Force Majeure

Reward

2011-05-20T21:31:00.001+09:00

Got myself a 2010 Finance award from the company.
Worked hard to make things simple.
Thanks to all the people who recognized my work!

Predictive analytics

2010-08-01T06:21:00.002+09:00

Performance management by Gary Cokins

Here is an excellent book that I would recommend to anyone interested in thinking one step beyond. The book is extremely dense and filled every other page with food for thought that will tie together the strategy, execution and scorecard of your business. It also introduces a couple of very interesting concepts that I could apply directly in my line of activities:

Managing risk: benchmarking your activities for risk allows you to detect levels that are risky in comparison of the return expected but also and very importantly potential for untapped growth and opportunities where your risk levels are low in regard of what your business is usually ready to cope with. Thinking activities and metrics in terms of risk is a very interesting concept that indeed aim at reducing risk but also -and counter intuitively- increasing it
Predictive analytics: Variance analysis, looking at past data certainly explains what happened, looking at current data helps knowing where one stands, however wouldn't it be better to manage your activities when an likely opportunity is detected and anticipated? When indicators warn of a possible risk before it transforms itself into a real concern? Predicting a situation through analytics gives you the ability to anticipate, exploit or correct situations before they even occur. Gary Cokins explains extremely well this mind frame that forces you to organize yourself in such a way that you rely a lot less on last month data and a lot more on what you should aggressively pursue next.

In my current activities, I applied these concepts directly with our distributors in the APAC region. It is essential to keep the pulse of our business partners in this credit crunch context and shrinking economy. Knowing when we can take risk without stopping the business or what to do when we start detecting difficulties that must be corrected has been key and given us the tools to reduce exposure or accept risk. The beauty of the approach is that we can manage the events before they even occur and redirect the business where it should go.

Process maturity model

2010-05-16T08:10:00.002+09:00

Carnegie Mellon University has developed a process maturity model that was initially used for software engineering. However, it has been very effectively adapted to any kind of processes.

It can be defined as 5 different levels:

Initial (chaotic, ad hoc, individual heroics) - the starting point for use of a new process.
Managed - the process is managed according to the metrics described in the Defined stage.
Defined - the process is defined/confirmed as a standard business process, and decomposed to levels 0, 1 and 2 (the latter being Work Instructions).
Quantitatively managed
Optimized - process management includes deliberate process optimization/improvement

One very important point to remember is that it is almost impossible to skip a stage.
Assess the maturity level of the process in your organization and move from there.

This is a very neat model to have in your toolbox. Not the first time neither the last I am using it.

Awards

2010-01-28T05:20:00.005+09:00

Yearly awards are always meant to be a special event that recognize the contribution of individuals or teams for their exceptional work during the year. Personally knowing most of the recipients, I know how much sweat and pain went into these awards and how little these prize will ever be able to fully say thank you.

This got me thinking. Aren't we celebrating the company's dysfunctions? Why does it have to be blood and sweat?

Reading: Re-inventing the CFO:How Financial Managers Can Transform Their Roles and Add Greater Value

2009-11-29T19:41:00.010+09:00

The good: a few interesting ideas
The less good: ...too much around the few interesting ideas

Here is a small book that I thought would give me a bit more insight in how a CFO can help his company. I was very curious to see if anything new would come up.

Let's get to the points that were interesting. First of all, it is always reassuring to know that most companies face the same type of challenges and issues. To put a mild positive spin to it, you are not doing worse than anyone else and knowing that the grass is not necessarily greener on the other side of the fence lets you somewhat focus on your own situation.

Secondly, Mr Hope introduces the notion that budgets and targets are not necessarily all that productive: his main point is that they generate more work and game inefficiencies rather than letting the organization be adaptive, track opportunities and focus on business growth.

Thirdly, the author emphasizes on a huge simplification of reporting and recommends analyzing trends, detecting anomalies rather than spending time in minor details and numerous indicators that hardly anyone ever reads. One of the amusing recommendation by the way is to simply stop issuing reports. If someone starts yelling, then it must be important, otherwise just let it die and move on to more value added activities.

So how do you move to value added activities? Quite mathematically, if you cut on the labor intensive-low-return activities, you free yourself up for more contacts with the business side, better understanding of the keys indicators that do matter to your company, and play a better role as a trusted adviser.

Well, all this makes perfect sense.

As much as I understand we are all trying to market something, be it ideas, services or products, it is somehow difficult to chase away the uneasiness that emerges from reading Mr Hope’s essay.

The author is indeed absolutely right to talk about the increasing difficulties and complexities that the finance organization is facing, and yes, sometimes many would like to feel that they are contributing a lot more to the organization and the growth of the company. But quite frankly, do we really need that many pages to be sold to the solutions that Mr Hope is presumably able to bring? Does he really need to use that much verbiage to say in an apparently very educated way what could be explained simply?

If Mr Hope’s target audience is the finance crowd that wishes to emerge from its excel reports and play a more active role in supporting the business, then he should know better. We still can call out a small Sales pitch when we hear one.

Reinventing the CFO mixes concepts worth taking a look at to the work experience of a consultant who probably enjoys the sound of his own voice ( a trait we are numerous to share...).

Some editing would have better served the author.

All in all, some interesting ideas for a quick read.

3 stars out of 5.

Gilles Daquin

Pricing vs your competitors

2009-06-14T23:44:00.006+09:00

While you should always be aware of you Marketing mix, it is sometimes quite difficult to assess a right level of price for your products especially in face of competition.

There are many aspects one can think of, recipes, intuitions or other "obvious" facts. You can work it out from your cost (which may not capture the value of your product), or define the price and then work down to the cost of manufacturing it.

However, among the most interesting solutions that I found was a suggestion from the Harvard Business review. It is easy enough to implement and quite elegant.

It basically consists in defining the primary functions that customers will look for in your product, as well as the secondary ones. Score them for their functional value and plot them against their price. Very quickly this yields a picture of where you position yourself in regard of competition (assessed on the same primary and secondary functions) and your peers products from the lower to higher range. You can also vary the importance of the secondary functions by attributing more weight to the primary functions and less to the secondary ones.

Gilles Daquin at http://gillesdaquin.blogspot.com

Best intentions

2009-06-14T23:00:00.003+09:00

One quick tip to quickly assess the viability of Corporate move. Its simplicity never fails to impress me.

3 simple questions to ask:

Is your strategy in phase with the objectives you aim to achieve?
Are your people in phase with your company's objectives?
Are your people in phase with the strategy to reach these objectives?

If any of these questions is answered by a "no", there is very little chance that success will be met.

Gilles Daquin at http://gillesdaquin.blogspot.com

Gordon Mandry

2007-12-29T03:36:00.002+09:00

Manchester 2003, Gordon Mandry,

Ah damn bastard…

If you are French, Japanese, English, American or Chinese, you are totally out of luck. The man hates you. Not simply ignoring you in a petty way, but he actively hates you by pointing out all the most humiliating stereotypes one can figure out about your home country and fellow citizens. Then if you make the mistake to shoot back some comment about the lame quality of the food you are being served, the weather that never stops to let you down preferably under 10 cm of chilling rain and long dark depressing skies, he will ask you why have you come to England, enjoying in advance the fight he is going to pick. You’ll then quietly answer “I came because of the quality of the teaching”.

Gordon Mandry is one of the most brilliant mind I came to learn from (besides a genius fraud who turned out to be one hell of a criminal!) And when this brilliant mind asks a question, you’d better know the answer, otherwise you’ll be reduced to dust and crumbles.

So yes, I was punched around a few times by the terror guy, but since the man inspires respect, I… fought back, sometimes. It is not always that easy.

So the most brilliant mind yells at my team on a marketing project he was overseeing. Since the guy is very clever, you have to ask yourself fast why he is unhappy, especially if you are killing yourself on the job. Then, you have to backtrack, rewind the course of the events and figure out what are the missing element of the puzzle. Then, if you still haven’t fainted, and managed to keep your cool, you infer that he wasn’t given an essential piece of information that you just managed to dig out.

Then the project goes on, and two weeks later, you are checked on the status and you can feel the growing ire of your director lying upon you: cold as steel. And then again, you have to ask yourself the right questions. You are convinced that you are going in the right direction and you try to understand why this very bright guy doesn’t see your point at the moment, and suddenly it becomes difficult to decide because you know you are being watched, you are going into the unknown and your director is not following you, at all. “I sincerely hope that you know what you are doing”.

So you have to think long and hard. If you back down, you know the project will be a total failure and you hate failure, on the other hand, it is not clear why such a brilliant person does not see the “light”. So you look for a reason and you figure out that Gordon has been extremely busy and highly solicited by many people and just never gets a chance to analyze all the elements of the problem and he won’t have time until the final submission of the project. So you think, because you have no other way… If you are right, you are right and you act in the best interest of your mission.

So it has been like “knocking on hell’s door” and I can hear the sound of my heartbeat growing bigger everyday. But I’ll fight for my results, they show a truth that is difficult to grasp at a glance and I believe in the analysis.

So comes the day of the final submission. And damn it, yes Gordon is a bright guy, and yes he spends time to read what I had to say.

Gordon is not the type to admit he is wrong, and I didn’t expect it, but he is the type to recognize your work when it makes sense. That’s the mark of a very clever person and of a true gentleman. Believe me it is not easy to stand up to a genius, and you’d better be sure about what you have to say. Maybe, I grew up a bit more, maybe I was able to bring value instead of taking the easy way out, but for this small lesson in life, for what Gordon let me learn and prove to myself, I can absolve his (numerous) sins.

Thanks Gordon, you bloody welsh bastard...

Gilles Daquin at http://gillesdaquin.blogspot.com

1996-2006 Start-ups, what have we learned?

2006-08-22T10:41:00.002+09:00

I was attending the other day a presentation held by several start-ups to present their offering.
While I am always enthusiastic about creative people who pursue a dream to bring change and new products on the market, the general feeling was a bit ..."back to the future".

I couldn't help wondering what we had learned, if anything at all, from the 90s:

One of the company set to establish itself in the electronic content publishing "everywhere-anythime-whatever the device". We were then showed a reading device, the size of a smaller lap top screen that would enable us, the customers, to read "everywhere, anytime, anyhow"... We were assured that technologically there were many complex issues and all this "thing was not trivial to establish". Nonetheless, I would be able to read in Norway a Japanese newspaper if I'd wish to...

With all due respect to the creative drive and enthusiasm (that I believe should be rewarded in one way or another), words of wisdom from a business angel were still echoing in my head long after the speech was done: "If the technology replicates a concept already existing, stay clear from this venture..."

Addition Feb 2011: well, you can't always be right, can you... Kindle anyone? (smile)

Healthcare and new cures

2006-08-15T16:20:00.000+09:00

It is not a mystery that the healthcare industry is still a market with a lot of potential for growth. The population of the rich countries are aging and need more care, medecine is still making progress in many untapped territories.

On one hand we have demand for more and better service, on the other hand research is pushing the limits and making more cure available.

A client of mine who came up with very interesting technology made the following reasoning:

"We know that 5% of the population in the rich countries suffer from the disease Z, there are roughly 500 Million people in the targeted countries, therefore our market is 5% x 500 million = 25 million customers" No need to say that the reasoning justified huge investments and ambitious business planning.

However, after studying the market conditions, and different healthcare systems, it appeared that the client had made a major mistake. They failed indeed to understand that while there might be several million potential users of the technology to cure dizease Z, the budget envelope dedicated to reimburse medical expenses is quite limited. The new cure will be actually competing against many other cures for other diseases. Thus, while the cure for disease Z might be promising, it will be probably overlooked in favor of treatments for cancer or other more serious diseases.

In the healthcare industry, don't forget to look at

the reimbursement schemes: the newest cure might not be reimbursed yet, therefore its adoption and expansion might be greatly limited
the "competing" diseases : the healthcare budgets are not extensible and your cure (in spite of its theoretical ability to cure an important number of patients) might not be the first priority

As nothing goes in this industry with small numbers, you can only imagine the costs of approximate marketing and strategic planning. Terrible losses.

Consultant or Collateral casualty? part II

2006-08-02T13:14:00.000+09:00

Some of you have expressed interest in the solution adopted with this particular client (look at post bellow "Consultant or Collateral casualty" for the background story).

Consultants, and Management consultants in particular, should be extremely aware of the task that is being asked. This is one point. The fact that you are aware of a political situation is all to your credit, however you need to represent your company to its best and still help your client.

No "updating your CV" is not the answer (although your CV should be always updated).

The answer is
a) you protect your company by documenting absolutely all your efforts, all the reactions and effects.
b) you protect your client by documenting every possible solution and action that reasonably could be tried.

What you think of the client next is left as an exercise to the reader... but my advice is to laugh it off (grin).

Be wise and do happy consulting, it's just part of the challenges you may face one day or another as a consultant.

Your best customers?

2006-07-31T15:16:00.000+09:00

Sometime ago, a client of mine in the healthcare industry gave my team and I a very simple assignment: " Increase the sales"!

The client, a subsidiary of a fortune 100 company, was wondering why its USD 100 Million yearly revenues were not lifting up.

This case was actually quite complex and very interesting. We'll see today one of the issues:

Looking at how the client had segmented its market, we found out that only two groups were so far identified. The "best customers" that were driving the sales and the "others" still not converted to a big purchaser status. To our client's credit, the technology was rather new and leading edge in the field of healthcare with actually very little customer data.

After collecting data and conducting a finer analysis, I found out that their market segment was actually constitued of 4 groups: the current "Heavy consummers", the biggest purchases, who were actually driving innovation, research, and whose main focus was to drive technology to even higher levels. The "Pragmatists" who were not specifically doing research but were closely following recent developments, trying to see how to adapt the technology to other forms of applications. The "Strugglers" who were trying to to see how to use the new technology, improve their skills with little information and noone to really turn to. And then, the "Total beginers" craving for any type of information, not even knowing where to start with.
Once these typologies were identified, it was quite easy to address their needs and consequently drive up the sales.

The biggest purchasers, the group that had all the company focus, were actually only making the technology extremely exclusive rather than making it accessible to more! Their interest was research and they had little time for the common user... No need to say that the focus then shifted to the "Pragmatists" who were more apt to develop the use of the technology.

The little conclusion of this very nice case was: you biggest customer is not necessarily you best customer!...

Consultant or Collateral casualty?

2006-07-24T16:23:00.001+09:00

Smart people know that in face of adversity, a bit of humor is still the best way to go.

Sometime ago, I was asked by a client to look at a specific issue.

So, I start to observe, collect information, talk with people, and after sometime, I have a quite good understanding of what is going on in the organisation.

I am looking at the team, and the way the issue is tackled. Slowly but surely, a strong feel emerges that a lot of this is assembled together in a mixed bag of approximative processes and people intuitively doing their best to provide "something". The project is meant to seriously affect everyone in the company, and not a departmental head is informed, noone knows or cares about it. More and more, this all venture tastes like a local initiative trying to achieve global results without any serious committment or sponsorship.

Curiously enough, slowly but surely I find myself uncovering information that the client knew in the first place but did not bother to forward.

Still -we are not trained to analyse a situation for nothing- I am wondering why an experimented manager keeps pushing for results in a context that he clearly knows won't yield anything (I'm already at this stage putting a figure on the cash that is going to go down the drain).

So, we are called in to conduct a project that has all the indicators in the orange or red, we are provided basic information, we are limited to resources or support, and lot's of the elements put together don't seem adequate to fit together.

hm... Still looking at the new organisational chart, one can see that the client is meant to report to a new manager reporting to the CIO or CFO while the client function is really to report directly to either of them.

The client assures us that he has "support" from his managers "well cc him so he is sees this is not so easy". Hm, right, what are we talking about anyway, just a "mere" Culture change, nothing too serious, a couple of enthusiastic staff should be sufficient...

It is not so difficult here to recreate the thought process of our client, and why he is calling in consultants to perform a task he is responsible for and that he knows is not achievable.

The clock is ticking, noone states anything clearly. As a consultant you are expected to deliver something. What would you do?

Livedoor: why it doesn't feel right

2006-05-30T14:06:00.000+09:00

Disclaimer: the comments written in this article represent my understanding of the case which is probably very superficial, as such the reader is invited to form his own opinion and access other sources of information that may or may not contradict what is being written here. I will be happy to publish your views if you believe they reflect more accurately the situation.

Livedoor link

So here, we are, Horie is jailed. The flamboyant entrepreneur and his company are no more part of the business landscape. The circumstances these events took place call for a few remarks:

It seems now quite established that Livedoor boosted its share price through financial window dressing and accounting malpractice.

However, the accuracy of the charges, and active scrutiny Livedoor seems to have been under, is, to say the least, surprising. Livedoor clearly cheated its shareholders, and business partners, however, the extent of the cheating doesn't seem to justify such a strong focus and scrutiny.

This is really where the Livedoor scandal gets foggy: accounting can be sometime a "view of the mind" and while the overall figures can describe a position close enough to a certain picture of a company, these figure may change depending on your financial perspective, company goals and what you believe can still be legal... right.
Did Livedoor pushed this conception a bit too far? Probably, however, the sudden outing of these malpractice looks a lot like the work of a privately sponsored team of specialists put together to find a skeleton in Livedoor's closet. When they found one, it was then just a matter of timing to take Horiemon down.

Was Horiemon victim of a plot? Most certainly, and this is business at its worse: cheating businessmen and shadowy counter - maneuvers from company directors threatened by somebody's else appetite. The investors are the only victims here, but this, nobody cares it seems.

Do we have to regret Horiemon? No, he acquired companies not to develop them or integrate them in a business strategy but to slice them down and resell them at higher value. He did not create, turnaround or reinvigorate, he destroyed. There is no law agaisnt this type of business practices, but that alone would justify his time in jail.

As from a shareholder's perspective, my accounting lecturer could have told that the writing was on the wall a long time ago: "if management starts to buy a sport team, you know it is time to bail out from the share." Livedoor tried to acquire a baseball team while its share price was at the highest...

Meeting with Altion

2006-05-11T16:38:00.000+09:00

I met Altion over a glass of red wine in downtown Tokyo and our common background in research and development sparked mutual interest and friendship. Altion is working with a team of highly qualified specialists in robotic technology. The next thing your kids will be playing with might very well come from their labs!...

Enter the mind of a scientist, here is all we can find out about Altion!...

H3 , Altion, and his twin brother (H3's!). In the background, in black and white,
a residual memory vision of the robots.

Your name: Altion Simo
Your job and employer: Research Scientist, AIST , National Institute of Advanced Science and Technologies.
Your languages: Some Balkan, European, Asian language. In a word : “A seriously messed up individual, language-wise, and Culture-wise”.
Your food: Seafood; Asian (raw and spicy) and Mediterranean (lot of olive oil involved)
Your countries: Albania, Canada, Japan
Your stay in Japan: my 9th year in a row, nice so far...
Your first success: Getting in touch with this world
Your most recent achievement: I finished building the twin brother of H3 a humanoid based robot I use when experimenting with children in a ubiquitous environment.
Your wake-up time: most probably 9.30AM
Your working hours: 10.30~11.00AM until 20.00~22.00
Your job's most rewarding moments: when everything comes together and the systems run without glitches
Your job's toughest moments: when I am IDLE or when things go the way you didn’t plan.
Your nightmare: every year when I meet my mother and she screams into my face : Haven’t you gotten married ?!... not yet?! (grin)
Your sports: running, and watersports (diving, swimming, jetski, etc... no doubt I am Pisces)
Your hobby: Motorbikes and the “Science” of Photography, Movies, Chillout/Ambient Music, laying in the Mediterranean sun, by the sea.
Your dreamland: only in the movies!(like the trilogy THE MATRIX)
Your treasure: The hardware hosting my assets (i.e. my head)
Your assets: my knowledge and experiences
Your areas for improvement: many (nobody's perfect)
You don't like others when they: When they don’t accept me without prejudice.
Your best time last year: visiting Hawaii (we were so relaxed and having a good time, that we missed the plane back to Tokyo)
Your quality time outside the office: roaming in downtown and meet cool people
Things that keep you awake at night: tomorrow’s output of life
Things that get you out of bed in the morning: trying every time something new on my research not to mention sentimental things.
Your favorite reading: Neal Stephenson, SNOW CRASH
In the plane: electronic books in my phone, mainly related to my speciality.
Right now: a book in Albanian “Liqeni”, a Japanese novel written by Yasunari Kawabata, and translated from French by my cousin Nasi Lera.
Your role model in your industry: People at the cutting edge in R&D who are enjoying it.
Your role model outside your industry: People who are shaping the world.
What will come next in your industry: Distributed Intelligence and Robots substituting computers... and a LOT of mishandling and ERRORS
You in 2016: Definitely out of research labs and in the business world.

Should the CIO report to the CFO?

2006-05-10T14:05:00.001+09:00

If we are to believe "Optimize" the business technology magazine (link) the CIO has everything to gain from reporting to the CFO:

The CIO can certainly have better access to budgets
There is a generally better understanding and implementation of the SOX compliance recommendations
The IT is "better aligned to the business goals and pro-actively matches the company goals rather than reacts on a day to day basis"

The article lets us then decide whether the CIO should report to the CFO.

All this is perfectly agreeable to me.

However, what the article fails to point out is that the CFO/CIO relationship is highly beneficial for certain configurations only, more specifically when the company is leaning for stability and optimizing its current operations rather launching into aggressive growth and expansion to new markets. When a company is mostly focused on acquiring market shares, having the business side constantly looking for new opportunities, being ready to discard one model for the next, tracking the sales, the customers data, having new model established back and forth, the CIO clearly needs to be as close as possible to the business side, its strategy, breath their air, excitment, understands their disappointments, needs, share their pulse.

While the CFO is certainly a central figure of any company, all this is best achieved by following closely the CEO, sharing his concerns and be ready support the objectives he sets.

"Should the CIO report to the CFO?..."

The rule of thumb is very easy; it all depends on where your company is leaning to:

Stability, stucturing and streamlining operations will require a stronger relationship with the CFO.
Aggressive growth, expansion will require to build a close link with the CEO.

It's easy to see what your company model is and make the right choice. "Should the CIO report to the CFO?" - As many things in this world... it depends! You probably know, by now, the answer...

Gilles Daquin at http://gillesdaquin.blogspot.com

Why bad companies are here to stay...

2006-04-26T15:49:00.000+09:00

A recent study by McKinsey was discussing the relative position of companies badly managed to well managed ones.

The findings showed that, obviously, companies that have adopted good management practices were better equipped in terms of flexibility, adaptation to change, and were generally performing better than poorly managed ones. This is hardly suprising.

An interesting question that was raised was: how come poorly managed companies survive longer than they should? Theoritically, only the better managed companies should prevail on the market.

The study suggests that badly managed companies survive longer mostly because regulations and laws tend to protect them. Any bad move made by a bad manager will actually be mitigated by a collection of external factors -regulations oriented- that will slow down the company errosion, and, as a matter of fact also indirectly contribute to a slower expansion of the better managed ones!...

What's in a CV?

2006-04-26T13:42:00.000+09:00

In Western countries where individual results -by opposition to Japan's job for life and promotion through seniority (and it's whole different debate) - tend to be highly praised, a CV that shows strong achievements such as

Increased yearly profit by 18%
Directly contributed to USD 19 Million sales
Managed line of 28 employees, raising profit to USD 7.2 M

will catch, with reason, the interest of a recruiter...

When the economic situation is good, it is very difficult to sink a company right away. The bad manager still will have some leeway, understanding, and trust (from the top) before any real damage can be felt.

While indeed profits may rise, one shouldn't be oblivious to the quality of said profits and sales: Has your manager placed his sales in strategic sectors? Is he taking the proper initiatives? Has he paved the way for future growth, are the employees being empowered to bring more ideas, business? Is morale high? Or he is just cashing in on quick wins while developing his network before moving on to his next important position?

When the economic situation is bad and everybody is "supposed" to be suffering, the bad manager's strategy will be probably to do a minimum so as not to threaten his position by taking bold moves (than he cannot actually conceive) and keep his seat for as long as the show will let him run.

How many so-called "managers" are moving around from one prestigious company to another every two-three years showing impressive result while invariably erroding company effectiveness wherever they go? How many are leaving behind them ill prepared department and companies? Their deeds did not have to be obvious and create havoc, their actions just prevented their company from positioning themselves better on the market. More than often they are also praised for bringing in money! But as we said, what is the quality of this money?...

So, this is the type of managers you are likely to recruit for your company one day or another. You will offer them a ready made springboard for their next assignement, at the cost of your company's integrity and growth. Sadly enough, most of them will make you feel happy about it before they move on to their next position. Do you get along with this situation? Will you let your company be vampirized? Do you believe this is a necessary evil one has to live with?

Recruiting has never been an easy task, but ultimately what goes around will come around, and this remains at any stage your own decision. Tough call.

(On a more joyous note, if you are the bad manager we have been talking about, you are probably not reading these lines as you are enjoying the comfort of a cosy armchair, drinking a smooth 20 years old whisky, in the lounge, with another important executive!... )

Corporate governance : What's in the box?

2006-04-19T09:39:00.001+09:00

A while back I had to analyze a large blue chip company and determine whether it would be a good or bad investment. The company had all its fundamentals in the green, perfect financial information, the strategy looked sound and the market promising. Logically it was a "buy and invest"...

So you think the company you are looking at is in good shape? The return is good, the market is healthy? You are ready to invest long term. You could be very far from the truth...

The figures are good but look for more...

While reading carefully a financial report is important, a lot of softer but nonetheless very valuable information lies in the Corporate governance structure of the company... and the good news is that this information is comparatively easy to understand.

Many tend to see Corporate governance as an assembly of sissy - feel good - foggy - whatever it is - anyway it is not the hard facts - obscure meaningless bureaucratic controls.

One couldn't be farther from the truth...

Corporate governance's main objective is to protect the interests of the numerous stakeholders of the company and foremost the people who own it. While the new Sarbanes-Oxley (SOX) compliance regulations define rules for better transparency, Corporate Governance describes the company's controls, rules and policies that enforce ethical conduct, respect, good practices and integrity of the way the company is directed.

Is it all about "endless love in a beautiful world of durable development and environment friendly companies"?

While we have been accustomed to numerous spin doctor practices camouflaging what really matters to make an informed decision, checking the publicly available information will yield much insight into a company. Whether the financial report looks good or not, whether the website is slick, whether the analysts tell you "it is a solid company".

For Corporate Governance, you should look at the following criteria

Existence of an ethic code of good practices?
Independence of the executive members of the board
Division of Management and Control functions
Specialized committees on the board
Non-discriminating voting procedures
Use of International accounting standards
Absence of anti-takeover measures
Information on executive salaries

What does it mean?

Are these points just obscure control measures? Are they "nice to have" features? Not by a long shot! All the Corporate Governance points should be investigated with as much care as the financials. They will tell you:

Whether management is accountable to their shareholders for their decisions
Whether management can be changed if not performing
Whether the shareholder's value is maximized (and a takeover will maximize the value)
Whether politics, cover-ups, and nepotism govern the company
Whether the company is optimized for future growth

In practice, what gives Corporate Governance?...

Going back to the blue chip company I mentioned above, with all the "right" indicators in the green, I looked where it stood on Corporate Governance. Here is a summary of the analysis:

Existence of an ethic code of good practices? Average
Independence of the executive members of the board Average
Division of Management and Control functions Terrible
Specialized committees on the board Average
Non-discriminating voting procedures Terrible
Use of International accounting standards Terrible
Absence of anti-takeover measures Terrible
Information on executive salaries Excellent

The conclusions were:

Too much reliance on one man and first circle
Inadapted strategies to changing situation
No counter power (risk of morale corruption)
Group think
Lower motivation of mid-managers
Higher “unproductive” politics : no emulation
Crown Prince might be inadapted
Succession war? No inner regulation process
Company not optimized
Company bears seeds of long term organizational problems
Risky investment for shareholder in the next 5-10 years
Risk for employees in face of unsolved latent tensions
Risk to competitiveness: less initiative, less creativity

No need to say that long term investments were not on the agenda anymore...

Gilles Daquin at http://gillesdaquin.blogspot.com

Cultural differences

2006-04-12T14:48:00.000+09:00

Working overseas is always a challenging experience, rewarding most of the time, and sometimes frustrating. Where will you let the frustration go is another question...

Work habits, customs can be very different. Especially in Japan, where the way to conduct business might differ greatly from what one could expect in the US or Europe. The simple fact of introducing yourself in an inappropriate way might be the cause for a long polite embarrassment. Thinking that the person who talks the more is the one in charge may lead to a few surprises... Codes may vary indeed from what you are used to: are you active and have a "can do" attitude?... You may very well be perceived as a slightly immature individual. Do you read what is being implied rather than being said? Are you sure your counterpart is conviced by what you say or is he just trying to be polite? Do you feel the meeting was a success, if so, why no contract was signed? Those are the very questions you may have to ask yourself while working in Japan.

The culture is indeed different, the sum of hundreds of years of experience. From a strict business point of view this may present quite a few challenges.

Being respectful of the customs and habits will certainly get you closer to the objective you wish to reach, but will it be enough? Probably not, and here is the dilemma:

Where lies the line between respecting the country's culture and getting people to do what they are supposed to? Do you blend in and try to move things from "within"? Will you challenge the rules at the risk of alienating the people you are working with?

The question is not trivial, especially for foreign investors who wish to acquire Japanese companies or grow business in Japan.

Numerous foreign companies have tried, some have succeeded and some have failed. While not everything can be put on the account of culture, being aware of the issue will only help.

But the question remains:

"Will you challenge the rules at the risk of alienating the people you are working with? Or will you blend in?"

Here is what I think:
Business environment is constantly changing, new strategies have to be put in place, new products created, new markets developed. Your operations cannot succeed if they are not in tune with the market or reaching opportunities. Growing your business requires change and change tends to create anxiety.

In any country people have a low tolerance for anxiety, and if you want your business to succeed, you will create anxiety. Wherever you are in the world, you will always find, as a manager, staff ready to help and grow your company and staff that is not. In any case, to push your business forward, you will have to reward those employees who support it and signal to those who are breaking it they should reconsider their attitude.

There is no other way. This is your business, and you have to enforce the strategy that you feel is the more appropriate and press your employees to support it.

While the way to convey your message should be appropriate to a Japanese environment, do not compromise on the objectives you are trying to achieve: communicate "Japanese", talk "Japanese", respect the people you are working with but don't ever let yourself be misguided by the cultural "differences". There are (and they are not extremely easy to overcome) but behind, there will always be the do-ers and the breakers.

This is your business, your business strategy, and your business culture, in a Japanese environment
Don't let yourself believe 'resistance' is a foreign/japanese cultural issue
Don't let your staff believe 'change' is a foreign annoyance: it is a business annoyance
Cultural differences, if well managed, are never the issue

How well is your company's cashflow managed?

2006-04-10T14:40:00.000+09:00

While numerous comments concerning the management of a company can be made, the point I would like to address today is the importance of cashflows:

Briefly put cashflows are the life and blood of your company, without them you cannot pay your employees, you cannot meet your debts, you cannot further expand or buy stock. If your cashflows are not tightly managed, you may very well end up filing for bankruptcy, even if your business is successful (i.e overheating) !...

Managing cashflow might be technical at times but this shouldn't prevent you from making sure your CFO knows what he is doing:

Does he understand your current business model?
Can he identify its weaknesses and strengths in terms of cashflows?
Can he offer solutions to mitigate the weaknesses?

It is very likely that every good CFO will be able to answer yes to all these questions... however, the problem is that less experienced CFOs will answer yes too...