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    Is "we were misled" an acceptable defence?

    Governance Management Performance Strategy
    The shares of boutique brewer, Moa Group, slumped by over 20% today, on news that the company expects to miss its revenue forecast by 30%. The market had valued the business on the basis of future growth projections. However when targets are missed, consequences follow—as they did today. While the announcement would have been disappointing for the shareholders, the CEO's reaction was simply stunning: "We were misled".

    Gosh, what an admission! Geoff Ross, CEO, has had a great run over the last few years, with the success of 42 Below, and more recently, Trilogy. Why did this doyen of the business and entrepreneurial community not see the 30% sales slump—just four months into the fiscal year—coming? Is "we were misled" an acceptable defence, or should the CEO and Board have seen the situation coming (through effective reporting and monitoring processes) and taken positive action earlier? "We were misled" sounds passive and dismissive. The latter option is more acceptable to shareholders.

    Without wishing to be impetuous, the Moa Group board needs to take stock. The company strategy and goals need to be reviewed to ensure they continue to be realistic given market conditions; reporting and monitoring processes need to be refined; and, the board needs to become more actively engaged in the oversight of the business. Then, and probably only then, will the now-visible discrepancy (between forecast and actual performance) be addressed and shareholder confidence restored. 

    Notwithstanding this critique, I wish Moa Group well for the future. It's products are great!
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    Why is the opening of a data centre newsworthy?

    Management Performance
    I'm amazed at the things considered to be newsworthy sometimes. Let me give you an example. Telecom's IT subsidiary, Gen-i, has just announced the opening of a new data centre, and the trade press have picked up the story. A data centre is a facility used to house specialised equipment, from which services are provided. They are not dissimilar to a telephone phone exchange, power station or other capital intensive facility operated by utility companies. Apart from promotional value (to Gen-i, promoting it's wares), I fail to see how the opening of a facility is actually newsworthy. It's not as if customers visit data centres, as they do bank branches or retail outlets. Surely the long-since commoditised information technology market means the primary interest of customers is that the services they purchase work as promised? Who cares whether a service provider doubles the capacity of an existing facility, or opens a new one? Must be a slow news day...
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    The Fonterra crisis: a failure to learn from past lessons?

    Governance Management Performance Research Societal Wellbeing Strategy
    Fonterra, dairy industry giant and also New Zealand's largest company, has been in the news of late, for all the wrong reasons. Fonterra processes raw milk and exports 97% the resultant products for further processing and consumption in countries around the world.

    The cause of the recent events was a suspicious product test, which raised the possibility that the bacteria that can lead to botulism was present in a 38-tonne batch of whey product manufactured in early 2012. The whey product is used in the manufacture of infant milk formula, and botulism can be fatal. Understandably, the event became front page news, with flow-on ramifications in political, economic and tourism circles, very quickly. 

    At this point, I want to acknowledge that mistakes, unexpected events and crises happen. This is a fact of life. The test of one's mettle comes in the response.

    On the surface, it would appear that Fonterra has failed to manage the crisis well, despite an exemplar case being widely available. In 1982, packets of the then market-dominant Tylenol product were laced with cyanide. Seven people died from unknowingly consuming poisoned capsules. Johnson & Johnson's response to the crisis was exemplary. They immediately withdrew every box of Tylenol from sale, established a 1-800 helpline and actively sought media coverage. While Johnson & Johnson took a short-term hit, they emerged stronger than before. Compare that with delays in reporting the possibility of the problem to the authorities, and seemingly poorly briefed representatives at press briefings. And where was the Chairman?

    No doubt a review (or, more probably, several reviews) will be conducted to discover how the problem occurred; why it was not discovered earlier; what processing, communications, information sharing and other processes failed; and how the whole affair was managed. I hope that, in the process, someone thinks to look to other similar cases—like the Johnson and Johnson one—and to learn from them!
  • Published on

    On strategy: keep it straightforward

    Governance Management Performance Strategy
    I had the privilege of working with a group of 23 wonderful people yesterday. The task was to present the 'strategy' day of the IoD five-day Company Director's Course, the Institute's flagship professional development programme. The course is designed to provide a solid grounding in governance and governance-related topics. Delegates usually have some governance experience, although some do not. The strategy component explores a range of topics including the importance of strategy; the strategic planning process and formation of strategy; the role of the board; and, the importance of implementation and monitoring.

    As I worked with the delegates, I was reminded that the underlying foundations of strategic planning are actually very straightforward. Just four questions need to be answered:
    • When are we now?
    • Where do we want to go?
    • How do we get there?
    • How will we know?

    For organisations, this means understanding the environment the organisation operates in, confirming the core purpose and strategic objective(s), and then selecting strategies and action plans to achieve the objective. That's all. The rest can (and should) be treated as tactical actions, to be completed by management as part of the business planning process. 

    One final point. The output of the process (the plan) should be as straightforward as the process used to create it. A coherent plan—that fits on one or two pages—is far more likely to be understood and supported, than a large document with many pages of tables, lists and detailed analyses.
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    The value of long service on Boards: redux

    Governance Management Performance Societal Wellbeing
    A couple of weeks ago, I posted some thoughts about long service on Boards. My conclusion then was that ten to twelve years was a reasonable upper limit on service, beyond which the value of one's contribution starts to fall away.

    While the context of that post was corporate boards, the value question also needs to be asked of elected local body officials—Mayors and Councillors—for they hold a governance mandate. I raise this because an article published in the Dominion Post today highlighted the issues of long service and the need for 'fresh blood' in the Wellington City Council. The average length of service is twelve years. One Councillor has spent 27 years on Council. While some of the longer-serving Councillors were quick to defend their long stints, I couldn't help but get the feeling that occupancy in the role and advocacy of single issues (not to mention fees earned), had become more important than performance and public good in a number of cases (click here and here for examples).

    This latest example reinforces the opinion I expressed two weeks ago. Performance and contribution should always prevail over longevity and status. I hope the candidates and voters bear this in mind in the run-up to the local body elections this October.
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    Project management: why can't we get it right?

    Management Performance Research Societal Wellbeing Time Management
    Many years ago, when I was just a few years out of university, I heard an alarming statistic: that most projects (70% or more) were delivered late, cost more and provided less than originally planned. Some were never completed at all. I recall discussing this with my then colleagues and associates, because it seemed like an important problem that needed to be solved. My colleagues said that new systems and processes were being developed, and that this would alleviate the problem. 

    Fast forward a generation... Many systems and processes have been introduced—including MS-Project, PMP, Prince2, PMO and others—but have the expected gains been achieved? Sadly, they have not. As a recently published KPMG report indicates, most projects are still late, cost more, provide less or fail outright. On this evidence, little has changed. Much time and effort has been spent developing and promoting new systems—and millions of dollars are still being wasted.

    So, what's gone wrong, and why haven't things improved? In my view, most project management systems and processes have failed to deliver any material gains, because they do not address the vagaries of the most crucial factor: people. A more holistic approach is required. Rather than spend more effort refining systems and introducing yet more processes, attention needs to turn to the people factors. The research literature is replete with information to guide a new generation of people-focussed effort. However, until someone takes up the challenge—to deal with the motivational, behavioural and other psycho-social factors—I suspect the wastage will continue.