Friday, September 24, 2010

Hopelessly Stumped Banking Corporation

HSBC is a solid, and perhaps staid, bank. It rode the financial crisis reasonably well and generally stays out of the headlines. Surprising then to see it on top of the financial news for the last five days thanks to a messy succession saga.

Here's what happened. Successions in HSBC are very orderly. The Chairman retires to tend to his garden somewhere in the English countryside. The CEO becomes the Chairman. The senior most executive being groomed for years, takes over as CEO. All very dignified and solemn. The Board congratulates itself over many glasses of the finest bubbly. The money continues to pour in and all is well in the world.

This time the script went wrong. Stephen Green , the current Chairman, had indicated in May that he wanted to retire in a year's time. A search firm was duly appointed to recommend that there were no suitable outside candidates so that the pesky shareholders can be told to keep quiet. But suddenly Stephen Green was asked to join the UK cabinet as Trade Minister. The garden could wait. Off he decided to go, some months in advance.

So they had to appoint a Chairman "quickly". To complicate matters, there was an outside candidate who would be eminently qualified. John Thornton, ex Goldman Sachs, who famously gave up a shot at the top Goldman post some years ago to move to Beijing and teach at the Tsinghua University. He was already a non executive director of HSBC and apparently was interested.

In stepped Michael Geoghan, the current CEO of HSBC. He couldn't believe that they were really thinking of not giving him, what was his "right". He said  - No way John Thornton. Perhaps even, "over my dead body". Stalemate. The Board didn't want to give it to Geoghan either- he was a bit too brash and they didn't like him all that much. So if not Geoghan, who else ? The insiders were up in arms against any outsider coming in.

So they plumped for Douglas Flint, the current CFO as Chairman. But this left Geoghan in a quandary. His subordinate was going to become his boss. He wouldn't accept that and decided to quit as well. Up stepped Stuart Gulliver who was being groomed for the CEO's job anyway, but which landed on his lap some years ahead of time.

All round dissatisfaction and tut-tutting. New Chairman and new CEO, all in the space of one week. Of such politicking are boardrooms made of. Now nobody is sure if the money will continue to pour in. Or the flow of the bubbly, for that matter.

So here's material for a Kollywood typical, starring Rajnikanth as Stephen Green, Vijay as Geoghan, Surya as Gulliver, Vikram as Flint , Prakash Raj as Thornton and the delectable Asin as the tea lady !

PS : This blogger is constrained to disclose that he banks with the said bank !

Thursday, September 23, 2010

Jobs for Life

Jobs for life ?  A quaint and obsolete concept ? Not even dinosaurs would think of such an idea ; Right? Don't snigger. No less a company than Siemens has done just that in Germany.

My first reaction was, of course, what on earth has Siemens done. Has it simply bowed to the pressure of the mighty German trade unions ? The power of trade unions in Germany is well known. The country has adopted a model for a cosy relationship between workers and managements. Confrontations, when they come, are often less intense than might be seen in other parts of the world. Wages are high. Its not easy to lay off workers.And yet Germany remains a massive industrial success; it remains the largest exporter in the world neck to neck with China. 

The arguments for flexibility with work force are well known. But why has Siemens opted for giving jobs for life - and that too in high cost Germany ? There must some arguments on the other side of the debate as well. There surely are.
If we turn around the people question to say that employees are "customers" and the employer must give the customer what she wants, then we start  from a different point of view. In the India and China  of today, the employee does not want lifetime employment because of the opportunities that abound. Its a moot point that 30 years ago, in both these societies, lifetime employment would have been a very attractive proposition.  But there are many societies today where lifetime employment would be a very desirable proposition. Worth taking a smaller salaray for the promise of a lifetime employment.
The workforce is not a homogeneous mass. Just like we segment customers in marketing, we must segment the workforce population too. There is a segment that will trade off higher wages for stability. If attracting that segment is interesting for the employer, then why not ?? Take a combination of lifetime employment, lower wages, long notice period for employees quitting, employer ability to lay off on grounds of non performance or indiscipline, and you have package not to be sneered at. It will also force employers to take long term views on manufacturing - all too often these days companies set up factories knowing fully well that they will shut them down in 5 years. World supply chains are not all that dynamic - witness the continued manufacturing might of Germany for the last 60 years.

Human motivation is not driven solely by fear. Its not just the threat of losing one's job that makes you work harder. Life gives you a perfect example of this. Its called parenthood. Every parent (alas, bar a few exceptions) would make seemingly irrational sacrifices for his child. Commitment and permanency are not dirty words in life. Neither should they be in business.

Saturday, September 18, 2010

In praise of Vaithy mama

Vaithy mama is a legendary figure if you were a schoolboy playing cricket in a certain district in the south of India in the 70s. No prizes for guessing that this blogger was one of them. Vaithy mama was the lone selector of the district cricket team and had the power of life and death over earnest schoolboys for whom being dropped from the team was the end of the world.

Vaithy mama's selection criteria were very clear. If you were a batsman, did your bat stay close to the pad; was the bat straight, did the front foot point in the direction of the stroke, did the ball travel all along the ground, did the front shoulder point to mid off, etc etc. Readers unfamiliar with this funny game can translate this as the good old way of playing cricket. Not the current day slam bang variety. To Vaithy mama, it didn't matter if the runs did not come. Did you play correctly ? Many a boy had got slapped for attempting a cross batted shot.

Such is cricket. It's more than a game. It represents a way of life - hence the English expression "ïts not cricket" . A world where fair play reigns paramount; where style matters as much as result; where the word gentleman is truly defined.

And then there's T20 cricket. I have had the unfortunate experience of watching the damn thing on telly  over the last one week. Call it the enthusiasm of the cricket connoisseur (?) who's been starved of the sport in the great wilderness of the Net Nanny's domain. And what do I see ?? Agriculturists marauding as cricketers. Attempted shots over the wicketkeeper's head. Ungainly heaves over wherever with both feet in the air, the bat facing point and the front shoulder facing square leg - picture the sight; akin to watching Govinda shake his ample frame purportedly in dance. And what do the bowlers do ? Bowl donkey drops in the name of "slow bouncers". Pray; a bouncer is supposed to scream at the quivering batsman's nose at 100mph . Not donkey drop. The sight of a so called fast bowler running in and delivering "slower ones" at 25mph all six times in an over is enough to make me gag -exactly what happened yesterday again and again. Ugh. Eeeks.

The sight that nauseated me most was that of Sachin Tendulkar trying to do all this. For those who don't know this lofty gentleman, he is the very embodiment of the classic cricketer. And yet here he is, standing in the midst of agriculturists attempting to heave and slog and looking like a ballerina trying to imitate the pelvic thrusts that goes for Bollywood dance. 

From what I saw two days ago, Vaithy mama would have definitely dropped Tendulkar from the team and cuffed him on the ear !

Saturday, September 11, 2010

The Right to no Information

The Right to Information is a fundamental right in most countries. Freedom of the press is a cherished goal. All very good.  But I think its now time to have a Right to NOT have information. I write this even though I have witnessed at close quarters for three years, the perils of such an idea.

Take the case of the story of the idiot in Florida who wanted to burn the Koran, which is the trigger for my post today. He is an irrelevant nobody  who perhaps has a dozen imbeciles who go to his "church".  Suddenly he has become a celebrity and has been interviewed and reported all over the world. And equal imbeciles in some corner of the world, who can't even point to Florida on the map demonstrate and threaten violence against America. That's reported on too. News has been "created" where none should have existed. With potentially dangerous consequences. The world would have been a better place if the worthy in Florida had been royally ignored.

A week ago, there was the tragic case of a mental case taking hostages in a bus in the Philippines. The media descended like a swarm of locusts on the scene and started reporting live. Each channel shrilly trying to outdo the other. The police planned an assault to free the hostages. Every preparation for this was broadcast live in graphic detail including the position of the snipers. The only problem was that the hijacker was watching all this on the TV inside the bus. Negotiators couldn't reach the hijacker once because he was busy giving an interview to a TV station on his mobile phone. End result - the attempt to storm failed and a disastrous ending with many deaths.

Dog bites man is not news; man bites dog is reportedly so. Therefore it makes sense for man to bite dog to gain his moment in the sun. All too many people are trying to bite the dog in order to get themselves into the papers. And the media is willing to provide the dog, sharpen the man's teeth, provide a cushion to kneel on for the act and are even prepared to pay him for the privilege of filming him sink his sorry teeth.

In a different way, the Right to Information Act in India is a similar problem. It was enacted in India a little while ago, to provide transparency about the government - governments should not be allowed to bury their activities under the cloak of secrecy. Many democracies have similar rights enshrined. Noble intentions. But the consequences are predictable. There is a huge number of people who have nothing else to do. Their pastime is to request all sorts of information under the Act. What is the weight of the the Minister's mother in law ? How many times did his dog poop on the carpet ? What was the water consumption in his house ? A bureaucracy has been created to cater to such requests for information. My tax payer rupees to amuse the retired, senile who has nothing else to do ? Thank you very much.

I strongly feel the need for a Right to NO Information Act !

Tuesday, September 7, 2010

Small enough to fail - alas

I had never heard of ShoreBank until I read this article in The Economist. The Economist titled its article – Small enough to fail. I add an “alas” to my post header.

ShoreBank , according to The Economist article, thrived for 35 years on a business model of a small community bank that targeted lending to poor people in poor neighbourhoods. It actually had higher repayment rates and lower delinquency,  as any careful micro lender will tell you.  But then the recession struck like a tsunami. In the neighbourhood in  which it operated, the recession has been brutal and most people lost their jobs. Despite very good payment records in the past, they couldn’t keep it up.  Unfortunately its location in Chicago and therefore the association with Obama made it a political lightning rod. No way it could be bailed out. Alas, it had to go.

This article set me thinking on the risk quotient for small businesses. By definition, small businesses cannot be diversified in terms of risk. They will be dependent on either a small market, or a small set of suppliers, or a particular technology or a single currency, or whatever. Even if they are an extremely well run business, they can be vulnerable to a violent swing in risk parameters over which they have no control. Exactly what happened to ShoreBank.

It must be remembered that some 90% of all businesses in the world are small businesses. They are, by far, the largest employers in the world.  Are they fundamentally vulnerable ?  And therefore at a fundamental competitive disadvantage over big businesses ?

Traditional risk mitigation strategies involve either hedging or taking insurance.  Both don’t seem to be attractive options here. Can small businesses pool together and hedge together ? Can some intermediary create a product that can help make this happen ?

These days, I am working with a small entrepreneur whose business has gone bad. What he and his family are going through has to be seen at close quarters to be appreciated. Risk is an esoteric term in economics text books. When it hits lives brutally, it stops being a concept and starts to become something frighteningly real. Small businesses face it every day , in ways  that big businesses would not even comprehend.  And yet, risk mitigation seems that much more difficult for small businesses.

This is a muse, without a point of view. I just wonder if risk management products must be evolved for systemic risks faced by small businesses. And just one other thing. The next time you delay a payment to a small guy, or squeeze him in a negotiation, just pause and spare a thought.

Saturday, September 4, 2010

I have the right to blog in office time !

The blurring of lines between work life and personal life has been a profound change in the last 10 years. We may not have fully realized it as it’s a classic case of slow boiling of the frog. If anybody had presented to you what the demands of working life would be when you started your career, you would have recoiled with horror. But like the proverbial frog, we have all been slowly cooked to death.

E mail, and later Blackberry, have been the two largest causes of virtually eliminating the line between business time and personal time. I know of a senior guy who sets an alarm three times in the night to check his email. He may be an extreme case, but most of us are not very far away from there. Just look around when a plane lands and you’ll know what I mean. The office comes to us all the time. We can’t go to bed without it – the damn thing is under the pillow. We can’t even go to the loo without it. The day is not far off when we’ll be buried with it.

Imagine a business situation where you are at an important meeting. Perhaps with your Chairman. How would it look if you jumped out every five minutes because the Blackberry was pinging. Yet that’s precisely what we do when we are talking to our child every day. (Or girl friend, if you are Gils !) Business has completely taken over personal time.

The second major development that has contributed to it is the world going flat. Time zone differentials mean that conference calls are invariably at night if you are Asian, unearthly morning if you are American, graveyard shift if you are Australian and interrupting the fine wine at lunch if you are French ! That is after the normal slog of the 12 hour day or thereabouts (French excepted !).

A third development is the concept of working from home. Increasing numbers of people do it these days. That’s like opening the door to the wolf and willingly inviting him home. Or perhaps its just a realization that he is going to come in anyway; so why not invite him openly. Fair enough.

I am not haranguing against work life virtually taking over personal life. It has profound social consequences which will be apparent only after a generation. But it’s a free world – its your choice whether you want to do it or not. Make this choice consciously ; it does not make any sense to allow it to happen without a thought. After all, you can always chose to be a Prof !! (that's just to needle JS who seems to have vanished)

But this post, as the title suggests, is not about work life taking over personal life. Its about companies preventing personal stuff from coming in to the office. Like blocking Blogger and the like (for the sake of official record, let me state that the enlightened companies that I work with do not do that !!). Pray what is the difference between the infamous Net Nanny and this lot ?? I’ve heard the stale arguments – workers will only be browsing porn if there’s a free for all. I pay you to work; not to while away the time. The company faces legal liabilities if people use office computers to do irresponsible things. Blah Blah Blah. When you don’t blink an eyelid in encroaching on every available minute of personal time, why is it that personal stuff cannot encroach into the office ??

Sorry mate. Not acceptable. I demand the right to blog at office.