RT @boardeval: RT @boardeval: See the FRC 2016 corporate governance review at our website https://t.co/vKv91G0Xvu Interesting reading!!

Word of mouse has replaced word of mouth

Jean Pousson reflects on the changing dynamics facing organisations. August 2010.

Last Christmas the number one song in the UK charts was not the X factor winner as generally predicted, but a profanity littered song(yes for Xmas!)called “Killing in the name of” by a US heavy metal group. This all started as a protest against pop impressario Simon Cowell(who manages the X factor winner) but gained sufficient momentum on social networks sites to topple the pre Xmas odds on favourite. Mr Cowell was gracious in defeat in acknowledging that perhaps he had taken the number one spot for granted.

This not only highlights the power of the internet in changing traditional dynamics but also that ,as executives, nothing(but nothing)should ever be taken for granted.

Over the last couple of years hallowed names like Lehman Brothers and Woolworths have disappeared. General Motors has gone bankrupt and Royal Bank of Scotland, once one of the biggest banks in the world, is now a pale shadow of its former self.

It would be far too easy to view these calamities as consequences of the prevailing economic conditions. Economic recessions always cause painful adjustments, but some organisations survive (and even prosper!) while others simply get brushed away into insignificance.

So what is to be done to cope against this uncertain world?

The first realisation is that dynamics of organisations change. Uncertainty is a property of nature and is also a property of organisational life. Organisations must therefore be on a constant state of alert and never allow themselves to be surprised either by a competitor or a change in customer behaviour.

Board discussions and strategic planning excercises need a different language. Tools which may have worked decades ago may not necessarily work as well now. For example, far too often when I look at organisations’ business plans, under the traditional PESTLE analysis (Political, Environmental, Social, Technological, Legal and Economic) the possible happening is identified, but what seems rarely discussed properly is the impact in all its forms on the organisation’s strategy, future and possibly survival of such happenings.

What the banking crisis has highlighted is the fact that risks were not fully understood and mitigated against. Risk managers often play last year’s game and often do not realise that new products and changing dynamics bring about new and different risks that traditional measures do not capture.

Organisations get lulled in the illusion of percentages. Let me demonstrate. Risk managers talk about a 99% confidence probability. But the one percent can cause immense damage if it were to happen. Royal Bank of Scotland (pre nationalisation)had loans to customers totalling some £852 billion! Work out the numbers for yourself.

On a personal level executives and directors must not neglect their own personal development. They must carry on learning but must also learn to unlearn, meaning dumping tools, thoughts, etc that may not work so well anymore. I would also recommend reverse mentoring, ie get a mentor who is much younger than yourself to make sure that you remain connected to the outside world. I’ll never forget when a few years ago, my daughter of 25 despaired because I wasn’t on Facebook, and that she had to email me stuff. Point taken.

To continue ,and finish, on the “nothing is for ever theme”, the December issue of the highly respected Harvard Business Review magazine, features a full page ad from a well-known consultancy firm, with Tiger Woods posing with his golf ball stuck among rocks. The caption?”It’s what you do next that counts .How can you ensure your next move is your best move?” And the firm’s strapline? ”We know what it takes to be a Tiger….High performance. Delivered.”

You couldn’t make this up if you tried!