The Abominable No-Man

Factories are great places for imaginative nicknames…I used to work with someone who was known as “The Abominable No-Man”.

That probably tells you all you need to know about his positive attitude to life and his communications skills.

And to be fair, that’s a nickname many businesses could probably pinch for their Finance Director or CFO as that’s the reputation that tends to precede us. People think we’re just there to crush their pet projects, moan about people overspending their budgets and rat them out to their boss when they miss their KPIs.

When I started out in the accounting profession, that was pretty much the brief for the Finance Department. But I was really lucky early in my career to work for the finest Finance Directors I’ve ever come across.

He was amazingly successful and, for a relatively young guy, was the Group Finance Director for one of the UK’s largest quoted companies. He’d got there by doing things very differently and he was a great mentor to me.

One of the things I learned from him was that it wasn’t the Finance Director’s job to say “no” to things. It was the job of a Finance Director or CFO to think through “if this is good for the business, how do we make this happen, even though we didn’t plan for it or set aside a budget for it?”

James – my old boss – had a great way of conceiving his budgets and strategic plans which is pretty much summed up by Stanford University Professor Paul Saffo’s “strong opinions, weakly held” mantra.

James was sceptical about anyone’s ability to write a strategic plan or a budget six months before the start of a financial year which would, with any great accuracy, predict the likely year-end out-turn 18 months later.

Which isn’t to say James didn’t do a strategic plan. He did.

What set him apart, especially at the time, was his willingness to change that strategic plan in light of new information, new evidence or new opportunities. He had to hit a margin target and a “cash at bank” target, but as long as he did that, neither the Group Chief Executive nor the City analysts cared much how he did it.

At the time he wrote the plan and set the budgets, James had a strong opinion that he had devised the best plan he could with the information available to him at the time. But if something better came along, those strong views were weakly held, and he devised a better plan instead without being overly precious about the plan he’d prepared a few months earlier.

This was James’s “X Factor” – the skill that, more than any other, set him apart. His nimble approach to running the finances of a large quoted company would set finance teams in many much smaller businesses into meltdown, even today when buzzwords like pivoting and re-imagining have seeped into the business vocabulary.

Even though it’s nearly 20 years since I last worked for James, I still use the approach he modelled for me every day as a Finance Director and CFO. And yet, it’s still a rare approach for a Finance Director to take.

I still see plans which are kept inflexible, unchanging and inviolable long after they’ve lost touch with reality. And, I’ve got to say, for businesses like that, usually the bankruptcy courts aren’t all that far away. Those businesses don’t seek help until it’s too late because they think that “staying strong” and “holding people’s feet to the fire” for their original plan shows the sort of strong leadership people are supposed to admire.

Maybe next time, by all means start out with complete and utter conviction to the plan you’ve just prepared. After all, you’ve done your research, you’ve done an options appraisal or two, carried out some sensitivity analysis and reviewed the risks. At that moment in time, it’s the best plan you know how to write.

But if something changes in your business, or the sector you operate in, make sure those strong opinions are loosely held.

It’s not a sign of weakness to change your plan in the light of new evidence…but it is a sign of monumental stupidity not to change the plan when it’s clear the plan you wrote a few months ago is never going to come close to the new reality facing your business.

Although he never used the term, and may well not even have been aware of it, the greatest Finance Director I’ve ever seen taught me 20 years ago that you ran your business plan and your budgets with “strong opinions, loosely held”.

And, for your business, that’s a darn sight better than being nicknamed “The Abominable No-Man”.

10 business lessons from one of the world’s greatest drummers

Former drummer for The Police, Stewart Copeland, fronted a great BBC 4 documentary the other evening. (At the time of writing, still on iPlayer for another month…don’t miss it!)

I’ve long taken the view that music can teach us everything we need to know about business…but to give myself an extra challenge, I thought I’d forget the rest of the band for a change and today focus solely on the drummer.

Here’s 10 fundamental business truths courtesy of the legendary Stewart Copeland (plus a bonus at the end)…

  1. Even in a short-ish programme, there were a couple of times Stewart Copeland grated on me a little…apparently this was pretty much Sting’s experience too, back in the day. But, even as a big music fan, I learned so much I didn’t know before from watching his programme. (Moral of the story: don’t discount what people you don’t like are telling you. They always know things you don’t.)
  2. Stewart Copeland has an irrepressible enthusiasm for his craft. He’s taken the time to study it, to find out the history of it, to seek out other practitioners of it. (Moral of the story: even if you’re world-famous in your area of expertise, there’s always more to know and more to learn. The greatest drummers, and business leaders, never stop learning.)
  3. Stewart Copeland works really hard. If you watch him on a drum kit, he never stops. His drumming defined the sound of The Police, one of the biggest bands in the world. He had to work twice as hard as most drummers to fill out the sound because The Police were a three-piece band, rather than the more usual four or more members. (Moral of the story: if you want to be successful, hard work isn’t optional.)
  4. The greatest people at any task are those who think differently about the job in hand. Buddy Rich, Keith Moon, John Bonham…and indeed Stewart Copeland himself…all had a very distinctive, instantly-identifiable style. (Moral of the story: the greatest successes come from doing things very differently from everyone else, not just doing what everyone else does 5 or 10% better.)
  5. There’s always a place in the market for something different. In the early years of rock and roll, drummers sat at the back of the band with their heads down, doing their best to be invisible. Then Keith Moon came along and the whole country knew the name The Who’s drummer, even if they weren’t a fan of the band itself. How many other drummers do you know the names of? I’m guessing not many. (Moral of the story: never think “everything has been done already”. It never has been.)
  6. It surprised me to learn that modern drumming started out in the distinctly un-modern world of the Deep South just after the end of the American Civil War. (Moral of the story: there’s always a deeper reason, and a longer history, for whatever you’re grappling with than you think. Problems, and opportunities for that matter, don’t just pop up from nowhere…they started out years ago, barely noticed at the time, and snowballed into the problem or opportunity you’re grappling with today. Pay attention to the little things that cross your path…sooner or later, they’ll become the big things.)
  7. One little invention – the foot pedal for the bass drum – seemingly inconsequential at the time, made the modern drum kit possible. Before that, there was no way a drummer could simultaneously play several different shapes, sizes and tones of drum to engage better with a tune and drive the song the way modern drummers do. (Moral of the story: don’t wait forever for a “big idea” to come along. Continual innovation, and trying to improve even a tiny amount every day is the best way to succeed. A simple lever was all it took to change the world of drumming for ever.)
  8. The segment with Sheila E. (Prince’s drummer and musical director) alone was worth watching the whole programme for. She made her own way as a woman in a man’s world and, I’m sure, wasn’t always met with the support her talent deserved as she climbed the ranks of professional drummers. (Moral of the story: never let anyone tell you that you can’t achieve your ambitions. Give full rein to your talents, and work hard. You can achieve anything as long as you don’t give up.)
  9. Also from Sheila E…what you do between the beat is as important as what you do on the beat. A 1-2-3-4 rhythm quickly gets boring and mundane. Great drummers add light and shade to help tell the story of the song. But she also said it was important not to overdo the “between the notes” playing or you’ll lose your audience too. (Moral of the story: more is not always better. And it’s a matter of art, not science, as to what the optimum balance is, even in something that seems as mathematically-governed as playing 4 beats to the bar.)
  10. Stewart Copeland played with a huge variety of amateur and professional drummers on his programme…from people on the streets of New Orleans to superstars in their own right like Sheila E, Chad Smith of the Red Hot Chilli Peppers, Taylor Hawkins of the Foo Fighters and John Densmore of The Doors. No matter what he was doing with another drummer Stewart Copeland had a smile on his face the size of a barn door. (Moral of the story: if you can find just one activity that makes your spirit soar, do it as much as you can for the rest of your life. Stewart Copeland won’t be going to meet St Peter grumbling to himself about spending too much time on his drum kit…it’s what he was born to do. Find out what you were born to do, then pray for one-tenth of the joy drumming gives Stewart Copeland. You’ll spend the rest of your life with the biggest smile imaginable on your face.)

Final bonus lesson…I got all this (and more, I could probably have written 50 points if I put my mind to it) from watching a TV documentary about very much a minority interest subject on a channel that is itself a distinct minority interest for the British television-viewing public. There’s always something you can learn, even in the unlikeliest places, if you keep yourself open to the learning opportunities that come your way.

If you’re a music nerd like me…or even (gasp!) someone who has no idea what this article is all about, you can see Stewart Copeland “on duty” in this great live performance… https://youtu.be/Ki97mpo6Y_Y

You see, learning opportunities are everywhere if you pay attention to what’s going on around you…and yes, even drummers can give you a lesson or ten about what really matters in your business.

(Photo by Oscar Ivan Esquivel Arteaga on Unsplash)

Commendable ambition or carefree folly…which do your goals sound like?

No sooner have we hung up the new year’s calendar on our office walls than all those magazine articles and social media posts come out exhorting us to set ambitious goals so that we “crush it” (ugh) during the course of the coming year.

Henry Ford famously said “Whether you think you can do it, or whether you think you can’t, you’re right.”

And he’s right. If you don’t think you can do something, odds are you never will.

Less often taken into account, though, is the flipside of Henry Ford’s famous quote – just thinking you can do it doesn’t mean you will.

That’s important for your business because you need to know the difference between ambition and delusion. One makes your business into a worldwide success, the other takes it to the bankruptcy courts.

That’s not to say ambition is a bad thing. Quite the contrary.

I’ve long been a big fan of setting what Jim Collins and Jerry Porras called Big Hairy Audacious Goals (or BHAGs) in their book “Built To Last”. Their idea was that businesses should break out of the year-by-year planning cycle and set a long term direction.

Maybe you want to be the biggest company by sales turnover in your industry. Maybe you want to get 100% 5-star ratings on TripAdvisor. Maybe you want to join the Fortune 500.

Unless you’re already there, or pretty close, these achievements are likely to be Big Hairy Audacious Goals which will take several years to play out, and when you start on your journey, whilst you’ve got the ambition, you don’t know every single step that will take you from where you are, all the way to your destination. (And if you do, it’s not a BHAG, it’s just a business plan for what you’re already capable of delivering. By definition, for it to be a BHAG, you can’t know exactly how to achieve it in advance.)

The system can work well. I spent several happy years as a non-executive director at a business which used BHAGs very effectively to grow their sales income over a number of years.

What this business did well was to have a set of more detailed plans underneath the Big Hairy Audacious Goal…even though they couldn’t map out everything in detail. But if they had a pretty good view of how the next 18 months would play out in the context of a 10 year goal, they had a detailed plan for that and didn’t worry too much about the eight-and-a-half years to follow.

But I also worked for a business which talked about BHAGs and the importance of ambitious goals, but didn’t think things through properly.

One ambitious goal they had was to grow thousands of new customers in a market they had no experience of, and where entirely new channels to market would need to be developed from a standing start.

This wasn’t the world’s craziest idea with a 3-5 year planning horizon. But to the general astonishment of everyone else in the business, the CEO set a 1 year target for this to be achieved.

The rationale was often stated as “we’ve always set ambitious goals around here, and we’re always achieved them, even when people said we couldn’t”.

This wasn’t completely untrue. Company folklore had many examples of “taking on the world and winning” in the past as a result of the CEO’s decision-making.

The Chief Executive had every ounce of the self-belief Henry Ford thought was important, but by remaining completely convinced their vision would unfailingly manifest itself into reality, all they were doing is what financial advertisements say you should never do (“past experience is no guide to the future”).

It won’t surprise you to know that this plan didn’t go well at all. Within 12 months, the Chief Executive abruptly disappeared after missing sales targets for the year by around 80%. Income dried up and, as a result of hiking the cost base on the back of the “certainty” all this new business would turn up, the business quickly got into trouble.

The CEO’s Achilles heel was believing their own publicity. They’d been, in the words of Nassim Nicholas Taleb, “Fooled By Randomness” (the title of one of his earlier books, inexplicably less well-known than his later mega-bestseller “The Black Swan”).

Just because things always had worked, doesn’t mean they always will.

Sometimes, due to random effects…such as sheer good luck in stumbling across a key customer at the right time, a news story that changes people’s perceptions overnight or a key competitor shutting down…even pretty audacious goals can be achieved without much in the way of planning or insight.

Enjoy those moments when they happen, because they can, and do, happen to us all.

But never make the mistake of thinking that just because you set an ambitious goal or a BHAG and it was miraculously achieved in pretty short order that there was a huge amount of causation between you wishing it to happen and it actually happening.

And certainly don’t build your entire business on the assumption that because you benefited from massive good luck in the past, largely outside your control or influence, that you’ll unfailingly benefit from it in the future every time you dream up a new ambitious goal you’d like to achieve.

If you want to make substantial inroads into a completely new market in 12 months or less, involving several hundred thousand marketing touch-points, leading to tens of thousands of sales conversations, leading to a few thousand billable new customers without a specific plan to make that happen…together with suitably qualified, experienced and aligned staffing and resources…sooner or later your luck will run out.

As it did for this business. From headlining in the trade press one day, it ended up an economic basket case the next.

The tragedy was, this was all avoidable. The objective as a three to five year plan was probably achievable, as a one year plan it was suicidal.

If there had been some test marketing, perhaps some idea of how the metrics might work in this new marketplace, the business would have been able to model the resources it needed, and the marketing approach to deliver the ambition. (They still didn’t have enough cash to do it in 12 months, but at least they’d have realised why, on the basis of some reasonably sound information.)

If, rather than increasing the cost base to deal with the “certain” influx of new activity, the business had waited until significant inroads were being made in the customer sign-up process, that might have given the business some breathing room to realise their approach wasn’t working and regroup to start again before the ran out of cash.

In the end, the jacked-up cost base and the non-existent revenue increase was what did for the business…as it does for just about every business which tries this. It’s akin to putting everything the business has on a single spin of a roulette wheel, and there aren’t many people who think that’s much of a strategy for building value.

That said, don’t shy away from Big, Hairy, Audacious Goals, or BHAGs. I’ve seen them work really well.

But the bigger the goal, and the shorter timescale you’re trying to accomplish it in, the greater the risk it won’t happen. Just believing it will happen is no guarantee.

A BHAG for 10 years hence can afford to be a bit sketchy. You’ve got time to fine tune the details in light of experience. An ambitious target to be delivered in 12 months or less isn’t going to happen without a detailed plan, and the right resources in place.

The key for business leaders is to know the difference between commendable ambition and carefree folly. Get those mixed up and you may well not be around long enough to regret it.

(Picture credit: Heidi Sandstrom. on Unsplash )

How not to screw things up like a politician

Grouch Marx once said “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies”.

At the moment, there’s no finer example of this phenomenon than the UK’s Transport Secretary, Chris Grayling. .

On top of a less-than-impressive few months in this role, yesterday he blamed the wage demands by rail unions for this year’s annual price rise in train tickets (BBC News report here).

Yet what the UK rail industry calls “regulated fares”, such as the season tickets which were at the heart of many of yesterday’s protests, are set according to a government formula agreed back in 2003 which has no connection whatsoever to wage rises in the railway industry (more details on the rail fare formula here).

This is important because once you’ve diagnosed the problem, rail unions in this case, that tends to be the problem you’ll set out to “fix”.

That’s not to say rail unions are blameless, or that they are tireless champions of anything other than their own members’ interests…it’s just to recognise that the Department of Transport’s ticket price formula can be in no way related to the wage rates of people working in the railway industry, as it’s not even part of the publicly-available formula for calculating ticket prices.

It’s hard to imagine that the interests of the UK’s long-suffering rail travellers would be improved by the Transport Secretary picking a fight with rail unions due to his lack of understanding of the pricing mechanism put in place by his own department.

Unless Chris Grayling was just playing politics to enhance his own standing within the Conservative Party, of course, which is probably several orders of magnitude worse than just being ignorant about pricing mechanisms for which he is the responsible cabinet minister.

By now, even if you weren’t sure before, I think we can probably agree that if you want something screwing up far more comprehensively than any mere mortal could hope for, the thing to do is to get a politician involved.

The question is how can business people like you and me you avoid screwing things up quite as badly as the average politician?

Groucho Marx was right – the diagnosis of a problem is key. Once you’ve decided what the problem is, that’s probably what you’ll do your best to solve. Get that wrong and the likelihood is that not only won’t you solve your original problem, you’ll probably have created another problem you didn’t have before in the process.

Albert Einstein said that if he was given an hour to save the plant, he’d spend 59 minutes defining the problem and one minute resolving it.

That may be a little extreme, but you can’t hope to find a good solution unless you’re solving the right problem. That’s where most politicians get it wrong – they’re taken in by their own political philosophies and see everything through those distorting lenses.

And, I’m sorry to say, business leaders, including myself, have distorting lenses of our own. Having a preferred view of the world distort our own perception of reality is a natural human characteristic. Everybody has it to at least some extent.

But there are things you can do to find better solutions. And that starts by how well you define the problem, as Albert Einstein said.

That depends in turn on how good you are at asking questions, and that’s a skill you can work on and improve, however good or bad you are at it now.

Research published in the Harvard Business Review set out a four-stage process for learning to ask better questions. In summary, this involves:

  • Establish the problem in as simple terms as possible – “We are looking for X in order to achieve Z as measured by W” is the format the article uses.
  • Secondly, you need to be clear how solving the problem contributes towards achieving a strategic organisational objective. You might think this was self-evident, but I’ve sat in plenty of meeting rooms where people thrashed out how to “solve” problems that, even if they were solved, would be unlikely to have any major impact on the organisation one way or the other.
  • Next, take a look at what your organisation has tried in the past and, if relevant, how other people in your industry have attempted to solve the same, or a similar, problem.
  • Finally, write a problem statement which defines the problem, its proposed solution and the requirements you’re trying to achieve, taking account of everything you’ve learned through the earlier stages in the process.

For the UK rail industry, it seems we haven’t even got past the first stage of defining the problem terribly well yet, but you can do better within your own business quite easily.

The HBR article has some great questions to ask during each stage of the process, but the key to solving any problem is always to cast your net as widely as possible when looking for answers.

If all important decisions are only made by senior executives in a conference room, I can guarantee a substantial proportion of those decisions will turn out to be wrong, or at least sub-optimal.

That’s not the executives’ fault – generally they come up with the best solutions that make sense to them, based on their qualifications and experience.

But usually they don’t have current experience of being a front-line sales person trying to sell whatever the company’s new business model is to a potential customer, or someone in the factory trying to produce against a revised product spec with tools that haven’t been properly designed for the purpose, or a call centre operator who handles the irate customers that call in when the revised product or service doesn’t work properly.

Of course, if it’s a strategic decision involving a large financial investment, senior executives have to make the final decision. To do otherwise would be to abdicate their responsibilities to the business.

But during the problem solving process, and especially the question-asking parts of it, involving as many people as possible, especially from the front-line can make a huge difference to the quality of the eventual solution and the cost-effectiveness with which it’s implemented.

If you want to screw things up like a politician, by all means sit in your conference room and make all the decisions amongst the senior executive team.

But I can guarantee that if your business learns to ask better questions, and involves a wider cross-section of staff than just your senior management team in solving them, even quite big issues for your business can be solved quickly and cost-effectively.

Let’s just hope that one day this might be the way we run our railways too.