Directorships are being mis-sold

#leadingconstantchange

Directorships mis-sold

I’m writing this piece as a layperson, reflecting on the position of Directors of all sizes of companies incorporated in the UK. I don’t hold myself out as a legal expert, nor do I sell Directors insurance, but I do come across Directors every day in the work I deliver, to help companies deliver their intended strategy and convert ideas and vision into practical actions for success.

It has long been a bean of an idea that to form a limited company online for £20, to provide a business card title of Managing Director seems to be an anathema. Suddenly an individual finds themselves elevated in status, with automatic authority over those who then chose to work for them. Just as bad is the promotion to Director status from a previous management role, and so my observations cover pretty much the majority of directors of smaller and medium sized businesses. I perhaps don’t extend this to the larger multinational businesses, as they often have systems, and required IOD qualifications, to be a board member.

The legality of being a director is of course “perfectly well” explained – in an inch thick Companies Act which can be bought and read!!.

But who has read it? I mean really read it, understood it, and embraced it?

The answer is probably 1% if that. A few more percent may attend a one day course on “How to be a director” The rest, (vast majority) don’t bother, and simply rely on good legal advice when it looks a bit dodgy, or when things have already gone wrong. By then it can be too late.

Most directors reading this article may have the belief that limited liability that comes with incorporated companies exonerate or protect them from individual claims against them. But they are misled. The limited liability extends to shareholders and not to directors.

Whilst it can be true that the limited company is the first target of any prosecution or fine, it is then perfectly possible to extend such action to all of the directors of a company as individual people whether or not you think it’s your fault or not.

There are a myriad of potential issues and personal claims to be made against any director who, for reasons of intent or simple mistake, falls foul of a growing number of Acts. These acts include Health and Safety, Data Protection, Environment, Financial Conduct Authority, and may more. The list grows by the year and there are requirements for all businesses no matter how big or small you are, to comply.

Falling foul of these Acts can result in personal fines (your limited company is restricted as to what it can cover for each director) and even extend to imprisonment for more serious breaches.

I would hope that every director has “Directors and Officers Insurance” in place, that will cover the costs of legal defense, discovery or even just the costs of an investigation that is later dropped. (remember I don’t sell insurance!) I know from experience that this is often not in place for many directors, or can be of an insufficient cover.

But the legal traps are baited with complexity, and insurance will not pay your fines, and the policy issuers will not do time in jail for you.

So back to my title.

If I were to be sold a product (A limited company in this case) and I was not told of the terms and conditions in clear English to allow me to gain a reasonable informed decision about my purchase, then who is in fact liable for the subsequent fallout?

The formality of directorships can be learned of course, and disciplines applied to reduce and mitigate the personal risks. If we buy a car, we have to hold a valid license, obtained after a rigorous test (theory and practice) Our cars are worth £10-50,000, and they are comprehensively insured, enforced by the police.

Our Companies are worth many times that of our car and hold the economic lives of many people, yet our ability to “drive” the company is never tested, save for when it goes wrong.

Are “directorships” therefore being mis-sold to us? Is this the next “PPI” claim waiting to happen? 

In summary, I think this is a problem that grows with each new piece of legislation or new Act Each one is a new opportunity to get it wrong in our increasingly litigious society in which we operate.

The opportunity maybe, is to move to a “directors license” that becomes a pre-requisite for holding the position. This could be done online for speed and efficiency, with a certified outcome after a test is completed.

I know some readers will respond that this is just more paperwork and administration, but the alternative is to carry on blind, as most do, until things go pear-shaped.

Happy to have a dialogue about this subject, so feel free to comment

I can be contacted direct at philip@tamplc.com or at http://www.teamactionmanagement.com

 

 

 

 

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BREXIT: YOUR CRITICAL 8 POINT PLANNING CHECKLIST

So we have finally reached the end of what appeared to be an exhausting campaign on both sides to consider our membership of the EU. The unexpected result has thrown the UK and Europe into uncharted territory in terms of the largest upheaval of the political status quo many of us have seen in our lifetimes.

The markets of shares and currency entered the anticipated state of volatility and this is probably set to continue for a short while, in the way that many of us will remember in the 2007/8 economic bust around the globe.

Although this is different, there are many similarities we can draw from, and using the lessons learned from this recent recessionary period, we can apply our business thinking even more effectively this time around.

Things we know:

  1. The referendum is not binding on the UK government, but is in fact advisory only
  2. Article 50 at the time of writing this article, has not yet been declared, and so we are in July 2016, still a fully paid up member of the EU, with no restrictions on trade
  3. The timetable for negotiations is thought to be two years from Article 50 being invoked
  4. The market volatility is indeed happening, but is not as bad as experts predicted
  5. The UK Pound has hit a 30 year low, making our imports more expensive and our exports cheaper to our customers
  6. Above all, we know that PEOPLE are upset, disenfranchised, and feeling vulnerable, no matter which way they voted

Things we don’t know:

  1. We have no idea what shape the “renegotiations” will take and what the outcome will be
  2. We don’t know if our relationship with the EU in trading terms will remain similar or change detrimentally
  3. We also don’t know how this will affect our businesses in terms of trade and profit
  4. We don’t know how the financial markets will react in the months ahead
  5. We also don’t know IF the Article 50 will EVER be invoked, the referendum was “advisory” on the UK Government and not legally binding
  6. We don’t yet understand the timeline of what I call reconciliation – within our fractured communities that is causing division and dissent across the UK

 

 So, as a small business leader, what do you do now, and how do you react – what do you need to consider in order to properly plan?

I base this article on the lessons learned from the 2007/8 crash, and the analysis of the winners and losers from this time. If you want to be a winner then read on.

As smaller businesses, whatever happens in the months and year ahead, is pretty much out of your control, so all that can be done is to PLAN THE VARIABLES that you CAN control.

The 8 critical planning factors are:

  1. Staff Engagement: This is a critical part of the planning process. As business leaders you need to recognise that people are emotionally led, and are probably feeling (often unspoken) very uncertain of their current and future employment position. Whenever this happens, performance and productivity FALLS. Your challenge is to ensure this doesn’t happen
  2. Sales and Markets: Even if you believe that you are somehow not connected to the wider global picture, think again. Supply chains are often long and complex, and any reduction in spend in a much larger business, WILL affect the businesses within the supply chain. Prepare for “new business” to be a little more difficult in the short term, and reassess your existing customers spending levels with you
  3. Finance and Margins: Fluctuations in both sales and revenue, but also in purchasing costs could impact your gross margins, and have a direct effect on your business. Rapid assessment is needed to scenario model the impact on your business.
  4. Cash Flow: Inevitably in periods of uncertainty, customers pay a little slower, preferring to keep that cash where it can be controlled. Plan ahead by setting out your payment terms more effectively, but then consider the use of finance products such as loans and leases to sell your product, with built in cash flow. Also consider the capitalization and reserves within your business, and establish fall back cash flow sources such as business loans, or even equity injection. Don’t forget that banks are only one such source, and crowdfunding sites may also provide you with easier access to cash.
  5. Talent and Skills: A critical lesson learned from 2007, is to retain your best talent, and take on people who are the very best at what they do. Find innovative ways to engage your people, which is not always best done via the pay-packet. Experience shows that job security and a sense of participation are top of the list in periods of adversity.
  6. Reduction in spending: Actually, one of the worst things you can do is overreact. Don’t cull your training, marketing or investment budgets without careful thought. The most successful companies that actually GREW during the last recession, did not “hunker down”, rather strode out into the markets and grabbed new opportunities.
  7. Efficiency and performance: As a business leader, DO conduct proper audits within your business, and discover all of the ways to reduce wastage, enhance and sharpen your sales offer, engage your staff and BE POSITIVE
  8. Your People: You hire them for their expertise, their ideas, their commitment, so don’t brush that aside thinking the best way to plan is from the top down. The OPPOSITE is true. Utilise their brains, their ideas and their energy to draw together the business to move forwards positively and with opportunity on the radar.

 

As a business leader, your role is to bring together your staff, explain the planning process and give them confidence that they are able to participate in the next steps. This will in turn enhance individual and team performance, reduce wastage and procrastination, and allow your business to maximise its position within its markets and provide the best financial return to your shareholders.

There is nothing worse than uncertainty in business, and whilst it is clear that smaller businesses cannot change the macro political scene, you as a leader can at least provide the direction and confidence that protects your business, the jobs of your committed staff and the value to your shareholders.

Take positive action now. Business must go on and don’t lose the opportunity to be the best that your business can be.

Plan the outcome that you want; take control of what you can

#leadingconstantchange #deepaudit #teamactionmanagement

 

 

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Business Plans Are just Old Hat

Business plans for many SME companies are documents that write down the intentions of the business in the coming period. In the 1950s we saw the rise, and then fall, of the “corporate planner”. This was a function that gathered market data, analysed the internal resources of the business and produced a plan for the coming 3-5 years to allow the board to focus its efforts on achievement.

old fashioned

Even recently business plans were produced, not by corporate planning functions, but by the business leaders; in order to write down their intentions and provide a stakeholder (usually a lending institution or investor) the ability to understand what they are backing.

In the last decade I could have retired on the £1 I would get from talking to each CEO or Director who confessed that their business plan was outdated, inaccurate, or just a “finger in the air.”

How so?

The pace of change in both social and market terms is now so fast, so eye watering ruthless, that to adopt and try to execute a formal business plan for the next 3-5 years is pure stupidity.

What companies need in this decade, is an “adapting” plan, one that changes and moves each quarter; forget the 3-5 years.

adaptable

Trouble is that few understand how to get such a plan.

Due to the explosion of information and complexity of our world, we also need to broaden and deepen the way in which we collate, react to and use data/information that will give business a greater chance of riding the waves of change.

This inherently lies within the people you employ within your business.

“What a waste, to hire excellent intelligent people and then spend your entire time simply telling them what to do”

So how does a business adapt its planning tools, to deepen and broaden information provision, to allow an adaptive plan to emerge, who owns it and how often does this need to happen?

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Is This The New Normal For 2015?

#leadingconstantchange

Leading Constant Change

2015 is going to be different. It will be the first full year in a post recessionary era where only a small few feel a positive difference, despite the government recovery figures.

Life for many is still as tough and as uncertain as it was a few years ago, and we may just have to acknowledge the fact that this is it – this is the new normal. Get on with it.

So how do we get moving in 2015 and what is the biggest challenge facing us?

Benjamin Franklin (1706-90 in a letter to Jean-Baptiste Leroy, 1789, famously said; “‘In this world nothing can be said to be certain, except death and taxes.”

In today’s world most people have changed the words to reflect our current state, to;

“In this world nothing can be said to be certain, except death and taxes and change.”

In our modern world of constant and accelerating change, many would agree. The technological advances, the ballooning of the world’s population and the furthering of our scientific know-how, puts many of us in a spin, wondering what quantum leaps mankind will take next year, or closer to home, just what will change in our business and consumer markets.

So why, I wonder do we spend so little time proactively seeking new and better ways to manage “change” in our Organisations?

We spend time writing wills, setting up trusts, planning funerals, last wishes, pensions and life insurance – quite a lot of detailed planning goes into these arrangements.

We also spend time as businesses and Organisations, ensuring compliance with our tax laws, in some cases a huge amount of time accounting for our income or profit both on an organisational level and also a personal one.

But what about CHANGE? What do we do to proactively manage the constant need to change?

Most organisations are using and implementing the Fayol model of structure in its simplistic form of; Managing Director, with functional Directors in the areas of Production/Operations, Finance and Sales.

But did you know Fayol’s real scope of work developed 14 principles of management in order to help managers manage their affairs more effectively?

Organisations in technologically advanced countries interpret these principles quite differently from the way they were interpreted during Fayol’s time as well. These differences in interpretation are in part a result of the cultural challenges managers face when implementing this framework.

The fourteen principles are: (1) Division of work, (2) Delegation of Authority, (3) Discipline, (4) Chain of commands, (5) Congenial workplace, (6) Interrelation between individual interests and common organisational goals, (7) Compensation package, (8) Centralisation, (9) Scaled supplier chains, (10) Order, (11) Equity, (12) Job Guarantee, (13) Initiatives, (14) Team-Spirit or Esprit de corps.

To develop a system of Management that responds, plans and executes programmes to manage constant change however, even Fayol may have been challenged.

His Principle number 6 however would suggest that he was already onto something that would eventually provide the answer.

It is of course the relationship between individual’s interests and the Organisational Goals that holds the key

Change is the big issue for many if not most human beings. We fear the unknown, regret that the glorified past has gone, and with technology moving so fast we sometimes just don’t hold all of the knowledge necessary to make a decision.

So we try not to.

Couple that with the oppressive regimes of Audit and the extensive PROCESS led management that we have imposed upon ourselves, and we now have senior Managers who are managing to constantly lower risk, reduce variation and suppress change, instead of innovating for the new tomorrow.

Is it any wonder then why we don’t consider skills to manage constant change a priority when all of our social and business systems are driven to reduce change, drive out variations and maintain a predictable path ahead?

We train hard in the areas of Leadership, but ignore that the basis of a Leader is tomove outside of the rules in order to find a way to get things done. We train in finance, in process, in IT and basic human management, using “Managing by Objectives” (Peter Huber) type cultures.

Modern Management techniques are still firmly anchored in Positivist thinking, where hard evidence is critical, as opposed to Interpretivists.

Positivists believe that the social world (as the natural world) is made up of facts which can be studied. It is the search for laws of social behavior using the logic and methods of the natural sciences. Positivists argue that by applying scientific principles of research to the study of society, Sociologists will be able to put forward proposals for social change which will lead to a better society.

Interpretivists believe that society cannot be treated as a science. They stress the ability of individuals to exercise control and choices over their actions and because everyone is different with different views and attitudes it is not possible to use scientific methodology to study society. Scientific approaches are not suitable for the study of the people that work in our Businesses.

And so our current Management training and theories focus on “hard thinking”, on process and rules, for without that we are surely lost?

In moving forwards, most enlightened Leaders and some Managers now take on board the Interpretivists views that people are not automatons, and that their individual thoughts, beliefs, ideas and attitudes will become their behavior and will directly affect their performance in the workplace.

Most Managers I speak to are abhorred by the thought that need to understand a little about people, their fears and motivators, ambitions and blockages, whilst they are at work, for surely the soft stuff happens at home only?

Their abhorrence comes through lack of knowledge, lack of proper training and the lack of Leadership instruction to modify their techniques, to cope and adapt to this fast paced world.

Consequently, we are still trying on the whole, to manage a workforce in the most traditional ways of measurement and rules, missing the opportunity to more fully engage with our people to gain competitive advantage by the early and willing adoption and acceptance of CHANGE.

Training your Managers to be competent at managing Change need not be a course in psychology. There must be just sufficient attention paid to the intellectual welfare of the workforce however, and then to translate that into the “hard” business planning processes that drive most of our businesses.

Proactively training your senior team in the principles of driving people based change, will enhance the competitiveness and competency of your Business in the next decade.

The real question for you now, is how long you will wait to take the step forwards, or will you, like many cling to the position of yesterday, and eventually will succumb to hard market pressures, and your ambitious and enlightened competitors.

(Philip Webb – author of “Leading Constant Change” – FT Publishing)www.leadingconstantchange.com

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Does Your Business Need a Pebble Chucker?

iStock_000009907270X

I heard the term at a talk given by Tony Wilson, the acclaimed motivational speaker, and he described this word and what it meant to the point where I decided that I almost have to change my job title to that of Philip Webb – Chief Pebble Chucker.

Quite simply, as the image in your mind will doubtless already have shown, the pebble chucker is the one who causes the splash, the ripples, the disruption and the little circular waves in an otherwise still pond.

The noise as the pebble hits the water always gets attention, and the disruption and the concentric circles never fail to mesmerise, as they expand ever wider touching more and more things as they go.

So, in business terms, I am the Pebble Chucker. I am the person who is invited into your organisation not to join you in looking at the peaceful still waters, but to throw in the pebble of change, of positive disturbance, and to work with you to move the business forwards.

It takes the active disruption of the old, in order to get to the new.

Several pebbles may be needed to move your business towards greater success, but the pebble chucker is not here to observe the beauty of the still water, the reflections and the quietness, for such water that doesn’t move will become stagnant over time.

Here to create noise, big sploshing noises that cause the ripples of change to move objects, gain interest and shift mind-sets.

Are you ready now for a Pebble Chucker in your business?

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Who Owns The SWOT Analysis?

SWOT has been around since the dawn of time, or so it seems. The basic audit tool that every business owner, director, manager and student uses to perform a “quick review” of any given situation or person.

But where did it originate, and who actually owns it?

It all started at the Stanford Research Institute, in California, in the early 1960s. A think tank had been set up to look at the problems associated with centralised planning functions, known then as the Corporate Planner. The function had slipped out of fashion for various reasons, and industrialists were on the search for a system of planning that could be used at all levels within an organisation and would produce consistent and robust results.

The Fortune 500 companies of the day sponsored this work, with the first sponsor listed as IBM; followed by Boeing, Union Carbide, Burroughs, Ford Motors, and the list went on.

The research looked at human psychology, the process of making a decision and the values and beliefs that drive us in the workplace. As the research progressed into 1963, they began to look at defining the problem and produced a series of questions that went like this:

  • What’s good about what we do today, and what isn’t good?
  • What could be good about what we do tomorrow and what may go bad?

This translated into a four box analysis called S F O T

An analysis of what could be perceived in the present-day as either SATISFACTORY or a FAULT; and in the future as an OPPORTUNITY or a THREAT. The initials were rearranged into the acronym S O F T and published in 1963. The originators of this test were Albert Humphrey and Otis Benepe, although it was Albert Humphrey who was ultimately credited in the history books as having thought it up.

The SOFT element was but a single jigsaw piece in the complete system of planning that solved the problems of how companies produce consistent and robust plans for change and improvement.

Following publication, the research was presented to the world by Albert Humphrey, Robert Stewart and Isaac Ansoff (remember the Ansoff Matrix?) via formal roadshow allowing them to deliver it directly to hundreds of CEOs of notable corporates.

In the audience were representatives of Urwick Orr, who liked the SOFT approach in isolation of the holistic planning system that was presented. Believing it to be somehow protected with either a patent or trademark, they changed the acronym to SWOT (Strengths, Weaknesses, Opportunity and Threats) and published it for their own gain, effectively stealing SOFT at the time.

The rest as they say is history. SWOT became the “quick n dirty” audit, performed by ordinary folk at all levels in an organisation. It has become taught in every business school on the planet and today remains woven into our education systems as a cornerstone of planning.

Albert Humphrey once told me, “it is a ridiculous idea that the four box product provides anything more than discussion and few good ideas maybe, restricted only to those people around the table contributing.” Although, he did concede that the SWOT acronym sounded better than SOFT.

But what of the ownership question?

The research that concluded in the 1960s was completed by 1970, and SRI disbanded the team. They had produced a planning system that was robust, inclusive, holistic and ground breaking. It was named Participative Planning, and Humphrey was gifted the Intellectual property in 1970. He then updated the programme from Participative Planning to Team Action Management and legally protected it.

In 1971 he came to England, at the request of the shareholders of WH Smith and Sons. He settled in the UK, working with the leaders of UK industry such as Adrian Cadbury (Cadbury), Don Sanderson (Allied Foods) Jim Kelso (Roche Products) and the list went on.

Humphrey died in on 31 October 2005, and had already legally assigned his life’s work, the SRI intellectual property and the TEAM ACTION MANAGEMENT programme, to me, as his disciple of 15 years, with the promise to maintain and extend his work to enable other CEOs and Directors to know about and to benefit from his work.

This IP has been licensed to The SWOT Team, who are able to replicate this planning system as well as deliver the concepts of solid business knowhow to others.

So, SWOT has an owner or, as I would rather describe myself, a caretaker of the Intellectual Property that gave rise to SWOT. The original research notes are preserved from the 1960s and show the evolution of what was to become the best known business acronym on the planet.

As for the effectiveness of SWOT?

Synonymous by its absence rather than its presence I once heard an expert say, “but the inclusion of SWOT shows an attitude of planning which is to be upheld as best practice.”

SWOT as a product, is only a small piece of the original powerful solution of company change planning, but it’s a start nonetheless.

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How Is Your Strategy?

How is your strategy?

It’s a word that has been in our business vocabulary for decades. As directors we are tasked to construct a strategy for our companies that takes into account a number of factors such as market shifts, technological advances, customer needs and of course our own ability as an organisation to join these things up to provide a trading framework for profit, performance, productivity and shareholder return.

But it cannot stop there. Plenty of boards have constructed exciting, innovative or market owning strategies and documented them for execution, still to fail over time. The problem, then, is twofold.

Firstly, the strategic direction fails to be updated in the face of new or continually evolving technologies or customer requirements. Those responsible fail to look ahead and plan out responses to new information, new technology or disruptive working models that threaten to strip away their trading position in a remarkably short space of time. Disruptive models and technology can change the game for businesses and create entirely new products and services as well as reforming whole supply chains.

The board must continuously anticipate and form multiple plans to respond to new challenges. Prior assumptions and often tried and tested business models may have to be abandoned as entire markets come under pressure or are attacked by competitors or new market entrants.

This means intelligence within the organisation must be brought to bear on a regular basis to ensure a rapid response and protecting the business as it moves forwards.

The core of the strategist’s work is always the same; to discover the crucial factors in a situation and design a way to coordinate and focus actions to deal with them.

And so we come to the second part of the problem. In asking you the question, “where does strategy end and operational execution begin?” the answers are often unclear. That is exactly the right answer of course, as to have no defined boundary between strategy and operations is the best situation of any organisation.

The issue is that in working with hundreds of companies, large and small, rarely do I find that the company has developed a system for doing just that. Strategy exists in isolation and is contained as a board room discussion.

Yet it is the people and processes within your company that are being asked to understand it, translate it into action and then execute with focus and determination providing feedback in diluted and honest to allow for improvements.

A company who discovers a robust and repeatable system for doing this will outperform those who don’t, every time.

In making it possible for your strategists to think operationally, and for your management and teams to think strategically, you will have found a way to be flexible, active in managing constant change, and will have installed an approach that can twist and turn with your markets, respond to your customers and protect your shareholder value.

So how is your strategy? Or should I ask, how are you directing your strategy, using your teams to bring about true competitive market advantage?

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