, Olufemi AWOYEMI
Being a speech titled “The Self Deception Reality and the Corporate Regeneration Myth” delivered at the CITC Leadership Centre’s Inaugural Leadership Word Masterclass on Leadership Renaissance in Nigeria held today at The Renaissance; Ikeja, Lagos.
“Behind any process of corporate decline, there is an infinite string of deceptions”. – Pedro Nueno
When a company falls ill, unlike people, it is usually easier to diagnose the problem.
In the field of corporate analysis, there is no such thing as an autopsy because when a company dies, the causes are usually long before the fatal event actually happens.
Quite often, we have produced business leaders in this country who are still in charge of the nation’s polity but alas! we cannot point to the companies they once managed (presided over).
It is obvious that the companies did not fall ill, suffer, writhe in their dying throes and finally die after they left; far from it, the process had long been on while they were there and because they failed to come to any agreement on how to avoid it, only allowed someone else to play the role of an undertaker.
The honours, accolades and encomiums we gave them while on their seats can now and should be withdrawn. They were earned by building their houses on a pack of cards. In some quarters, it is believed that there however may exist genuine force-majeurs that makes a compelling case for a company to die or become extinct. While I believe that this is plausible, I am quick to dismiss it as a charitable disclaimer of the leadership in question because it says a lot about the quality of management that was in place; not being able to anticipate such a major catastrophe.
The death of a company can be likened to that of a person who has diabetes but does not follow a diet, who has liver problems but drinks alchohol, who suffers from chronic bronchitis but smokes, and although that person’s health clearly deteriorates from day to day, he or she refuses to give up his or her health destroying habits until the deterioration is irreversible.
He dies, not because the doctors did not present the fact, but because he embraced the self-deception paradigm that he can do it, perhaps expecting a cure to appear from above.
This is a clear testimony of man’s tendency to value outward appearance more than reality!
This tendency equally and readily manifest itself in corporate matters, were the executive management appears genuine, but their true intentions are far from that declared.
In the conflagration of entrenched self-interest(s) of the key players of management/owners, a decision is arrived at which either achieves a turnaround for the organisation or goes to postpone the time and role for an undertaker to carry the can. For now, we will wear a mask for all to see and get real later (believing the deception so well that it becomes the only truth known to them).
Even at this, they often forget that a dying company, like a fallen tree, can still provide food for many parasites. A chunk of it can equally be replanted to create a new one. Rather than allow the organisation to die, they can be placed on a sure path of recovery to help keep the society functioning; be it in the private or public sectors.
We need not look too far for examples of such organisations and parastatals that have been rendered comatose by our inability to resolve the self-preserving interest of an individual with his/her fiduciary responsibility(ies) to his employers and shareholders.
Just a Game?
There exist infallible reasons to suggest that Corporate Turnarounds or Repositioning as widely used is fast turning into a “perception” game – the objective of which is best known to those who decide to embark upon it.
A cursory run-through of the buzz words employed in this turnaround game, some of which include Repositioning, Restructuring, Right-sizing, Down-sizing, Re-engineering, Repackaging and lately, CHANGE reveals that for every new management that takes over an organisation, the name given to their own effort at managing the concern, like our national budgets, economic plans and party manifestos gets christened mainly for maximum effect.
The long term sustainability of such plans and programs is a sad commentary on first, the state of our economy and operating environment which makes it a fast paced deteriorating business climate and secondly, the ever shifting interest of owners/management due mainly to a sub-optimal self-regulating (corporate governance) culture.
For those who choose the noble profession of organisation & methods facilitators or change managers, they are often left to lick the wounds of the bruises suffered in performing the task, having found out for themselves, the difficulty of reversing the momentum of a sinking or “non-performing” company.
They often start off being aware and expectant of a heavy opposition to conventional wisdom but remain propelled by the lure of achieving levels of social recognition and wealth that would be beyond the reach of conventional entrepreneurial or professional career paths. Some are often lost in the euphoric thinking that they are the “messiah” long sought after that they fail to appreciate the nuances of corporate politiking and thus fail even before they start.
For most of us, even as managers, the problems seem initially to follow such a textbook pattern that even the non-anointed understands it and think they can solve.
I must confess that in my more than three decades of being on the field, I have learnt that it is not that easy.
For in the field of corporate regeneration, so many variables are involved that to find a common structure for formal analysis is unthinkable. I find it to be something closer to an art than a profession. Lately I have found out that it really cuts the picture of a divine interceding into the affairs of the company.
In the end, however, when a situation turns out well and one looks back on the process that has been followed, one discovers that basically one has only been correctly applying well-known management principles.
Rarely is success attributable to the use of some sophisticated or leading edge technique that the business schools teaches one but rather to knowing how to lead a good team of people, managers and professionals.
This rather simplistic conclusion does not however remove the fact that the interventions provided by the consulting firms, competent managers and purposeful management count for nought. No! They rather serve as a complement to the base foundation of mobilising people for breakthrough performance both as an organisation and indeed, in their individual lives.
Thus, these ex-business leaders mainly failed to provide good leadership to their organisations. It must be mentioned that for a discerning executive, there are situations that tend to occur repeatedly in the organisation’s life processes that can be leveraged upon to help focus issues better and achieve a better final result.
Those leaders that were celebrated upon their retirement from their organisations only to see the firm die a couple of years later definitely have a case or two to answer. Outside the usual owner squabbles that negatively impact the development of the firm, failure to execute a plan of action that would guarantee the going-concern of the firm should be the clearest indication of the elevation of self-interest above corporate realities.
Times have certainly changed!
The last decade has witnessed such profound changes in virtually all aspects of life leading to a myriad of changes in business and the way personal life is; and should be conducted. From recent experiences in Nigeria, the changes can be seen from the new role expected from the financial sector in managing growth of the productive sectors of the economy and the expected impact of fiscal and monetary policies on entrepreneurship and corporate sustainability.
The emerging realities of the new democracy ethos, good governance, ease of doing business, competitiveness, transparency, integrity and the elimination of “rents/subsidies”.
The evaporation of reverence for institution and authority and its replacement with personal brands that looms larger than entities thus driving value perceptions.
The growing public demand for information and the right to know accentuated by technology.
Our companies are specifically faced with the following changes:
Market definitional changes – disruptions in intermediation and dis-intermediation at both ends of the transaction value chain by new and more dynamic service providers who are operating from a new model.
Emergence of forceful competition from hitherto non-traditional sectors and non-local players in service delivery, professionals services, sovereign finances and funds management all working to create a new path to capital formation.
n The re-emergence of “big” businesses set up more towards a monopoly and transitioning into an oligopoly.
The changing risk complexion of traditional services offering.
The rapid increase in technological changes or reduction in the shelf life of technological changes, platforms and processes thus creating a need for constant upgrades to remain competitive.
The changing profile of the customer and the ascendance of data analytics.
Changes in government role from being a sole provider of service to a provider of the operating environment and lately from being an an enabler to a competitor in access to funds (thus choosing winners and losers in the business space through its policies) thus changing previous areas of business comfort/discomfort.
Reducing margins from traditional income generating areas coupled with an increasing shareholders expectation for impressive results. A good example is companies declaring profits in a recession from non-core business areas.
The changing ownership structure of most companies tilting from private to institutional/public companies; government to entirely private; and local to foreign/strategic alliances.
The era of the knowledge worker with the necessary skills and competence, sufficiently empowered to provide the new level of value adding services to an increasingly discriminating public for which the question of loyalty to institution is fickle, driven more by value perceptions of reward for productivity based on service offering.
Increasing dearth in skills and competence to drive the new organisations being created at a frenetic pace.
Local and overseas economic and political developments have also helped to drive the point home that the realities have changed to create a new and different operating environment.
The challenge is immense and the Nigerian firm is facing a defining moment where it either leap frogs into the next level of business growth or writhe in the pangs of daily survival challenges prolonged by late-in-the-day interventions.
Disruption is real and with it comes change and the attendant pains of child birth.
Are we ready for these changes at the leadership level?
The State of Our Companies:
Generally, our companies have shown such a great vitality, their ability to withstand is so high, and their tolerance of things being done badly is so great that it is almost impossible to kill a company quickly; ditto the economy.
Pedro Nueno, whose work on corporate turnarounds greatly influenced me, had this to say:
“The only way to kill a company is by doing it little by little. If you shoot it in the heart, it survives bleeding for a long time. A company must be poisoned or malnourished, all of its parts must be pushed into a process of irreversible decay. So long as any one of its parts remain alive, the company can be regenerated from this single part”.
He continued, “There are many symptoms that an employer or senior manager can perceive to diagnose the changing conditions of his company. Some of them are listed below:
1. Loss of key managers
2. Loss of profitability
3. Loss of market share
4. Deterioration of liability structure
5. Sales increasingly based on price
6. Poor Implementation incidence
7. Resistance in financial community
8. Reticence among suppliers
9. Increasing labour hostility
10. Increase in non-payers & deteriorating pay imbalance, and
11. Loss of productivity and Internal inefficiency”
Because companies are not fragile enough to compel those running them to take the above processes of decline more seriously, it continues for quite sometime. My experience in a multi-subsidiary company, which is now re-engineering itself, confirms further this position.
Management, being aware of all the compelling reports available to it, continued to carry the carcass until each successive Director completed their tenure. I am sure that the current leader would be praying to re-engineer the company to stay afloat until the completion of his own tenure. He might get lucky that an event occurs that allows him to reduce his losses by closing down unprofitable operations, which if you look closely, is facing competition from ex-employees of the same company.
Such Managing Directors can receive consolation from the conclusions reached by Peter Nueno in his treatise on the company’s death, when he stated that
“However, some people are entitled to include in their list of achievements that they have killed a company”.
At another company, engaged in a critical sector of the economy, they resorted to creative accounting, image campaigns, and wringing of the last drop of money from any sellable asset in order to be able to carry on without facing the reality confronting them.
This situation, my former boss, the CEO of a well-managed financial institution once said, “ arises because of one of the common initial causes of business decline – the lack of an entrepreneurial spirit; the absence of anyone who really sees the company as his and demands that his manager(s) get results without demotivating them through his own actions”.
I couldn’t agree more with him; this lack of entrepreneurship (and intrapreneurship) is often played out through apathy, abandonment or plain incompetence.
All this can still be reasonably dealt with through a well-planned management intervention program.
The most difficult however, and that which inflicts the leadership, remains the extraordinary capacity for self-deception that goes on in most companies.
See no evil and Say no evil:
One of the earliest major engagements in strategic management I had to tackle was that of a big corporation, which at its height of performance, was a dinosaur. At a stage in the company’s life, sometime in 1996, issues had been raised about the:
· Un-viability of some subsidiaries due to consistent losses occasioned by obsolete equipments which created considerable wastages on production, faced increased competition from small time players who were considering forming a co-operative, lost key technical staff and encountered a further loss of patronage from government – a key customer;
· Need to encourage flexibility in operations as the cost of maintaining all the subsidiaries was becoming over burdensome for some of them to continue in business;
· Need to enter a new market for a subsidiary whose market analysis had seen an emerging change in customer preferences and thus required a shift in business philosophy to move into the market;
· Need to invest in new technology to drive the business and operate as a self sustaining concern;
· Apparent shift in personnel requirement to drive the fast approaching shift in business models and customer service issues;
· Expected paradigm shift needed in how the company was structured to address the yearnings of its people for greater responsibility and necessary empowerment to take their subsidiary’s destiny into their own hands
In 2000 after a change in management, a new senior employee had asked his superior after coming out of a re-engineering briefing with the newly engaged firm of consultants the following questions:
· How is it possible for so many problems to be created at the same time, falling in the space of a few years from success to the danger of a major catastrophe we now face?
· How is it possible that the management team could contemplate such a decline without taking corrective action?
· What must have been going on in the board meetings quarter after quarter?
· So, why did the directors not do anything to change the company’s direction? What did they say to each other to keep the deception going year after year?
· Did they resign themselves to thinking that the economic situation was going to change very shortly and that then everything would be put right?
· Did they accept losing the company providing that it did not cost them any money earned in the glorious past?
The company has now put together a series of interventions and leading-edge restructuring plans geared to turn-around the fortunes of the ailing company. We all pray that they succeed. If they had wanted to change the fortunes of the business, the steps to be taken, the strategies and models to be employed could have been sourced through private discussions with their consultant friends, the internet or good books documenting case studies or research work of similar corporate turnarounds which abound in our various business schools. I will spare you the boredom.
My interest here is simply to help us answer the one principal question: why did the management deceive themselves to avoid starting the hard and difficult processes that could have restored their health while looking forward to the divine intercession we talked about earlier, after all we all quibble the popular phrase: “heavens help those who help themselves” (don’t check your bible – its not there).
Parallels exist with how the sovereign has handled the affairs of the state and the economy recently.
Unfortunately, It would not be difficult to write a long list of well-known companies in Nigeria that are today living in self-deception and sooner or later will have to face the harsh reality. In that list, we would find the odd large bank who has been re-engineering for the last couple of years still overburdened with unskilled personnel, little technological sophistication, minimal creativity and considerable product maturity.
We will find insurance companies intractable from years of bureaucratic practice. We would equally find companies with cost structures that are just not viable in an increasingly cost-competence driven industrialised world, and without the resources or time to change their situation for comparative competitive advantage.
Let’s leave out this new fad called CHANGE – sooner than later, the true import of the concept (doctrine) would set in and we will have to separate the real change agents from those who simply pay a lip service to an inevitability.
Self-deception, while so clear, sometimes so collective and so lasting, has specific mechanisms that explain it, maintain it and perhaps justify it. The mechanisms of self- deception are sometimes so strong that they withstand the energy of high-calibre executives.
The network of false arguments produces an enormous degree of internal resistance within the company and senior managers sometimes prefer not to face them for fear of an immediate upheaval that would be more shattering than a gentle decline. In the instance of the conglomerate above, there was too much top management in the group and too few companies to direct, control, supervise, and assume responsibility for.
We are told that monks do not usually burn down their monasteries, and that monastery of managers would hardly be likely to offload companies that were their raison d’etre of their jobs. The MD thus knew that all that was expected of him was that he did not make waves.
I can confirm that at least in one of the subsidiaries closely observed, there had been an implicit agreement to maintain an unstable equilibrium, jiggling with the subsidiary’s numbers – which was all the top dogs, saw – to artificially prolong the life of a terminal patient. In such a situation, they were hardly likely to let go of the businesses that were not causing any problems and thus allowed them to justify their jobs.
For the new businesses proposed, they knew that since they did not control the market knowledge, control could be affected, so they stuck to their guns, embracing the ultimate self-deception of all time, the hope of finding a different destiny before the final crunch.
There exist more examples of situations of companies contemplating repositioning or a major life saving intervention of which beneath the façade of change, their exist a desire not to face the reality of their situation, choosing instead to embrace the cosmetic programmes for which the number of consulting firms have grown to provide.
This attitude really forms the crux of this article as it does not restrict itself to the business world. It is probably also the attitude of the bad employee, of those whose marriage is on the rocks, of the person who drinks or smokes too much, and of those in many other such situations. It is probably one more indication of man’s fallibility.
By way of synthesis, the main conclusions reached concerning the extraordinary ability possessed by owner-employers and top managers to deceive themselves as to the state of decline their companies have reached, reveals a very serious and collective self-interest which conflicts with the long term survival of the business and often makes nonsense of leading edge business survival interventions/initiatives.
Individual interests, incompetence in the specific turnaround task, lack of interest on the part of the owners, political priorities often present motivations that may become inter-wined to prolong the deception and with it, the steady deterioration of the company.
People delight in hiding from reality, seeking a way to fill their minds with job survival tactics and postpone facing what should be their professional priority. Instead of getting up and rolling our sleeves, we often look for someone else to do it for us, and take the blame when it does not go along the intended path.
It is therefore an enlightened opinion that the very first step in achieving a successful turnaround is the confirmation that the owners and managers are favourable and satisfactorily disposed to achieving a change through the quality of responses to the symptoms of deterioration. In the case on a non-deteriorating company who only seeks to be market driven, the repositioning imperative would arise as a result of its regenerative structure.
However, and I would like to conclude on this note, if the signs of deterioration is noticed in a company, there is no need to wait any longer; one must act immediately or quickly find someone else who can.
After all, Thomas Edison’s electric light did not come from a continuous improvement of the candle; but in the main, a continuous improvement over the benefit of the candle.
The new game is now all about embracing disruptive innovation over continuous improvement; and that may often times involve encouraging ownership of the change process at different levels of the organisation. A new leadership mantra.