trust your people!

I get very frustrated with managers who can’t seem to trust their own people. These are the same managers who have hired them and sing their praises to the market place as the “best” and our “most important resource”, blah, blah, blah.

Yet when it comes to planning for the future, these same managers treat their employees as if they are children and don’t seem to believe that they can actually do anything for themselves. Let me give you an example, we are the midst of the annual game of “budgets and planning” for our next financial year. We have been asked to provide what we believe we are going to be able to deliver in top line revenue.

Having given this some serious thought about what we have in the pipeline, what the current market place is doing, our own abilities and the fact we are short staffed (doing “more with less” as they say) we put forward what are still aggressive growth numbers. “Not good enough” we’re told.

Now the company isn’t even going to reach its numbers this year (our region is though!!) and yet they still want to increase the target for next year by a further 20%! Where is the reality in that? You have asked us for an honest assessment, which we have provided. It is about 14% over this year so we’re not exactly slacking…

The reason they are pushing for more? They don’t believe we are being “fully open about the potential” in our region, i.e. we are lying. There is nothing to be gained for us lying. There are no excessive bonuses to be paid. We are trying to provide the most accurate assessment to assist with their capital expenditure and growth planning. Why don’t you just trust us – those closest to the market place?

Are we once again forced to play “the game”, where we come in extremely low, you come in very high and we settle on roughly the same number we just gave you?

If you don’t trust your people, get rid of them – your wasting your time and ours.

© management mojo 2008. All rights reserved.

the power of “why”

Often when dealing with clients, the power of “why” becomes clear all over again. My recollection is that Toyota (who else?!?) use it when trying to understand a problem more clearly. They have quite a rigid decision making process and the “5 why’s” is one of them (and it clearly works!). It helps separate the symptom from the ailment and makes it so we know what to fix.

I thought that I would apply the same logic to this global “credit crunch”. So here goes:

We are in a credit crunch. Why?

Because there is a lack of liquidity in the market place. Why?

Because no one is lending any money. Why?

Because the banks don’t trust each other. Why?

Because their ability to repay their debt is shaky. Why?

Because the loans they have made to consumers were not based on prudent risk assessment.

So the symptom of poor credit assessment and imprudent lending (the ailment) is a credit crunch. What are the central banks trying to do. Increase liquidity. Will this solve the problem? Doubtful – it may mask the symptom for awhile, but the underlying problem has not been addressed…

Will we ever learn?!?!

tackle the problem

March, the start of spring, and what a month it’s been!

A starting total of $400 billion has been pumped into the US financial system. Interest rates in the US dropped a further 75 bps and Bear Sterns effectively ceased to exist, much to JP Morgan’s delight (guaranteed by the government? who would have guessed!). The BoE pumped over £10b into our own financial system and the pressure to cut interest rates from various sectors is growing, even in the face of rising inflation.

The pumping of money into the financial systems is about boosting liquidity in an attempt to avoid insolvencies within the banking sector because of counter-party fears. This makes sense in the short-term, however, the medium to long term impact of these decisions spells out inflation.

You cannot “create” money where there was none and not expect repercussions to follow. There are implications to all our decisions: remember that.

Will interest rates fix the current credit crunch? Personally, I doubt it. Interest rates didn’t create the problems and I very much doubt they will now magically fix it. The system was flawed with relaxed lending standards, unsupported derivative structures, poor credit rating insight and a basic lack of prudent financial behaviour, to name a few. We cannot fix these problems by reducing interest rates, this is only attacking the symptoms, not the attacking the underlying problems.

Whenever challenges are faced, in business or life, tackling the root of the cause may be more difficult, but is the only sustainable means of learning and moving forward. How some of the world’s brightest people are ignoring this is beyond me (and a whole other discussion!).