Is diversity cutting it?


No acceptable corporate communication today without a word on diversity, which is mostly understood as gender management and how the more women in their ranks, the greater companies are. The HBR even recently came up with a paper called “Women make teams smarter”.

And that is certainly true.

However, this corporate ideal has decayed into a holier-than-thou attitude which now hurts the employee ranks and brings forth two issues.

In some places, men now know for sure they won’t access certain exposed roles because their KPI is not high enough in the cup size area (how’s that for a sexist comment? Inappropriate, isn’t it. Trust me, that felt good). On the altar of the politically correct, they know they will never, ever, make it to the gender-diversity alibis some roles have become. Like that woman on the Board, alone representative of her gender on the Board. She just bought herself the safest seat: if she steps down, the Board loses its “gender diversity”. Fewer female than male executives equals less competition trying to take the cookie away from her… She is safer than her peers.

In this Fortune 500 company, the CHRO role is now so out of reach you need to wear high heels to grab it. No other way, Sir. It is discrimination, but in a way, that is alright and not really the point: women have been discriminated against in a number of ways so one could say it is only fair. Why not?

What is more concerning is the fact now some men consider leaving the boat and moving to friendlier shores much earlier with higher damages to the company. Internal battles for the highest, visible C-suite positions, used to see a very limited number of opponents, generally two or three, groomed by the Gods and put to the test for the fittest to survive. Like they say: “there can be only one”.

But now that the top doghouse has its access restricted, the top dogs have less incentive to enter the competition for the N-1 and N-2 jobs that are traditional paths to said top position. Where two used to fight for the top job, leaving one loser who would then move away, four, five, or more now fight for the positions underneath knowing these are the last available rungs on the ladder. That makes three or more losers who will seek their fortune under other skies.

Bottom line: we wanted a wider talent pool by considering the better half of mankind. But the way we applied our policies, we are likely to have restricted our talent pipeline. Unfortunately we will probably have to go that way for a while, be it only for the proverbial penny to drop and the culture to change. That is the first issue.

The second issue lies somewhere else but is certainly equally dangerous: the tree hides the forest. Gender diversity pumps the diversity budgets and steals the show whereas diversity is something else entirely and certainly not only restricted to gender. It is the necessity to confront different ideas, generated by diverse and different backgrounds. Ethnical diversity is certainly one thing to promote, but more than that, cross-functional mobility (from marketing to HR, from finance to manufacturing etc), or diversity of background and education are the best way to ensure “frank exchanges” on ideas, which means discussion, creativity and therefore difference, innovation, edge. That diversity is too rare in a world of co-optation in which one hires amongst one’s own.

Women are great, and they are men like everyone else.  They need equity in Corporatia. But beware to not be counterproductive in the name of the political correctness, and not miss the true meaning of diversity. That will only bring resentment amongst the troops and prevent from reaching the objective. This not a criticism of the purpose, only a warning regarding the way the action is led: hell is paved with good intentions.

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The End… To End Era: All Kneel Before the Actuaries!


There are a few conflicting trends currently happening in Corporatia. These are not exactly new trends: they have been at work for quite a long time. Yet they are starting to re-shape the face of the working world in many aspects: the behaviour of consumers, the international labour division, international trade flows etc.

The point at stake here is the attitude towards risk in general, and the way Risk – capital R – is now becoming the obvious, most traded commodity. Companies, as a very complex and intertwined system of promises – promise towards the employees, towards the customers, towards the suppliers. The simple fact one issues an invoice and agrees to / has sufficient faith in the fact said invoice will be honored later, is an example of how the system works.

And it works well indeed. Yet, all actors of the system are now putting pressure on one another in order to decrease their own risks. This pressure usually takes the shape of a discount on the mother of all commodities, money: in order to lower my risks, I want you to lower your prices, always. Or the other way around: “look, less risks with me as my prices are lower!” So far nothing new under the sun.

What is interesting, though, is that in order to decrease risks taken by shareholders – that is, often and quite naturally, risks for the CEO to have to step down under the pressure of said shareholders – companies tend to focus on barbarian things such as their “core business”, e.g. usually markets in which they are in the top three competitors, thus divesting and selling away assets that are not considered as “strategic” (a beauty of the S-word: “often used to justify something that can’t be backed by a sound cash-flow analysis”, one of my professors used to say. Ah, wisdom!)

The trend could not stop there: companies are now selling departments or functions they do not feel they are getting enough value out of. Motto: “someone can manage it better!”

The trendy label for this is “outsourcing”: of IT, of Finance, of HR… What is sold to outsourcing firms is often the transactional side of back-office functions in a purely financial logic: let us exchange a department that costs X% of the turn over (say, payroll or accounting) against an outsourcing contract that will cost Y% of the turn over. Guess what: Y < X, I am sure that one took you by surprise.

While the company transfers all responsibility on said functions, exchanging partial control on some of its resources against a service level agreement (fully inclusive of penalties, fees, roles & responsibilities, bilateral governance…), it exchanges the operational risk to the outsourcer against a certain financial stability (“I give you the risk against a flat fee: if you don’t deliver, you compensate”). If the deal is badly negotiated as it is often the case, the selling firm partially loses its agility. I will say it differently: if I can exchange control + a cost of $10 every month against lesser control + a cost of $5, but the possibility to invest my new $5 in something I think will get me more returns, I as a 21st century corporation go for it any day of the week.

The bottom line here is that the ability to deliver is no longer the goal: the capacity to decrease the – financial – risk is, which accounts for the increasing influence financial markets wield on firms and shows how companies have become a financial investment vehicle, far from the label of corporate citizens or purveyors to the needs of Earthlings that some observers are trying to tag them as. Corporate citizen vs. Investment vehicle: a tough contradiction to solve, so long live the Vox Populi whose pressure kept danger at bay so far… most of the time! But that is another discussion.

That exchange of risk + control against financial visibility has so far made the day of India, Morocco, Mexico, all countries that fully benefit from the outsourcing trend and good for them. Ricardo (as in “David Ricardo”, the British economist, I was not going to take a Mexican example there) had seen it all along: countries are climbing their way to wealth thanks to specialization. At the same time, what the consuming trends require is that corporations take responsibility and full control over the risks that they pass on to their customers.

Risk? Buy a coffee at a certain fast food chain whose mascot used to be a red-haired clown (where is Ronald now by the way?) The water has to be drinkable or sue the water utility company! The whole thing must not cause any harm. Makes complete sense.

That was before. It now must alsobe served at a harmless temperature in case you were to trip and fall with it, or better, pour it on your skin as soon as it is delivered to you, or have the espresso machine maker pay! The cup has to be good to nature in case you were to throw it away next to the bin, so have the cup manufacturer pay! You should not be able to gag on the straw, either so… Next, the available sugar will probably have to be harmless to diabetics. And do not get me started on the hamburgers, the meat and all that jazz…

But I am getting off topic, here. My point really, is that this outlet that serves what is said to be edible tidbits is at the end of the value chain really. As such, it has to cope with all the risks that were generated by the whole chain and stands responsible for them before mankind, should anything feel like turning a unit of said mankind into a corpse for instance, and even though the hamburger retailer does not own the whole chain. Yet with the buy-and-sell of operating functions, back-office departments etc, we are creating more and more complex value chains, that is more and more complex risks with less and less power over them.

Of course controls exist all along this value chain to protect one another, but the zero-risk concept is alien to this world. So the company which runs the outlet will most likely want to hedge its risks, get them financially covered. We had delivery terms and conditions. We had a quality blueprint. We are probably on our way to be enslaved under the rule of the god of Service Level Agreements, without having a clear picture whether or not this exchange actually generates value since the cost of operating with outsourced resources or governing the whole joint system are hardly ever accurately taken into account.

Think of the old Agency Effect: now that, for example, front office and operations belong to one firm and back office to another, do you seriously think they have the same agenda? Who can tell what is the cost of that?

What is the conclusion then? Well… we live in a world in which the word is “affordable risk”, a concept firms translate immediately into “how can I reduce it?” Corporations decrease their operational risk in exchange of extra cash, or rather exchange operational control against cash control.

The question is: how much cash can that be… How are called people who compute the financial value of a risk and therefore the penalty to be paid should the risk occur? Yep. These probably have a great future ahead of them. It sometimes feels like “Foundation”, Asimov’s book. If there is a god of Service Level Agreements, He certainly has an army of servants. So Hail to them, the Actuaries!

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ibad


Apples are special to mankind. They are both the reason why women ‘with pain will give birth to children’ or why three regular chocolate cake helpings make each breath harder to draw. It also makes it difficult to explain to your kids why an ounce of feathers is as heavy as an ounce of lead. Try for yourself!

One bad apple recently spoiled the whole bunch again. Steve is sick for the third time and the Apple community – which dramatically expanded since the Mac thanks to the iPod, iPhone and iPad – is in disarray. The stock went down by more than 8% in some places.

Apple has got quite a strange history and so does its founder. What is surprising is the company that gave Jobs the boot in 1985 to rehire him via an acquisition in 1996 and saw him on a sick leave not just once, but twice, never planned a proper . And quite unfortunately for Steve, although his first disease was dubbed a curable one, the idea of a relapse was always a blipping dot on the radar.

Quite unfortunately for Steve, yes. And for the world as well, which seems to love being iJacked. And for Apple, too, the company whose stock price obviously keeps demonstrating the principle of gravity for one single reason: “Jobs’s too good”. Or too bad, since the iCone (that he seems to slowly become keynote after keynote 😉 ) appears in the total incapacity to build a viable succession plan. Or to share the spotlights.

What could be the reason can only be guessed: pride? High expectations? Romanticism? The only sure thing is that Jobs, despite his quite moving and inspiring speech at Standford, has issues proceeding with the next step in the True Leader handbook: grooming Mr Right Successor.

Beyond a dropping share price and ensuing difficulties to finance (as well as to incentivize the board!), consequences are difficult for the company: disorganization, best talents jumping off the ship – always the first to leave! – and innovation, polished marketing and sales pitches, exclusive image and that je-ne-sais-quoi that once defined Apple and took so many years to build, going down the drain. Because one man could not find his spiritual heir to head the ship.

The key manager syndrome is more present in our environment than we think. One loves the concept of being irreplaceable: such an acknowledgement! And by definition, “there will always be time”. Yes, right: by definition time is gone.

The percentage of successful succession plans – ie: the number of decisions made in a succession plan that are actually implemented once the event occurs – is usually low, more often than not lower than 10%. This failure comes with a severe cost: every one wants to have a say in the (sometimes in-) famous “people review” decisions that is often viewed as one of the most prestigious HR (as well as managerial) acts: “I shall say who may replace whom, who is ready for a given career path and who is not”. Tickling sensations of power…

Such a poor implementation would have had the manager of a product or project review fired by the following Thursday, yet as soon as we start talking about people, “companies’ most precious assets” HR and leadership teams get away with it with a smile. Mankind is amazing…. You cannot believe it? Apple repeated not just once but twice the original mistake: fail to identify and groom the relevant leaders (plural!).

The solution is not to drop the succession planning process altogether and let the baby go down the pipes with the bath water. It is just to start implementing decisions and consider succession plans for what they are: the anti-collision plan a company needs to develop to face rough times. Thumbs up Bill Gates for bringing up Steve Ballmer, whatever one thinks of the character. Steve is reassuring enough to keep the ship staffed and afloat. Yes, maybe is Microsoft a bit less inventive. But they’re still there. Whereas Apple without any consideration to the next generation of leaders – it might be too late already – will dry, wrinkle, shrink and die forgotten until the idea of it disappears in its turn as well.

It took a couple of months to Apple to actually come up with a list – a list! – of successors. On February 23rd of the year of our Good Lord 2011- it was about time! –  the firm started naming a list of prospective CEOs. Along with the worn-out name of Eric Schmidt, future-ex-Googler, are considered Tim Cook who is the current acting CEO, Phil Shiller and Jonathan Ive – how surprising: the marketing and the designer internal guys – as well as Jon Rubinstein, ex-Apple now HP. The real surprising is the re-surfacing of Steve Wozniak. The Woz: a real strategy or the “rubbish idea that sounded good at the time”? Or worse: maybe it is the substitute the only value of is to stand as a make-believe to reassure the addicts. “Couldn’t get Elvis but his manager is on the line”? The simple status of this list shows how much the company is in disarray.

What to think of such a leader who fails so dramatically to have a succession plan setup? Probably that he thinks more of himself than of the company he thinks of. When the company’s value is summarized to the presence or vacancy of a key man, surely the manager’s job is not done. It has a strange Pharaoh-Hosni-Mobarakish feel to it: “I am Egypt”. “I am Apple”. Poor management, poor manager who will get the company down the drain by his sole doing, no matter how high he previously took it, and not just once. In the absence of a successor, this apple is seedless.

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Nuclear Destruction


If we were to define business management as the capacity to create as much value as possible using the means available to you while staying on the good side of the law,  we would then need today to talk about some people who are clearly incapacitated.

I am often amazed how strongly businesses believe prices are the only weapons they can use to sell. Working with small as well as with very large corporations, I often hear “we are too expensive” (ok, probably true, can’t harm to think so), “our prices are too high” (I concur for every firm I am a customer of, but I am probably biased). In times of crisis, the first survival reflex I notice is “slash down the prices”.

If I were a teenager, I would probably insert “LOL” here. Please. Seriously. So as many managers seem to have missed the point, let us start with some basics.

A purchase depends on the perception a customer has of the product. If I like a product, I am more likely to buy it than if I hate it (hm… D-uh!). If I love it, I will buy it. Think of all the recent and less recent fads: an Elvis or a Beatles record, an Amstrad or a Commodore computer, a walkman, that little black dress, Rubik’s cubes, Communism, an iPad, cocaine, whatever has a ‘Green’ sticker on it.

Some of these items came at an outrageous price considering the small amount of material or work they required, and I am not only referring to the dress. However, such items were the it-thing of their era and price would not matter such a great deal. So, point made: price does not matter as much as we think. Perception does.

What is this perception made of? It mainly consists in the value the consumer thinks the good or service can deliver to him / her. Consumers will compare two goods with similar or a different value propositions. If the value propositions are the same, then price becomes the discriminating criterion. If the value proposition differs from one item to the other, price is reduced to being only a part of that proposition. The bigger the difference, the less the price will be used for discrimination purposes.

At a certain point in the value spectrum, the value propositions differ so much that they no longer compete: comparing prices is irrelevant because comparing the two items becomes irrelevant. Price is then only a matter of affordability and ultimately, a matter of priority (let us call this latter concept “price elasticity” for short. E.g. Heroin. Price is only a factor of prioritization for the addict: what comes before heroin if I am in need? Not much. What comes after? About everything, Mom included. Let’s put her on the market).

The other side of the spectrum is the commodity. What happens in a market where all actors offer the same value proposition? The item is commoditized, these actors compete on price! The best way to get away from this, is to renew, re-think, re-whatever you want but do something to that value proposition. De-commoditize it. Many ways to do this, but we will talk about it another day.

That sounded easy, right? It sounded like “Value Proposition for Complete Morons 101”, did it not? So let us have a look at the following documents.

Here is a document coming from a very official corporate leaflet. Glossy recycled paper, rich colors, laughing kids, diversity and visible minorities (yes, women). It advertises the Values – capital V – of the firm, is handed out in the lobby of the Headquarters of the company, and quite a renowned company it is. Let me ask you: in which sector does this company operate? I have used a few illustrations:

a)      Bob’s Big Burger, a restaurant chain.

b)      Laksa International, a financial services firm

c)      Ekson Gomez, a raw material / commodity exporter

That is the best bit: not only these Values will not help you find out which firm this is, but it impossible to find out in which sector the company works! Change the name, from my sister-in-law’s babysitting student initiative to General Motors Corp., these values are generic enough to apply to all.

A question for you in that case: since I cannot find anything more valuable here than I will at a competitor’s, what will I think of it? Easy: no better value proposition than the neighbour’s, that spells “commodity” so let us see how I can drive that price down. Besides, how can I trust these values? They are so common everyone feels the urge to have them engraved on their frontispiece.

Bottom line: someone paid to have this “imagined”, validated, printed, distributed as the “official image” of the company. That is: for the company to resemble more a commodity than it did before this hm… act of communication was bought. They paid and therefore they lost money since the importance of price as a factor of differentiation has increased. Let me sum this up: someone paid to lose money. Trust me: this is much more frequent than you think. Every business promoting products that are complex or complicated to explain, with too many criteria to compare, does the same mistake: French wine, cars, computers and computer parts, flower delivery services (go compare flowers!)… They all advertise on the same things and therefore end up all looking alike. They pay to become commodities. There is someone out there lurking in their corridors, that needs to be fired.

The company who issued the original document is Areva. They do nuclear power plants and fuel. Since they deal with the atom and the ways to harness its power, let us hope these guys draw the line at destroying value.

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2010 is going – the acid test


2010 has only a few more moments to live. I always told my hairdresser – by far the best economist this side of the world – that it would not survive such a harsh winter as we are going through these days. I am hardly ever wrong on such matters.

But the accuracy of my predictions is not today’s subject. The end of a year is usually assessment time, that special moment everyone ponders the outcome of the year. What went well and less well, what could have been done better, how did the year turn out. On a personal side, one may confront with the good resolutions that were adopted at the same time last year (did you really call your mother-in-law over for dinner every month as you promised?) On a professional side, one usually confronts one’s results against the objectives that were set earlier in the year. Just to see how one did and on which side of the bonus one stands.

Now, why it is only done at the end of the year escapes me entirely: it sounds as relevant as checking out whether there is still enough time to turn while the front bumper is about to passionately become one with the wall. Wishful thinking… Good management practice would have managers assess their team’s situation quite frequently, monthly for instance, in a brief manner (“Still on track, Y/N? How far, why, corrective action?” Job done). And whoever says there is not time to do so clearly state s/he should not be managing a team.

But there again, this is not the point. The point is the decision acid test. I once was taught about one I find more relevant than Kant’s principle of decision-making. It is rather simple: each manager making a decision should ask him/herself: is this decision I am making, creating or destroying value?

I am of course not talking about creating or destroying value for myself: doing so is exactly checking my decisions against the performance objectives that were assigned to me, in order to find ways to improve my incentive pay. And as the Agent/Principal Theory(*) reveals in all its beauty: following my performance objectives is not exactly the same thing as creating wealth for the organization. Remember: manager tells employee ‘customer visits are low. Go visit 100 customers’. Employee goes. Visits 100 customers. Manager is angry: ‘sales did not increase!’ Employee says ‘but I did visit them as you said’. Which may perfectly mean ‘I had coffee with them and we talked about the family’ rather than trying to sell anything…

Does this sound outrageously caricatured to you? How is this: one of the largest computer manufacturers (named after its founding figure/s) used to incentivize part of the sales force on the ordered amounts. At the end of the year, orders would explode. Only to be cancelled by January.  Decision was made to replace ordered amounts by invoiced ones as the KPI. Guess what? Exactly: invoices in December, bills of credit in January…

Following one’s performance objectives does not mean following the company’s performance objectives, only that assigned by one’s manager: subtle difference! Said manager is also subject to the agency theory as s/he reports to a higher management. That makes the cascade of ExCom objectives somewhat shaky as we go further down in the chain of command… Don’t we love KPIs! The day someone is given a KPI, s/he stops managing the business and starts managing the KPI.

This acid test calls for an assessment against the bigger picture only. Value creation / destruction covers the overall value impact the decision that is about to be made will have on the organization as a whole: including ripples beyond the scope of responsibility of the decision maker, considering the information and the tools available to him or her.

Run this test as a trial for 2010. And use it next year to on your own decisions and that of people around you to detect corporatchiks, be it just for fun and keeping the result to yourself – or not. And when I say “fun”, I mean it. It will be my way to offer you some in the year to come, along with many other fun subjects: is HR useless? How to create a culture? The importance of promises in an organization. In exchange, do not hesitate to share your best test results.

Happy new year!

(*) yes, I disagree with most of the ideas explained in this article. Yet opposing viewpoints are interesting.

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Doctor No


I was having a nice brunch with a few friends of mine and everything was going really well – nice food, great company – until I made the mistake of asking one of them a stupid question: “so, what is this new job of yours about?”

Bob – not his real name but he wants to stay in the shadow – paused for a second. “I was hired by the soon-to-be ex-CEO of a very successful dot-com company who is now selling his shares. He made a fortune in the online sex industry and is now willing to become an Angel with all these millions he got (note: interesting choice of words). So he set up this family office and hired me along with a couple of other guys to run it”.

“That sounds really cool. So what do you do all day, defeat the greedy heirs’ plot to put their plump little fingers over Daddy’s lifework, pain and sweat? (that is, 5 years thereof… A short life of effort it is)”

“Not really, no, said Bob. My boss is a big name now and a lot of people in the industry look up to him”. That was true, I had to admit. “He receives a lot of requests for investment, a great number of business plans. Really, the deal flow is not a problem at all. And he decides extremely fast, often within minutes, sometimes within a couple of days. He also often says yes. So I am basically paid to do one thing. Tell him no”.

More than anything, that simple job description underlined again how a number of managers are not great because they are blindly followed, but because their ideas are good. They are good because they survive a rough survival process: great managers do not fight disagreement nor diversity of opinions, but rather value it. They create the environment that will let diversity of opinion naturally flourish in some kind of rich jungle environment.

As it is the case in every jungle, weak ideas will die, feeding fitter initiatives. We often talk about teamwork and how important that is in abstract terms: saying no, challenging each other is certainly one of the best concrete illustrations of the advantages inherent to teamwork. It is the acid test of an idea. From what I could gather, Bob’s boss had understood three things:

1) Put my ideas to the test, see if it survives. If it does, it is a good idea. If it does not, this safe environment – that’s just you and I – will give me an opportunity to improve or even discard it for cheap. It is risk free.

2) What matters and demonstrates my status and power in the organization is not my ability to impose an idea (“alpha dog” behavior) but my ability to generate value (“alpha provider” behavior). I will not let my ego tread on the life of the organization, that is also on yours as a member of that organization, or go against the market because I feel like it or based my decisions on the result of a customer survey of 1. Me.

3) I know my strengths (credibility, fast-decision making, “deal magnet”) and the drawbacks they come with (I accept too many, too fast). I know my limits. I hire you to keep these drawbacks at bay. You are now an additional competency I have. I know myself – a rare fact indeed! That does not make me weak but enforces my credibility and values you at the same time. You know your purpose when we work together.

Creating a proper environment in which I can be challenged by someone else cures many diseases in a preventive fashion. No is a doctor.

That discussion put an end to my having a good time right away. I have been hating Bob for having such a great job ever since. So I will stab him in the back by revealing his real name. Charles.

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Mirror, mirror on the wall


Christmas is just around the corner and you are about to write your letter to Santa. Sticking your tongue out, head slightly tilted on the side, you will slowly write in beautiful cursive letters your request for a management course, a 360 or a series of coaching session. “Dear Santa, I’ve been such a good manager…”

But think of the modest household to which Rudolf will not even bring stock options that magic night: so many poor managers whose Blackberry stockings will not be filled with “Great Leading Principles from Leaders You Don’t Know Yet (But Maybe Will If They Break Even Someday)”, “The Art of War applied to Team Coaching” and other wonderful bedtime story books.

Santa thought of them all. There is one management tool that everyone constantly forgets: the team. My direct reports have learnt from me, from my management style, what I value or abhor, how I react in the various situations we face together (or rather: that they face alone. I scowl if they dare tell me about any sort of problem. Works every time). They found out what interested me and subjects I would not want to deal with.  They have learnt to challenge me or they have not… It all depends on me and the more we have been working together, the truer.

How is this? Two reasons mostly: I hired them for the most part (I inherited the others from my predecessor), which means I selected them from traits I appreciated (or failed to, “same difference”). And I bellwethered them there, using a selection of means ranging from performance objectives, habits and routines I had them adopt, reactions to their actions or lack thereof, recognition of certain values and not of others. In one word: example.

There we are: if you can not buy yourself a 360 for Christmas, think of the next best thing (even better if you ask me): step back, observe your team. Their strengths most probably reflect yours. The things you blame them for might very well come from you. In these times of performance appraisal, putting things back in perspective and running a quick consistency check is certainly the best Christmas gift you can offer around (ho ho ho…)

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