Tuesday, November 07, 2017 09.57AM / Olufemi AWOYEMI
Being a speech titled
“The Self Deception Reality and the Corporate Regeneration Myth”
delivered at the CITC Leadership Centre’s Inaugural Leadership Word Masterclass on Leadership
Renaissance in Nigeria held today at The Renaissance; Ikeja,
Lagos.
“Behind any
process of corporate decline, there is an infinite string of deceptions”. – Pedro Nueno
When a
company falls ill, unlike people, it is usually easier to diagnose the problem.
In the
field of corporate analysis, there is no such thing as an autopsy because when
a company dies, the causes are usually long before the fatal event actually
happens.
Quite
often, we have produced business leaders in this country who are still in charge
of the nation’s polity but alas! we cannot point to the companies they once
managed (presided over).
It is
obvious that the companies did not fall ill, suffer, writhe in their dying
throes and finally die after they left; far from it, the process had long been
on while they were there and because they failed to come to any agreement on
how to avoid it, only allowed someone else to play the role of an undertaker.
The
honours, accolades and encomiums we gave them while on their seats can now and
should be withdrawn. They were earned by building their houses on a pack of
cards. In some quarters, it is believed that there however may exist genuine
force-majeurs that makes a compelling case for a company to die or become
extinct. While I believe that this is plausible, I am quick to dismiss it as a
charitable disclaimer of the leadership in question because it says a lot about
the quality of management that was in place; not being able to anticipate such
a major catastrophe.
The
death of a company can be likened to that of a person who has diabetes but does
not follow a diet, who has liver problems but drinks alchohol, who suffers from
chronic bronchitis but smokes, and although that person’s health clearly
deteriorates from day to day, he or she refuses to give up his or her health
destroying habits until the deterioration is irreversible.
He
dies, not because the doctors did not present the fact, but because he embraced
the self-deception paradigm that he can do it, perhaps expecting a cure to
appear from above.
This
is a clear testimony of man’s tendency to value outward appearance more than
reality!
This
tendency equally and readily manifest itself in corporate matters, were the
executive management appears genuine, but their true intentions are far from
that declared.
In the
conflagration of entrenched self-interest(s) of the key players of
management/owners, a decision is arrived at which either achieves a turnaround
for the organisation or goes to postpone the time and role for an undertaker to
carry the can. For now, we will wear a mask for all to see and get real later (believing
the deception so well that it becomes the only truth known to them).
Even
at this, they often forget that a dying company, like a fallen tree, can
still provide food for many parasites. A chunk of it can equally be
replanted to create a new one. Rather than allow the organisation to die, they
can be placed on a sure path of recovery to help keep the society functioning;
be it in the private or public sectors.
We need
not look too far for examples of such organisations and parastatals that have
been rendered comatose by our inability to resolve the self-preserving interest
of an individual with his/her fiduciary responsibility(ies) to his employers
and shareholders.
Just a Game?
There
exist infallible reasons to suggest that Corporate Turnarounds or Repositioning
as widely used is fast turning into a “perception” game – the objective of
which is best known to those who decide to embark upon it.
A
cursory run-through of the buzz words employed in this turnaround game, some of
which include Repositioning, Restructuring, Right-sizing, Down-sizing,
Re-engineering, Repackaging and lately, CHANGE reveals that for every new
management that takes over an organisation, the name given to their own effort
at managing the concern, like our national budgets, economic plans and party
manifestos gets christened mainly for maximum effect.
The
long term sustainability of such plans and programs is a sad commentary on
first, the state of our economy and operating environment which makes it a fast
paced deteriorating business climate and secondly, the ever shifting interest
of owners/management due mainly to a sub-optimal self-regulating (corporate
governance) culture.
For
those who choose the noble profession of organisation & methods
facilitators or change managers, they are often left to lick the wounds of the
bruises suffered in performing the task, having found out for themselves, the
difficulty of reversing the momentum of a sinking or “non-performing” company.
They
often start off being aware and expectant of a heavy opposition to conventional
wisdom but remain propelled by the lure of achieving levels of social
recognition and wealth that would be beyond the reach of conventional
entrepreneurial or professional career paths. Some are often lost in the
euphoric thinking that they are the “messiah” long sought after that they fail
to appreciate the nuances of corporate politiking and thus fail even before
they start.
For
most of us, even as managers, the problems seem initially to follow such a
textbook pattern that even the non-anointed understands it and think they can
solve.
I must
confess that in my more than three decades of being on the field, I have learnt
that it is not that easy.
For in
the field of corporate regeneration, so many variables are involved that to
find a common structure for formal analysis is unthinkable. I find it to be
something closer to an art than a profession. Lately I have found out that it
really cuts the picture of a divine interceding into the affairs of the
company.
In the
end, however, when a situation turns out well and one looks back on the process
that has been followed, one discovers that basically one has only been
correctly applying well-known management principles.
Rarely
is success attributable to the use of some sophisticated or leading edge
technique that the business schools teaches one but rather to knowing how to
lead a good team of people, managers and professionals.
This rather
simplistic conclusion does not however remove the fact that the interventions
provided by the consulting firms, competent managers and purposeful management
count for nought. No! They rather serve as a complement to the base foundation
of mobilising people for breakthrough performance both as an organisation and
indeed, in their individual lives.
Thus,
these ex-business leaders mainly failed to provide good leadership to their
organisations. It must be mentioned that for a discerning executive, there are
situations that tend to occur repeatedly in the organisation’s life processes
that can be leveraged upon to help focus issues better and achieve a better
final result.
Those leaders that were celebrated upon their retirement from their
organisations only to see the firm die a couple of years later definitely have
a case or two to answer. Outside the usual owner squabbles that negatively
impact the development of the firm, failure to execute a plan of action that
would guarantee the going-concern of the firm should be the clearest indication
of the elevation of self-interest above corporate realities.
Examples
abound.
Times
have certainly changed!
The last decade
has witnessed such profound changes in virtually all aspects of life leading to
a myriad of changes in business and the way personal life is; and should be
conducted. From recent experiences in Nigeria, the changes can be seen from the
new role expected from the financial sector in managing growth of the
productive sectors of the economy and the expected impact of fiscal and
monetary policies on entrepreneurship and corporate sustainability.
The
emerging realities of the new democracy ethos, good governance, ease of doing
business, competitiveness, transparency, integrity and the elimination of
“rents/subsidies”.
The
evaporation of reverence for institution and authority and its replacement with
personal brands that looms larger than entities thus driving value perceptions.
The
growing public demand for information and the right to know accentuated by
technology.
Our companies are
specifically faced with the following changes:
Market
definitional changes – disruptions in intermediation and dis-intermediation at
both ends of the transaction value chain by new and more dynamic service
providers who are operating from a new model.
Emergence
of forceful competition from hitherto non-traditional sectors and non-local
players in service delivery, professionals services, sovereign finances
and funds management all working to create a new path to capital formation.
n The
re-emergence of “big” businesses set up more towards a monopoly and
transitioning into an oligopoly.
The
changing risk complexion of traditional services offering.
The
rapid increase in technological changes or reduction in the shelf life of
technological changes, platforms and processes thus creating a need for
constant upgrades to remain competitive.
The
changing profile of the customer and the ascendance of data analytics.
Changes
in government role from being a sole provider of service to a provider of the
operating environment and lately from being an an enabler to a competitor in
access to funds (thus choosing winners and losers in the business space
through its policies) thus changing previous areas of business
comfort/discomfort.
Reducing
margins from traditional income generating areas coupled with an increasing
shareholders expectation for impressive results. A good example is companies
declaring profits in a recession from non-core business areas.
The
changing ownership structure of most companies tilting from private to
institutional/public companies; government to entirely private; and local to
foreign/strategic alliances.
The
era of the knowledge worker with the necessary skills and competence,
sufficiently empowered to provide the new level of value adding services to an
increasingly discriminating public for which the question of loyalty to
institution is fickle, driven more by value perceptions of reward for
productivity based on service offering.
Increasing
dearth in skills and competence to drive the new organisations being created at
a frenetic pace.
Local
and overseas economic and political developments have also helped to drive the
point home that the realities have changed to create a new and different
operating environment.
The
challenge is immense and the Nigerian firm is facing a defining moment where it
either leap frogs into the next level of business growth or writhe in the pangs
of daily survival challenges prolonged by late-in-the-day interventions.
Disruption
is real and with it comes change and the attendant pains of child birth.
Are
we ready for these changes at the leadership level?
The State of Our Companies:
Generally, our
companies have shown such a great vitality, their ability to withstand is so
high, and their tolerance of things being done badly is so great that it is
almost impossible to kill a company quickly; ditto the economy.
Pedro Nueno,
whose work on corporate turnarounds greatly influenced me, had this to say:
“The
only way to kill a company is by doing it little by little. If you shoot it in
the heart, it survives bleeding for a long time. A company must be poisoned or
malnourished, all of its parts must be pushed into a process of irreversible
decay. So long as any one of its parts remain alive, the company can be
regenerated from this single part”.
He continued,
“There are many symptoms that an employer or senior manager can perceive to
diagnose the changing conditions of his company. Some of them are listed below:
1.
Loss of key managers
2.
Loss of profitability
3.
Loss of market share
4.
Deterioration of liability structure
5.
Sales increasingly based on price
6.
Poor Implementation incidence
7.
Resistance in financial community
8.
Reticence among suppliers
9.
Increasing labour hostility
10.
Increase in non-payers & deteriorating pay
imbalance, and
11.
Loss of productivity and Internal inefficiency”
Because companies
are not fragile enough to compel those running them to take the above processes
of decline more seriously, it continues for quite sometime. My experience in a
multi-subsidiary company, which is now re-engineering itself, confirms further
this position.
Management, being
aware of all the compelling reports available to it, continued to carry the
carcass until each successive Director completed their tenure. I am sure that
the current leader would be praying to re-engineer the company to stay afloat
until the completion of his own tenure. He might get lucky that an event occurs
that allows him to reduce his losses by closing down unprofitable operations,
which if you look closely, is facing competition from ex-employees of the same
company.
Such Managing
Directors can receive consolation from the conclusions reached by Peter Nueno
in his treatise on the company’s death, when he stated that
“However,
some people are entitled to include in their list of achievements that they
have killed a company”.
At another company, engaged in a critical sector of the economy, they
resorted to creative accounting, image campaigns, and wringing of the last drop
of money from any sellable asset in order to be able to carry on without facing
the reality confronting them.
This situation, my former boss, the CEO of a well-managed financial
institution once said, “ arises because of one of the common initial causes
of business decline - the lack of an entrepreneurial spirit; the absence of
anyone who really sees the company as his and demands that his manager(s) get
results without demotivating them through his own actions”.
I couldn’t agree more with him; this lack of entrepreneurship (and
intrapreneurship) is often played out through apathy, abandonment or
plain incompetence.
All this can still be reasonably dealt with through a well-planned
management intervention program.
The most difficult however, and that which inflicts the leadership,
remains the extraordinary capacity for self-deception that goes on in most
companies.
See no evil and Say no evil:
One of the earliest major engagements in strategic management I had to
tackle was that of a big corporation, which at its height of performance, was a
dinosaur. At a stage in the company’s life, sometime in 1996, issues had been
raised about the:
·
Un-viability of some
subsidiaries due to consistent losses occasioned by obsolete equipments which
created considerable wastages on production, faced increased competition from
small time players who were considering forming a co-operative, lost key technical
staff and encountered a further loss of patronage from government – a key
customer;
·
Need to encourage
flexibility in operations as the cost of maintaining all the subsidiaries was
becoming over burdensome for some of them to continue in business;
·
Need to enter a new
market for a subsidiary whose market analysis had seen an emerging change in
customer preferences and thus required a shift in business philosophy to move
into the market;
·
Need to invest in new
technology to drive the business and operate as a self sustaining concern;
·
Apparent shift in
personnel requirement to drive the fast approaching shift in business models
and customer service issues;
·
Expected paradigm shift
needed in how the company was structured to address the yearnings of its people
for greater responsibility and necessary empowerment to take their subsidiary’s
destiny into their own hands
In 2000 after a change in management, a new senior employee had asked
his superior after coming out of a re-engineering briefing with the newly engaged
firm of consultants the following questions:
·
How is it possible for
so many problems to be created at the same time, falling in the space of a few
years from success to the danger of a major catastrophe we now face?
·
How is it possible that
the management team could contemplate such a decline without taking corrective
action?
·
What must have been
going on in the board meetings quarter after quarter?
·
So, why did the
directors not do anything to change the company’s direction? What did they say
to each other to keep the deception going year after year?
·
Did they resign
themselves to thinking that the economic situation was going to change very
shortly and that then everything would be put right?
·
Did they accept losing
the company providing that it did not cost them any money earned in the
glorious past?
The company has now put together a series of interventions and
leading-edge restructuring plans geared to turn-around the fortunes of the
ailing company. We all pray that they succeed. If they had wanted to change the
fortunes of the business, the steps to be taken, the strategies and models to
be employed could have been sourced through private discussions with their
consultant friends, the internet or good books documenting case studies or
research work of similar corporate turnarounds which abound in our various
business schools. I will spare you the boredom.
My interest here is simply to help us answer the one principal question:
why did the management deceive themselves to avoid starting the hard and difficult
processes that could have restored their health while looking forward to the
divine intercession we talked about earlier, after all we all quibble the
popular phrase: “heavens help those who help themselves” (don’t check your
bible – its not there).
Parallels exist
with how the sovereign has handled the affairs of the state and the economy
recently.
Unfortunately, It
would not be difficult to write a long list of well-known companies in Nigeria
that are today living in self-deception and sooner or later will have to face
the harsh reality. In that list, we would find the odd large bank who has been
re-engineering for the last couple of years still overburdened with unskilled
personnel, little technological sophistication, minimal creativity and considerable
product maturity.
We will find
insurance companies intractable from years of bureaucratic practice. We would
equally find companies with cost structures that are just not viable in an
increasingly cost-competence driven industrialised world, and without the
resources or time to change their situation for comparative competitive
advantage.
Let’s leave out
this new fad called CHANGE – sooner than later, the true import of the concept
(doctrine) would set in and we will have to separate the real change agents
from those who simply pay a lip service to an inevitability.
Self-deception,
while so clear, sometimes so collective and so lasting, has specific mechanisms
that explain it, maintain it and perhaps justify it. The mechanisms of self-
deception are sometimes so strong that they withstand the energy of
high-calibre executives.
The network of
false arguments produces an enormous degree of internal resistance within the
company and senior managers sometimes prefer not to face them for fear of an
immediate upheaval that would be more shattering than a gentle decline. In the
instance of the conglomerate above, there was too much top management in the
group and too few companies to direct, control, supervise, and assume
responsibility for.
We are told that
monks do not usually burn down their monasteries, and that monastery of
managers would hardly be likely to offload companies that were their raison
d’etre of their jobs. The MD thus knew that all that was expected of him
was that he did not make waves.
I can confirm
that at least in one of the subsidiaries closely observed, there had been an
implicit agreement to maintain an unstable equilibrium, jiggling with the
subsidiary’s numbers – which was all the top dogs, saw – to artificially
prolong the life of a terminal patient. In such a situation, they were hardly
likely to let go of the businesses that were not causing any problems and thus
allowed them to justify their jobs.
For the new
businesses proposed, they knew that since they did not control the market
knowledge, control could be affected, so they stuck to their guns, embracing
the ultimate self-deception of all time, the hope of finding a different
destiny before the final crunch.
There exist more
examples of situations of companies contemplating repositioning or a major life
saving intervention of which beneath the façade of change, their exist a desire
not to face the reality of their situation, choosing instead to embrace the
cosmetic programmes for which the number of consulting firms have grown to
provide.
This attitude
really forms the crux of this article as it does not restrict itself to the
business world. It is probably also the attitude of the bad employee, of those
whose marriage is on the rocks, of the person who drinks or smokes too much,
and of those in many other such situations. It is probably one more indication
of man’s fallibility.
Conclusion
By way of synthesis, the main
conclusions reached concerning the extraordinary ability possessed by
owner-employers and top managers to deceive themselves as to the state of
decline their companies have reached, reveals a very serious and collective
self-interest which conflicts with the long term survival of the business and
often makes nonsense of leading edge business survival
interventions/initiatives.
Individual interests, incompetence
in the specific turnaround task, lack of interest on the part of the owners, political
priorities often present motivations that may become inter-wined to prolong the
deception and with it, the steady deterioration of the company.
People delight in hiding from reality, seeking a way to fill their minds
with job survival tactics and postpone facing what should be their professional
priority. Instead of getting up and rolling our sleeves, we often look for
someone else to do it for us, and take the blame when it does not go along the
intended path.
It is therefore
an enlightened opinion that the very first step in achieving a successful
turnaround is the confirmation that the owners and managers are favourable and
satisfactorily disposed to achieving a change through the quality of responses
to the symptoms of deterioration. In the case on a non-deteriorating company
who only seeks to be market driven, the repositioning imperative would arise as
a result of its regenerative structure.
However, and I would like to
conclude on this note, if the signs of deterioration is noticed in a company,
there is no need to wait any longer; one must act immediately or quickly find
someone else who can.
After all, Thomas Edison’s electric
light did not come from a continuous improvement of the candle; but in the
main, a continuous improvement over the benefit of the candle.
The new game is now all about
embracing disruptive innovation over continuous improvement; and that may often
times involve encouraging ownership of the change process at different levels
of the organisation. A new leadership mantra.
Thank you.
About the Author
Olufemi AWOYEMI, FCA is the founder / CEO of Proshare.
E-mail ceo@proshareng.com
Profile https://www.proshareng.com/team
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