Conquering
the Coming Collapse Review Despite a litany of corporate
failures there remains an obsession with growth driven by shareholder
value which when you cut through the jargon actually means greed. In
many ways the greed of shareholders is eclipsed by the greed of
executive directors who communicate publically that their aim is to
grow the business for the good of all concerned on the premise that
growing the business is good. Yet, as we have learned and experience
regularly, executive directors are often more interested in growing
their own wealth base and achieving this very quickly. The old
Japanese style business model which set out 1,000 year plans have
been replaced with 'here and now' planning. In the UK the Thatcher
years replaced traditional five year planning cycles with twelve
month planning cycles. Within ten years this became a three month
planning cycle; today it is almost hourly.
Generic
expansion having proven to be a slow process, modern expansion
strategy is fuelled by takeovers. Takeovers allow a company to grow
both revenue and profits instantly giving the impression of good
management. Inevitably the underlying problems of combining disparate
businesses into one come to surface but by this time those who have
been rewarded for stellar growth have moved on; or retired to their
place in the sun; or have been locked up - but not without
significant pay-offs. The staff and management of businesses taken
over have little in common with their takeover masters and as a
consequence of losing out on real senior management power bide their
time for revenge.
The
obsession with business expansion is often explained by the maxim 'if
you're not growing, you're declining'. Business schools back this up
by charting the typical life cycle of products and businesses,
suggesting that merger and takeover activity will lengthen the upward
curve. However within a very short time-scale the absorbed profits of
the newly acquired enterprise become history, and the new financial
year is replaced with the dawning reality of increased costs of
running an increased business. Head office becomes monolithic and
tensions between those at the front end and those cosseted by a lack
of customer exposure increase dramatically.
Sometimes
the takeover gravy train comes off the rails as either availability
of takeover targets dry up or the amount of money needed to fund them
reaches such a colossal level that it is seen as financial suicide to
continue. Sometimes the aphrodisiac effect of these immense deals
become so potent that they go ahead anyway but soon after the whole
thing unravels and both the target and the predator collapse. In some
situations, expansion is fuelled by partnerships and franchise
arrangements. However these take far longer than quick conquest and
involve patience, hard work, and recognition that profit has to be
shared for this to work and sharing is not something which is common
in the recent corporate world. Yes, the sound bites may say 'we're
all in this together' but when it comes to financial reward that's
not the case.
It does
not take a genius to work out that if I am working as hard as I can,
but I am being paid a fraction of my bosses who appear not to care
whether I turn up at work or not, my motivation will be low. Not just
that, I learn to agree with everything and say yes to everything, and
play the part of a loyal and committed worker, but I also learn that
the most important person to look out for is myself. This is after
all what I learn from my leaders. At higher levels in many
organisations motivation is extremely high, but often not in the way
that leaders hope. The game in head office is to expand personal
empires to the detriment of peers. More staff, bigger offices and
larger budgets become the trappings of success. Energy is expended on
beating internal rather than external competition. It is often the
case that when senior executives retire they are ill-prepared for
life in the real world, as the only plotting they become involved in
is who gets stuck with putting out the recycle bins on Thursdays.
The
focus on short-term profitability and growth allows executive
directors to amass fortunes in bonuses and shareholding undreamt of
in the more austere approach of the past. The long haul is rejected
in favour of the 'I deserve this now'. Whilst there are only twenty
four hours in any day whether you're the chairman or the janitor, the
disparity between the value of those twenty four hours for those at
the top and those at the bottom of the organisation becomes so
glaring that it creates fractures across the whole organisation; some
obvious, most hidden. It's easy to see your enemy if they come out in
the open, but the latter part of the twentieth century and the early
part of the twenty first century clearly demonstrates that if you
have fewer resources than the ruling class, coming out in the open is
not a good idea. Which is why guerrilla warfare is the most difficult
to tackle.
As with
Emperors, Dictators, and Prime Ministers, senior management
eventually begins to believe they are infallible and those around
them feed that illusion in the hope that some of their godlike aura
may be transferable. They begin to act as though only they know and
truly understand the meaning of business and how to make it grow.
Decisions begin to be made with little or no reference to the reality
of the workplace and rely heavily on employing highly expensive
advisers to tell them what they want to hear - that they are
visionaries, and that they will be enrolled into the legend that is
the company. In the financial services industry, where the
availability of money makes it easier to spend and amass fortunes,
collapse of organisations such the Royal Bank of Scotland (RBS),
Anglo Irish Bank, Northern Rock, and HBOS are classic examples of
corporate blindness towards risk and personal responsibility. It is
easy to be reckless when it does not involve your personal money.
Even failure is rewarded by handsome pay-offs, but only if you are at
the top.
We
appear to know nothing of history - of a plethora of short-lived
rulers who thought they knew it all and forgot what it was like to be
at the bottom of the pile. Whilst it may seem ridiculous to us now,
many Roman Emperors either believed themselves to be Gods or were
promoted to Godlike status during their short lifetimes by those
closest to them. This phenomenon has been repeated across numerous
empires. Consumption of nectar and ambrosia is not a good diet for
stimulation of common sense and awareness that not all is well around
you. Euripides said 'those whom the gods wish to destroy they first
make mad'. And is it any different now?
Recent
history is littered with the Gods of industry and banking, once
hailed as heroes in their own land, who now are the subject of the
previous sycophantic saying 'I always knew he/ she was no good'. Yes,
I'm sure you did, but at the time said nothing. There is a myth that
the Roman Empire declined and fell because of excess and debauchery.
Whilst both were common enough what really contributed to the decline
and fall of the Roman Empire and many others since (Britain, the
Soviet Union, and the short-lived German Reich) was a combination of
increased citizenship, internal turmoil, and primarily and probably
as a consequence of the first two: unsustainable costs in running the
empire. The army gained the empire and was supported in its efforts
by resources raised as tax revenue from the existing population and
the newly conquered population. Eventually as the empire grew it
became unmanageable for a number of reasons, not least the cost of
maintaining an expanded empire.
The
Romans were never satisfied with what they had. Success was measured
in conquest. From Rome they conquered the rest of Italy and from
there the known world. The cost of maintaining a standing army of
between 250,000 and 450,000 in order to a) continue expansion and b)
to hold the borders began to outstrip income. In order to reach these
numbers legions of auxiliaries were used to supplement Roman
citizens. The auxiliary soldiers quickly learned to employ the
fighting tactics of their new masters and eventually learned to use
this against Rome.
The
solution to the rising cost of expansion was to offer Roman
citizenship and self rule to the conquered territories thereby
placing a buffer zone between themselves and the barbarians beyond
the borders. Whilst in theory this would give people a stake in
Empire it also gave them an acquired taste for freedom. The distance
between the centre of control (the senate), and the dispersed
workforce (the legions), resulted in significant delays in
communication and feedback. Generals were often in the field for a
number of years during which time they became self-absorbed and
increasingly convinced of their own importance to the Empire. In the
meantime those at 'head office' spent their time feathering their own
nests and careers, ignoring and forgetting that their continued
existence relied on the 'workers' at the front end of 'the business'.
As a consequence, front line generals became significantly
disenchanted with the senate which in turn became resentful of the
power base being created by upstart soldiers.
