Monday, February 21, 2011

Giving and Receiving Feedback

As a line manager over many years, this is a familiar topic. Yet there is always much to learn if you care to look. I have recently been in a couple of situations where I was essentially an observer to feedback being given, and could see how ineffective the feedback was, even though the one giving the feedback followed most of the good practices I know. So, I thought, why?

There are many well known tips for giving feedback, whole books in fact. Since context and example are so critical, I always like the idea of giving feedback in the moment, in other words small doses often and using immediate incidents rather than waiting for a formal session. However, like many such tips, it is easier said than done. You have to be able to find a quiet moment. It has to be private. And it still has to be carefully formulated, with enough time for the other party to explore, often to go through some denial and rejection before taking the learning on board. Creating these conditions can be nigh on impossible.

One reason it is so hard is that initiating the giving of feedback is often like sitting in a dentist’s chair. You know it is wise, even necessary. Yet you don’t know exactly what is coming, except that it is likely to be unpleasant. It might be worse than a bit of pain, you also might learn something unpleasant about yourself. You rarely receive any reward. No wonder many of us need to psyche ourselves up a bit before embarking on the journey.

The pain can be intense. Most of my toughest times at work, days with tears and nights when I couldn’t sleep, were around when I had to deliver tough feedback. Because we shirk it, when we finally get around to it the receiving party is often surprised and unready. Of course that is one of the hallmarks of a good line manager – that their staff are rarely surprised by your feedback since you have been so good at feedback in the moment. In our dreams! I especially remember the regular task of relaying to staff their annual ranking position. One or two faces usually fell, and they looked at me as some sort of traitor. I knew then that I had failed yet again. My only comfort was a belief that I was not alone in this failure, and most line managers shared that experience.

Often, when you and your predecessors had shirked for a long time on a difficult case, the resulting sessions could last months, with hour after hour of patience required to pierce the denial. During this process, I was often tempted to sugar the pill and duck out from the most direct messages. Partly this was out of self doubt. If this person denied my feedback so vehemently, maybe he was right and I was wrong? Partly I also wondered if the therapy caused more suffering than the original delusion. There was always the possibility of shipping the problem to the next line manager of this poor soul.

Another fundamental issue for me was the potential mismatch of goals between growing confidence and giving complete feedback. Confidence is critical to performance. Just look at sports for proof. Building the confidence of the team is for me the surest way as a line manager to improve performance. At times that caused me to give developmental feedback in an overly careful way, especially with a relatively new team member. I am sure the masters of this art would see no conflict here, but I can vouch that it bothered me time and again.

Many of us have suffered with this, on both sides of the table. There are many good techniques to improve how we give and receive feedback. When using an example, first explain the behaviour exhibited, then the intent and how you witnessed it. Then posit an alternative behaviour and explore how this might have worked differently. It is worth reading up on this model.

My recent experience has highlighted two insights which were at least partially new to me. The first one is part of context, and that is the criticality of the relationship quality between you and the person you are trying to give feedback to. Your relationship can vary between hero, mate, stranger or enemy. Your level of ambition and your approach to giving feedback has to reflect that reality.

If you are lucky enough to have reached the status of some sort of role model, you can really use it to the benefit of the other party, as they will imbibe your every word. This is a privilege, so use it. You can use the technique of sharing your own experiences when giving examples. You can make sessions as long as needed, since both of you will enjoy them. You just have to keep pointing out that you might be wrong and they must seek evidence from others too.

To a mate, you can also take some risks. Only a mate can blur the boundaries between professional and private, for example by pointing out a damaging mannerism or hygiene deficiency. Do it - your friend needs this feedback! With a mate, you just have to be careful in keeping some discipline and structure to your relationship.

With a relative stranger, recognise the limitations. You have some early advantages you can use. For example, you can take a risk by sharing an early impression, with the caveat that your evidence is limited. You never know, you might hit the jackpot. But avoid deep soul searching stuff, as it is most unlikely to work. Keep to the basics.

Finally, there will be people where there is some sort of conflict. They may not respect you, or might blame you for something about their circumstances. If you believe you are part of the problem (maybe they just have a problem with everyone, in which case you have to try to penetrate or no one will) then act accordingly. Using personal examples will fail every time. Subtle feedback is dead in the water, messages must be simple, repeated, and evidence based. You can find a third party you both trust to help you. At all costs, avoid the temptation to be cruel and punish.

There is a 4-box model here, perhaps with depth of relationship on one axis, shared respect on the other. For most of your relationships, they will lie somewhere near the middle, but you can still modify your approach to best fit the situation.

My second tip is about shared understanding of purpose. The biggest misconnects with feedback come when the two sides don’t agree on goals. This is more common than you might think, and lay behind what I witnessed recently. As an example, the line manager might value customer satisfaction, the subordinate technical quality. If the subordinate considered themselves technically superior to the line manager, this will only intensify the mismatch.

The solution is an extension to the conflict situation above, since it is a type of conflict, albeit one of goals rather than relationship. In a way, the line manager has already failed by not communicating clearly the expectations. This has to be a bedrock of any relationship, and has to be fixed before any feedback is offered. If this proves impossible, revert to the conflict plan. Repeated, simple messages, lots of evidence, clarity of consequence, discipline of documentation. Looking back, my very worst line manager experience had precisely that disconnect, and I failed to address it correctly. My recent observations show I was not alone in that.

I’m off on holiday for two weeks now. If I find time, I’ll see if I can develop that four box model for line manager relationships. Or maybe I’ll just relax, sing, share some joy and have fun.

Tuesday, February 15, 2011

On Power

I recently read “The feast of the goat” by Maria Vargas Llosa. Although it is quite dark, I recommend it. It is a novel, set in the chaotic last days of the Trujillo regime in the Dominican Republic. I had never heard of him, but he ruled for thirty years ending in 1961.
The book provides a graphic description of how and why these regimes evolve and survive. Trujillo becomes popular using populist causes such as fear of immigrants. People of talent are attracted to him as a means of getting things done. He is a genuine success for a time. He gets the constitution changed to consolidate power. He courts outside stakeholders, the US, and the Church, with flattery and a promise of stability. Then he uses emergency powers to dominate all media, restrict movement, and immaculate opposition. The secret police spy and kill with impunity. He believes these are necessary steps to make progress for the country.
Only his own hubris brings him down. His family come to own much of the economy. He starts to believe his own narrative, surrounded by fawning acolytes day and night. His family become high maintenance. People become his plaything, men killed and girls raped at his whim. Mistakes are made and enemies created. In the end, the outsiders can take no more and exert a squeeze, but he is only brought down by a hapless bunch of conspirators whose plan is solely to kill him. Afterwards a chaos ensues which is even more bloody than the regime itself, at least to start with.
I was lucky to read this as the crisis in Egypt unfolded, as it helped me to understand what it must have felt like in Mubarak’s bunker. The parallels in the story are almost complete. Let us hope a character or coalition emerges in Egypt now to lead the nation on a good path. That is far from certain.
It is tempting to look at Egypt or Dom Rep and scoff that this is a feature of the less developed world only. Think again. True, the developing world has the most obvious cases, with much of Africa, some of Latin America and Russia presided over by despots. In China it is a cabal not an individual, but the features are otherwise similar. But it was only seventy five years ago that European nations surrendered what amounted to absolute power to Hitler and Mussolini. Since then, many of the most enduring leaders have been anything but consensual. Think of Thatcher, De Gaulle, Berlusconi.
The phenomenon is more widespread than that. It took a Mandela, a Ghandi or a Walesa to create a revolution. In sport, Alex Ferguson is seen as the quintessential manager. Even religions create dangerous power structures, none more so than Christianity. Come to think of it, that might be the root cause for the prevalence of the power model around the world. And if you think the US is immune, just look at the gerrymandered shape of congressional districts.
By the way, I’m not accusing all the names mentioned here of all of the excesses of Trujillo. But even the generally benign ones share some features.
As usual, companies mirror countries more closely than we might want to believe. Jack Welsh epitomised the dominant CEO. Money often follows such characters. The City seems happy with highly loose corporate governance, no separation of Chairman and CEO roles and cavalier personalities.
I saw and felt this in my own career. Much bureaucratic life revolves around seeking power. Those who gather power attract followers as a way of getting things done. And, inexorably, the powerful become cavalier with due process and somewhat hubristic. Further, many managers simply could not operate effectively in a situation where authority was ambiguous.
Hence the famous quote attributed to one baron Aston. Power corrupts, absolute power corrupts absolutely. But here is a more recent quote, from an interview published last Sunday, in fact.
“I need to say this – you shouldn’t trust any government, actually including this one. You should not trust government – full stop. The natural inclination of government is to hoard power and information; to accrue power to itself in the name of the public good.”
Who said that? It was Nick Clegg, deputy prime minister of the UK and leader of the liberal democrats. Well said, Nick. This should remind many of us why we might have voted for his party last year and supported the forming of a coalition. Maybe we have forgotten that in our annoyance over tuition fees?
The problem is, in practice, an opposite quote can be equally true. “A power vacuum inhibits progress. An absolute power vacuum causes complete sclerosis”.
Who said that? Me. Just now. I’ve seen that too. Shell has been notorious in its insistence on checks and balances. It comes from its dual country origin, and from the Dutch Polder model, which loosely means a consensual culture. Over time, I’ve seen the advantages. And our darkest days have come when we briefly abandoned many of the principles in the era of Phil Watts and untruthful reserve reporting. But Watts was a product of the failure of the alternative. Shell was lamentably slow in driving through necessary changes, retaining powerful little country empires and a leadership by a committee long past their sell by date. And, at times, it did feel like the whole edifice conspired against decisions and actions.
The downside of a power vacuum applies in countries too. Belgium now appears ungovernable. India’s democracy dissolves into local autocracy. And, in the US, wonderful checks and balances appear to endlessly defer facing up to existential threats such as structural deficits or climate change.
Herein lies the problem. We have yet to develop a more effective management method than a power based one, and managers still learn, and people respond to, power based techniques. So far, the global track record of organisations eschewing power is pretty poor.
Perhaps that would be a good global project to support, promoting a model based on things other than power. Maybe the growing influence of women in the world can lead the way, though it certainly hasn’t happened yet, at least not outside Scandinavia. Open media must be helping, especially things like Wikileaks, with its ruthless exposures of abuse of power.
This concept could revolutionise schooling or management training, and spawn new political models (don’t try to tell me that Democracy, as currently practiced, does the job).
Now that would be something special for people to develop. Trouble is, we’d get nowhere. We lack the power.

Monday, February 7, 2011

On Debt, Gambling and Parasites

I was brought up by a very thrifty mother, a woman who epitomises protestant values. I never heard her say “never a borrower nor a lender be” but I suspect that is only because she didn’t know the phrase. Quite a few people from that generation are like that, a product of austerity and rationing.

Mum never had a mortgage, and was nervous when I took one on, only slowly accepting the argument that in London in the 1980’s there was no other way to get onto the property ladder. As she believes in owning rather than renting, I got my way in the end. But some of her values have stuck with me. I squirrel assets and don’t take financial risks lightly. And I have mistrust of those trying to make money from money, and even more of those making a parasitic living from providing the outlets for people to do so.

Experiences over the years have led to this musing. Through friends I have witnessed first hand how debt can lead to a sort of paralysis. And, more recently, I’ve observed the nature of advertisements now on English language TV.

It is easy to take a smug view of those in debt when one has never really been in debt oneself. My parents were moderately well off, classic Thatcher conservatives really. Thanks partly to their investment in my education and support, I’ve earned well and found it easy to avoid reckless risks.

But I now realise it is so easy to slide the other way, indeed I would say it is hard not to. There are many reasons why.

Owning property remains a laudable goal, and the need for high multiple mortgages has only worsened, and, albeit with a pause over the last couple of years, providers make it all to easy to take on the risks. Job security is a thing of the past, so the main risk factor in taking out a loan, disruption to steady wages, has intensified. The same is true of divorce.

Then there are the parasites. We were all mis-sold endowment mortgages. The way credit cards are marketed is disgraceful. Every store or item has its alluring credit scheme attached. Loan sharks abound. And, once someone is enmeshed, there are gambling and lotteries everywhere.

Meanwhile, societal expectations only intensify, as our networked world tempts us to reveal an outward affluence widely.

I fear that in some emerging countries, this could develop along an even worse trajectory than in Europe or the USA. There may be little legacy of inherited assets as a parachute. In many cultures, appearances and giving gifts matter a lot. And superstition can be part of society too, as well as gambling, legal or not.

Last Chinese New Year I attended a Feng Shui workshop interpreting the year. There are some good principles in Feng Shui, but the way everyone started making notes when the section about luck and money came around was for me disturbing.

How do people react to being in debt? It is both shaming and confusing. The pressures to appear in control are strong. Understanding the maths and budgeting is beyond most people, now there are so many variables involved. So people put their head in the sand and wish the problem away. They don’t open their mail. They accept solutions to defer a day of reckoning. Then they desperately try to reduce costs, but find they are in a vice-like grip because of the added cost of servicing the debt. Often there is no way out.

Before you smugly condemn these people, ask yourself what you would do? If we have a difficult relationship, our natural tendency is to hope it improves rather than address the problem head on. It is the same with a medical condition, or a big decision at work. We all do it, probably you as well. Consider that it may be that the only reasons you never got caught in a debt spiral might have been luck – the year you joined the workforce or bought a house for example, or the wealth of your parents. I am not so quick to condemn these days.

Back to the parasites. At least the lotteries and the gambling companies are honest. I find it so scary that every second advert on Sky these days seems to be either for online gambling, or its likely consequence, loan sharks and dodgy debt restructuring. What a testament to a society filled with pain! It is overwhelmingly the poor who gamble, often still men with money siphoned from the family. The government won’t stop it, as they get rich on the tax levied. But surely the explosion in easy gambling is stacking up social problems for the future?

My experience of the finance sector places them behind bookmakers in their probity. I recall one story from the USA from my Shell days which opened my eyes. We did a deal with a credit card company, whereby if customers took out the card of a particular company they could get discount on fuel. It was a good deal, and many applied. The problem for Shell came because most applicants were refused the card. The reason was not that they were not credit worthy, in fact precisely the opposite – credit checks suggested they would pay of their monthly balance in full, and hence be poor margin prospects for the credit card company. Since many of these people were previously loyal Shell customers who were insulted, even shamed, by the rejection, we lost a lot of customers as a result. More fool us, we should have done our due diligence on the deal.

But what does it say about the credit card company? Their margins were high, since they could afford the large discount available on fuel. Yet they obtained those margins by exploiting a vulnerable group in society, those tempted by some credit to be rolled over at exorbitant interest rates. For that same group can be captured, lured into a trap from which there is no easy escape. It is worth noting that credit card interest APR is current about 20%, while bank base rates are less than 1%. Deposits earn maybe 3%. The APR of some companies offering fast loans on Sky are over 2000%. All are hidden in small print, and in practice turn out even higher, as missed repayments lead to penalty fees, exorbitant charges are imposed for sending letters, and so on.

Think about it. Their goal is to entrap you, and then milk you hard. If in the end a debt goes bad, for the most part interest and fees from that same customer have created more than enough margin to compensate. How different is this business model from the loan shark lurking around the council estate?

This condemns retail banking, in my view. By the way, my experience with people trying to sell me investments is even worse, as a careful look at the small print usually reveals their obscene margins – for essentially nothing - and their attempts to obscure them. What about investment banking? These people are little more than overpaid bookmakers, making margins through smart hedging and laying off, certain to profit from sheer volume of trade, so long as the whole edifice doesn’t crumble around them as in 2009 – in which case the bail out will come.

And the biggest scandal of all? Such transactions are tax free! At least bookmakers have to pay a large government levy. Not so financiers. The most brilliant, constructive proposal of the last generation has been the Tobin tax, in which all financial transactions are subject to a small levy. It would have the effect of bolstering reserves, at the same time as stabilising markets, since it would be the low margin, high volume trades that would be affected.

The financial lobby (including my saintly Economist, by the way) make two arguments against Tobin. They say it is uncollectable, which is utter bullshit. Look at gambling, it works there. Compared with VAT, collection would be trivial. They also say it would reduce the competitiveness of countries who introduce it. Just like all taxes do, but it doesn’t stop us deploying them. In theory, that argument would have driven all gambling offshore, but it hasn’t. And what is something like the G20 for if not for such reforms?

Financial services have a role. Look at micro finance in India and Africa, it is wonderful. Companies need banks to finance their investments. But I become quite a socialist, and also something of a Lutheran, when I survey the horrible landscape in these areas today.

I try not to complain without offering practical remedies. A Tobin tax is one. Public awareness campaigns about gambling, like for drink driving, is another. Introduction of real international competition in banking sectors is a third.

This is soluble. Personal misery from debt is set to soar, especially in the developing world. And Diamond as his ilk trouser millions in the meantime. 2009 offered an opportunity, and the world has squandered it, and such horrible outcomes will only intensify before another such opportunity arises. How tragic.

Wednesday, February 2, 2011

The Curse of Size and Countries

Some months ago I wrote about the curse of size for companies. I’m convinced I saw more diseconomy of scale than economy of scale during my career. Plusses from scale come in the form of lower cost in things like manufacturing and greater brand heft. Minuses come from slow moving processes and loss of spirit. I believe that now the age of mass production is past the minuses usually outweigh the plusses.

Yet companies strive to get bigger and bigger, swallowing each other up and expanding ruthlessly. Most of this is because growth is usually good. Ideally, companies should grow and then sub-divide, like some sort of cell. But they don’t, mainly because bosses like the power and kudos that scale gives them and won’t voluntarily relinquish it. I am surprised that markets don’t more frequently force the issue.

Anyway, thinking about optimum size for a company got me pondering the same question for a country. What is the ideal population size for a country? Or are GDP or geographical size better measures?

There may be an optimum density of population, which is bigger than Russia’s and smaller than Singapore’s. In the former case, logistic and time zone costs are horrific and in the latter, growth is eventually constrained by land availability. Then again more land means more scope for natural resources, and less creates scarcity which can drive up rents. This is not simple.

The number of countries in the world is increasing. In the last 25 years, we have added all the states from former Yugoslavia and the USSR, and Slovakia too. Germany went in the other direction. East Timor split from Indonesia, and now it looks like Sudan will split too. Rumours persist that Belgium may be next, with what sometimes appear insurmountable problems in forming a sustainable government. Quebec might separate one day, perhaps even Scotland and Wales might as well.

The fissuring of states is driven by people, not governments. People of one ethnicity or religion want to divorce from those of another, usually when one side builds a grievance after decades of perceived discrimination. Driven to its conclusion, this trend could lead to a world with very many countries indeed. Working against the trend is the age of mass migration, where many countries become a hotchpotch of ethnicities learning to appreciate each other. Yet the trend may play out over more generations before stalling, as people exert more power. For example, if what we see in Egypt today spreads further in Africa, it could have longer lasting consequences than the break up of Sudan.

Over the centuries, size has implied military might, and countries have used this might to grow by acquisition of empires. There seems to be a point where diminishing returns set in, just as with companies. Remote provinces become costly and ungovernable, while people get spoiled from their years of superiority. It happened to Egypt, Greece, Rome, France, and England. Will the USA be next? They certainly show warning signs. The military ventures to ever less hospitable places. Obesity must be a symptom of being spoiled, as is a persistent trade deficit. Obama calling on the sputnik moment last week is unlikely to turn the tide on its own.

But there seems to be another way to win. Look at Hong Kong, Luxembourg, Monaco, even Switzerland. These are small countries which get away with parasite type behaviour, often in financial matters. Smallness is essential, as you have to be insignificant enough to not draw a reaction from others. But it is inherently risky, especially if they try to get too clever. Iceland and Ireland spring to mind. Much though the parasite model is a bit distasteful, you have to admire Switzerland especially for getting away with it for so long. You don’t meet many poor Swiss.

The very biggest can get away with bad financial behaviour too, of a different kind. Only because the dollar is the reserve currency of the world can the USA run the deficit it does. If China were smaller and less important, their currency policy would have come under more pressure as well.

What about at an individual level? Do we feel happier if we belong to a giant or a mouse? Here again the evidence is mixed. How the USA, with its scale and diversity, can maintain and exploit its national pride is a minor miracle. Then again, a country like Ireland can maintain an identity through its smallness. I know from experience that you are more warmly welcomed in almost every country in Europe when carrying an Irish passport compared with an English (British) one.

So, there seem to be a lot of pros and cons whichever dimension you choose. As with companies, the winning strategy must be to choose a positioning to fit your strengths and then stick with it. Perhaps someone could define a model. How about China as operational excellence, Finland as product innovation and Switzerland as customer intimacy? Instead of developing that, I’ll settle for making some predictions.

First, the number of countries will continue to grow, maybe at an accelerating rate. In one way, this is sad, as it will only be when we learn to live with each other that we can spend less global GDP on guns and more on innovation and facing global challenges like climate change. But more countries doesn’t have to mean more wars, so long as we become more educated and wealthy too, and learn the benefits of cooperation.

Second, the USA will struggle. Its politics become ever more dysfunctional, while its people fall behind in education, fitness and attitude. However, problems will emerge in China and India too, with sheer size becoming even more of a challenge as inequalities deepen.

Finally, if you were to be born today and have the luxury of choosing your country, you could do worse than choose Switzerland. Plus ca change.