof prosperity when it seems that it was not just Elvis that left the building, but in fact Mr.Common Sense and Mr. Corporate Governance as well.The story goes along the lines … unbridled greed, selfish behaviour, a failure to considerthe needs or interests of others … these are the tendencies that have unleashed angeragainst the world of business and its leaders.While the governance scandals of recent times have revealed some fraudulent characters,much of what has gone wrong is due more to incompetence than dishonesty.In the excitement of a globally expanding economy, the fear of being left behindtranscended good judgment in making business and political decisions. The collapse hasdemonstrated a failure of among other things, today’s organisational and regulatorystructures and management information systems.In drawing a parallel to Cinderella at the ball and to add a little spin to comments fromMr. Buffett - during times of prosperity most hate to miss a single minute of what is onewonderful party. The giddy participants all plan to leave just seconds before midnight,the problem is that they are dancing in a room in which the clocks have no hands.Currently businesses face a backlash because of the failure by some to make sound moraland ethical judgments and rightfully so. This includes many CEOs and their Boards thatawarded excessive personal remuneration. Society reluctantly accepted the argument thatremuneration that ran into the millions in terms of salaries and bonuses were meritedbecause of the exceptional growth these individuals were driving.The question is: ”Where is the accountability now that things have gone wrong?”Surely these rewards should now be reversed? The current situation could be equatedto:”So we as management are responsible for success, failure on the other hand has gotnothing to do with us!”.In rebuilding trust and staving off interference from regulators, auditors and NGO’s, partof the corporate sectors’ work must be to address the new realities of networkedcommunications and technologies that support not only speed of communication, but alsogreater transparency. Executives, who believed that decisions could be hidden from thepublic view, or that business complexity somehow absolved them from personalresponsibility, need to think again.In his blog, Tim Cummins recounts the method used at IBM called ‘Balanced BusinessDecisions’.Balanced Business Decisions forced people through several discrete yet simple phases. Itmade clear that everyone owned risk and was responsible for its management - unlike theworld of today, where ‘experts’ are hired to relieve management of the need to take
  2. 2. personal ownership.The philosophy of ‘Balanced Business Decisions’ is based on concepts of trust,teamwork and collaboration. It demands thought and consideration of viewpoints andperspectives that go beyond your own narrow interests. What business needs today is notsocialism, but social responsibility.The approach:First, you have to describe what you are trying to do and what outcomes you want toachieve. Second, you face a long checklist of stakeholders - internal and external - andhave to describe the impact on these stakeholders and what their reaction might be. Third,you have to develop and document a risk mitigation strategy for any identified issues ordependencies, with particular focus on the steps needed to reduce probability. Keepingthings secret is not an acceptable risk strategy.Finally, you have to write an imagined press article that resulted from your initiative,remembering that the job of the press is to expose and ridicule, rarely to praise.Certainly the system is not foolproof, but it is easy to understand and to follow, unlikemany of the horrifically complex enterprise risk systems imposed by ‘experts’. Perhapscorporate executives would have done well to adopt such a simple yet rigorous approachto their business decision-making.In Tim’s view restoring the credibility of business, requires:- Executive management must de-mystify risk and ensure that all employees and tradingpartners understand their responsibility for its assessment and management. Ignorance isnot an excuse.- Businesses must introduce risk management techniques that do not depend on expertsand outsiders, but which every employee can understand and use.- Responsibility and accountability for making good decisions - and learning from badones - applies equally to everyone in the company and its selected trading partners. Thataccountability starts at the top.Reminded of the teachings of Benjamin Graham which seemingly only a fewremembered during the prosperity party that was taking place: “You’re neither right norwrong because other people agree with you. You’re right because your facts are right andyour reasoning is right—and that’s the only thing that makes you right. And if your factsand reasoning are right, you don’t have to worry about anybody else.”The point is that corporate governance and corporate responsibility transcends marketlevels and the behaviour of the masses. For many organisations, governance, riskmanagement and responsibility are part of the organisational fabric, embedded in theculture, ever present, ever considered and never compromised. For others (which wedon’t even need to name, just browse the headlines) it is just a fad – a fire that needs to beextinguished for the time being, before moving onto the next one.

×