Quinn & Goldman Sachs - the case for management competence

Tuesday, June 1st, 2010

The extent of the failed insurance company Quinn’s loss leader pricing in the UK is revealed with the branch contributing £44m of the 2009 loss, £28m of that from commercial insurance.  

Quinn’s largest creditor, Anglo Irish Bank (AIB) is amongst those expressing an interest in buying the remaining assets and is looking for a JV partner that would be both regulator credible, and could manage the business to recoup some of AIB’s losses. 

This smacks of desperation.  The business is stopped.  In addition to a new investor approval is needed from both Irish and UK regulators for any commencement.  Meanwhile staff are queuing up to take redundancy, and competitors are sweeping up the renewals and new business.  It is difficult to understand what could be left to salvage – particularly in a market where competition is more than competent and reputation matters.      

For AIB this surely underlines its difficulties in understanding the risks it was taking in lending to Quinn.  Like RBS and its Goldman Sachs Abacus 2007-AC1 losses, the consequences are significant.  The risk assessment was clearly not adequate to protect the interests of the investors.  Demonstrating again, that without competent interpretation, data is just numbers.  

From the outside it is not possible to differentiate between commission or omission.  And what, after all, is the end result difference between the caveat emptor/competent entity justification of Goldman Sachs, and Quinn’s determination to grow its business using other people’s money?  Were these investors merely ‘unlucky’ in their timing of their ‘me too’ participation in the Bubble?  Did they confuse investment with the CDO/churning and slicing/repackaging of risk activities that others were conducting? Were bonuses paid for the decisions that have broken these banks?

As businesses go forward into the post crunch world, risk can no longer be palmed off onto others or its management delegated to a piece of software.  The bottom line is that Management Competence matters, particularly those ‘soft’ skills that enable a business to navigate through uncharted strategic territory. 

What are you doing to ensure your teams are competent and confident to deal with the ‘not business as usual’, high uncertainty post credit crunch world? 

 Next Steps

Talk to us about effective and engaging ways of developing those illusive ‘soft’ skills in high IQ managers and staff.

 http://www.tribune.ie/business/news/article/2010/may/30/quinn-facing-3000-hike-of-uk-commercial-premiums/

Tags: competitive advantage, Goldman Sachs, leadership, Quinn Insurance, risk management, Talent, Team
Posted in Ideas Blog

Credit Crunch Fall Out - why competence matters

Wednesday, May 12th, 2010

What are we to make of the news that Anglo Irish Bank is looking for an insurer to take a 50% share in its indebted client Quinn?  The reason is that the bank fears that without an insurance company leading the business, it will not recoup €2.8bn of loans made to the privately held company.  The Quinn family has said simply that it will not be able to pay them back.  AIB are looking for a company that does not yet have interests in the UK and Ireland – who are presumably willing to take the risk in order to buy into the market.

Quinn are in trouble with the Irish and British regulators because of their lack of capital, and the fact that they have allegedly been growing business by loss leader pricing.  Their business methods have raised concern for some time with UK competitors allerting the FSA about unfair competition.  Meanwhile the administrators are preparing a prospectus for the sale of the company. 

What a heady mix of developing consequences of competence issues  - bank and business.  And a clear demonstration of the limits of oversight - both regulatory and risk management systems.  This particular nightmare has added political colour as communities North and South of the UK/Irish border fight to maintain their jobs, and the Irish State must be groaning at the extent of the outstanding loan.  

It begins to put the Goldman Sachs fraud allegations into perspective.

Next Steps?

Don’t risk your business, talk to us about managing talent and performance in high IQ staff and managers.

Tags: competitive advantage, FSA, Goldman Sachs, performance management, Quinn Insurance, reputational risk, risk management
Posted in Ideas Blog

Top, excellent, solid and fired?

Wednesday, March 10th, 2010

‘10% as ‘top’ performers, 20% as ‘excellent’ and 50% as ‘solid’’.  Our eyes were caught by press reports that AIG-N (the holding company for AIG group) is having difficulty persuading staff to accept a new performance management system (and bonus scheme).

The issue is newsworthy because AIG is effectively owned by the American state following a massive bailout.  The press reports underline the perennial difficulty of defining performance for staff divorced from the front line and dealing with complex products with long time lines.  The proposed system will rate 10% as ‘top’ performers, 20% as ‘excellent’ and 50% as ‘solid’.  The reports do not say what will happen to the remaining 20% - but US employment legislation makes systems designed to churn/replace ‘underperforming’ staff relatively attractive.  

That any business could have 20% of staff not performing is an anathema in today’s markets.  Is this type of performance management system an indicator of leadership and soft skills failure?  Whatever happened to the mutual interest between senior management and staff in organisational success?  Perhaps after many years when everyone received excellent markings, and the bonus to match, it is too hard to address other than with this ‘one size fits all’ approach to change?  Or is it simply a sop to (justifiably) angry politicians?

Next Steps? :

Talk to us, in confidence and without obligation about building management competence and influencing skills especially in high IQ staff and technical experts 

Tags: AIG, culture of challenge, leadership, performance management
Posted in Ideas Blog

The Case of the Fat Controller and the poisoning of Performance?

Wednesday, February 10th, 2010

The Fat Controller, (Sir Topham Hatt), is a ‘hands on’ manager.  He delivers feedback to his team in person (usually escorted by two uniformed ‘associates’).  His highest praise - ‘really useful’; his greatest criticism - ‘You have caused confusion and delay’.  Performance failure and an inappropriate attitude are met by being shut in sheds for days or consigned hard physical labour (shunting) duties. The team’s reality is that failure to be useful leads to the scrap heap and the smelter. Truly the world of small children has few shades of grey.   

Like some Asian cultures, the British are masters in the art of ‘face’ and not saying clearly what they mean (the use of euphemism).  There are good historical reasons for this – not least the need to not offend on a crowded island.

 The downside is that our messages are not always understood, particularly by recipients from different cultures - including the current educational culture.  A worthy national agenda and aspiration of inclusion is easily misunderstood and manipulated without the supporting vocabulary of duties and deliverables/obligations.  Jane Jacobs (1) makes clear the difference between the private and the public sectors – the latter which is able to legislate, regulate, commandeer resources and insist on ‘fairness’.  The private sector where we must co-operate and influence to gain resources, and the market defines ‘fairness’. 

How strange then the transition to work for many of today’s Generation Y, burdened by high expectations - including of ‘fairness’.  How strange the entry into a world of hierarchy, where experience counts, and we are not all equal (2).  And how strange for Generation X managers to be confronted by these beings from another planet at a time when performance really matters.   Much easier then to try to hide behind the ‘not the XYZ company way’ statement to close down arguments, than use appropriate communication skills.  Now more than ever the ‘soft skills’ needed for the delivery of performance management messages matters.

Next Steps? :

Talk to us, in confidence and without obligation about reducing fear and increasing  competence in your performance management

Tags: competitive advantage, Generation Y, leadership, performance management, The Fat Controller
Posted in Ideas Blog

The ‘Problem’ with Generation Y

Wednesday, January 13th, 2010

Managing performance is possibly the most challenging of management activities.  In high IQ companies individuals are hired and promoted for their intellect and associated skills and consequently are usually well educated and have reasonable self confidence.  To manage the intelligent workforce, managers must deploy expert soft skills.  In these organisations team working is a core component of competitive advantage as they design and deliver complex services and products against global competition.  For these managers there is no top down process to hide behind.  They are appraising people they selected for their skills and expertise, whom they rely on and work beside every day.  It is made more complicated because ‘expert soft skills’ are not that common in managers who were themselves hired and promoted on their IQ. 

So far: so normal. 

What has changed is that the relative calm of the boom years has come to a sudden end, and with it the status quo.  Managers are now significantly challenged in navigating the market turmoil, often whilst restructuring (sometimes for survival).  Consequently they have a significantly increased workload and are naturally beset by their own insecurities.  Throw into the equation a Generation Y of younger managers and staff who lack experience of recession and who still carry forward their expectations of advancement.  The consequences can be explosive. 

The complaint is frequently that the new generation do not know how to behave at work.  Indeed this may be true (see below).  However, the root of the problem lies in the inability of managers to challenge and address inappropriate behaviours.  It is difficult for high performing, high intellect and currently very busy and stressed managers to take time away from the business to address their interpersonal skills.  In the current economic climate to do so may be seen as a declaration of incompetence, wasting time that is needed for the business and therefore career shortening.  The resultant turbulence is often ‘delegated’ to HR as HR ‘fix’ the emotional stuff, and yet of course HR do not lead the business.

The solution is to acknowledge that traditional courses are unlikely to appeal to time and performance stressed managers.  This is why we developed our Business Risk Challenge.  It is a powerful development activity - but doesn’t feel like it because it is great fun.  And it goes straight to the heart of those difficult interpersonal skills. http://www.theperformancepractice.co.uk/the-business-risk-challenge 

Next Steps? :

Talk to us, in confidence and without obligation about building management competence and influencing skills especially in technical experts 

 Generation Y Tales from the Front Line‘

 Ø  A manager, attempting to keep his meetings productive, asked all participants to switch phones and laptops off .  He was contacted by HR and told that this requirement was counter to staff  ‘human rights’ after the Generation Y’ers complained to HR..  

Ø  Two undergraduates wrote to prospective employers suggesting that as they were such good friends they should be employed doing the same job, together.  One letter, two signatures. 

Ø  A graduate engineer denied a place on the company sponsored MBA programme, phoned the CEO to ask why, and express his disappointment.  The CEO, in his turn phoned HR to express his disappointment. 

Ø  A lack of critical thinking as young managers try to solve a problem with the same actions again and again , (according to the procedure manual), even when it is not working.

Tags: competitive advantage, Intelligent Workforce, leadership, Learning and Development, performance management
Posted in Ideas Blog

Righteousness and expertise - sales and compliance?

Tuesday, November 3rd, 2009

The righteous and expert do not always make the most influential of colleagues, particularly when they are trying to influence senior colleagues who have made their careers by their ability to deliver market beating sales volumes.   The BBC’s ‘The Choice’ interview, (03/11/09), with HBOS’ whistle blowing, ex Risk Manager Paul Moore made fascinating listening.  The obvious business issues: the culture clash between sales and compliance in the business and the impact that an intelligent technical expert can have on an organisation. 

The interview reveals how the HBOS board realised it had a significant problem and how it then failed to adequately deal with it.  Also remarkable in the interview was the level of ‘principal’ expressed by Paul Moore.  So what would you do when informed by the Risk Management department that your sales strategy – upon which you had worked so hard and long and upon which the past recent success of the business had been based – was unethical and non-compliant?  Fear takes many forms including denial and anger.  ‘Buying off’ the messenger was probably the most comfortable solution – providing the relief of quick and apparently decisive action.

Sales is, in many ways, the Cinderella of business, misunderstood and short sold as easier than it really is.  Numbers driven sales teams, remunerated on the short term may give managers relief from apparent uncertainty - but the reality is that to be sustainable a business requires sales practices based on the risk of the product being sold.  That risk is of course made concrete when the deal is signed - retrofitting never really works just adding cost and complication.   This in practice means a higher cost of sales, with a longer calendar pipeline, which is a difficult sell.  And the Sales Director/Manager job is likely to go to the candidate who says ‘yes’, rather than the one who says ‘yes, and……’.

Ø  ¨ How whole business is your approach to risk management?

Ø  ¨ Does your organisation take undue comfort from delegating key responsibilities to technical experts?

Ø  ¨ Do your Risk Managers rely on their expertise or relationship with regulators to influence your business?

Next Steps? :

Talk to us, in confidence and without obligation about building management competence and influencing skills especially in technical experts 

To hear the interview go to http://www.bbc.co.uk/programmes/b00nk2c2  it is available for 7 days after broadcast.

Posted in Ideas Blog

How Many Angels on the Head of that Pin?

Thursday, October 29th, 2009

The ‘reveal’ of the failure of the banking market continues to be spectacular.  News that the FSA is considering micro product regulation caught our eye (Mortgage borrowers face stricter tests www.ft.com 19th October 2009), as did Melvyn King’s recent statement that banks should be split so that they may fail.  For managements who daily face the test of competitive markets, the concept that the ultimate sanction of commercial failure could be lacking is interesting—as is the idea that a reputable business would sell a product that it did not understand.  It continues to raise questions about management competence and what happened to the management of risk in the banking sector. 

Some of it is evidently merely human.  There is much comfort in delegating difficult topics such as risk management to ‘experts’: it reduces those uncomfortable (natural and probably appropriate) feelings of incompetence and fear in the face of complexity.  In regulated sectors it also ticks compliance boxes, (although Solvency II is an attempt to make this more challenging).  And inevitably most experts want the work, and may even be unaware of how limited their view and tools are.  Underlining the point, a recent Web 2 Risk Management interest group discussion on the topic involving senior risk managers from major companies, was quickly submerged in a technical discussion of the merits of various models, (exactly how many angels dance on the head of a pin?). 

The breaking of the connections between competence, responsibility and authority is one of the more interesting parts of the banking sector reveal.  How did senior management teams sanction the development and sale of products that had such serious consequences for their own businesses, but above all for their clients?  Was it short termism, lack of competence, that they knew they were too big to fail?  Or was it the culmination of years of silo’d management practice with no–one worrying about the big picture?  The challenge In organisations seeking success rather than nationalisation, is how the business (inevitably faced with ever increasing product and market complexity), ensures this essential connection is maintained?   

Ø  ¨ How whole business is your approach to risk management?

Ø  ¨ Does your organisation take undue comfort from delegating key responsibilities to technical experts?

Ø  ¨ Do your Risk Managers rely on their expertise or relationship with regulators to influence your business?

Next Steps? :

Talk to us, in confidence and without obligation about building management competence and influencing skills especially in technical experts 

Tags: competitive advantage, leadership, performance management, risk management
Posted in Ideas Blog

AQ & Market Crunch - Seduced by Schwarzenegger?

Wednesday, July 22nd, 2009

As the global recession crunches markets, organisations are entering the unknown. What worked in the bubble is no longer applicable, and previously high performing talent is finding itself challenged by uncertainty. What to do? One of the suggestions is that we add the Adversity Quotidient (AQ) to IQ and EQ as an element of individual manager performance to be measured and required in new recruits and existing staff. We are talking in essence about emotional (and intellectual) resilience in the face of professional challenge. I find the idea worrisome – let me explain why.

The focus on the individual is a concern in itself. Globalisation means that anything simple has been off shored and outsourced. Western organisations compete in open markets and at the higher end of the value chain. Effective and sustained competitive performance in such complexity requires a team response.

Even if we are seduced by the focus on the ‘strong man’ (Schwarzenegger for Governor?), an individual’s ability to deal with adversity is not set it changes over time, and from situation to situation. Domestic influences are important – bereavement. Divorce etc., as well as the corporate and team environments. It’s quite usual for individuals to be considered as a star in one team and then fail when moved into another.

At the Performance Practice we see an active process in successful entrepreneurial companies of a ‘live’ testing of resilience, and a development of competence over many years. The senior core of managers will have usually been in the team for a long time – their strengths and weaknesses are known. Their internal relationships/networks are solid and have been built up slowly. This testing is not possible in organisations which are unable to, or choose not to, grow their own talent.

As such the concept of AQ is attractive, particularly in turbulent times when organisations, their HR teams, and recruitment agents try to reduce the risk of new hires and promotions. But is it really a break through or is it an attempt to codify elements of experience, knowledge and maturity? When markets change fundamentally and the risk management software is no longer so effective in predicting outcomes, knowledge and competence really matter – and the individuals who have that are likely to be older, more expensive and harder to manage.

Next steps
• Talk to us about how to making this ‘hard’ soft stuff easier and improving practical performance management skills.  performance@theperformancepractice.co.uk

Tags: competitive advantage, culture of challenge, executive coaching, leadership, performance management, service industries
Posted in Ideas Blog

Performance Management – connecting rewards to results

Monday, May 11th, 2009

How did the link between performance and reward become so etiolated? ‘interesting times’ indeed when bankrupt organisations pay out pre bankruptcy bonuses and benefits, and company officers walk away apparently without sanction.  The breaking of the link raises many questions.  Did the City ‘pay to go away’ culture lead directly to the loss of management competencies? Did a super abundance (overstated?) of profits allow the development of a culture of avoidance and collusion?  Did failure to understand the true nature of the products and services being sold, lead to the confusion of a market bubble with management performance?   

To most (and surely especially to more junior staff) the breaking of the link between performance and reward makes a mockery of much vaunted systems of recruitment, appraisal, and development.  Those of us with grey hair understand that systems need people to co-operate to make them work.  For this to happen not only must they be credible (measure the right thing), the individuals concerned must be confident in their ability to use them.  At The Performance Practice we know that the practical side of performance management is actually really difficult – particularly in high intellect and entrepreneurial organisations.  Big hitters (and wannabes) do not usually take lightly to being realistically appraised: those professional skill sets you hired tend to be applied enthusiastically to the more immediately motivating question of pay rises: whilst the conversation is about performance it’s impact on the relationship between manager and managed is potentially damaging and technically orientated managers may not even be willing to try.  Responses to this challenge are not necessarily logical but emotional.  Ironically it often feels much easier to introduce a standard system and tick the boxes, rather than address the real issues – particularly when the organisation also has to meet a regulatory or legal requirement.

? Does your performance management system reward performance?

Tags: culture of challenge, leadership, performance management, risk management, service industries
Posted in Ideas Blog

Executive coaching, business coaching and market breaking change

Thursday, April 16th, 2009

Constant change is a fact of business life and with the global recession, now it’s market breaking.  Executive coaching is one way of providing your team with the space to think and try ideas out, before they go public in such challenging times.  Business coaching often helps to  increase individual accountability, improve productivity and enable creativity as well as ensuring that your key talent or high potential employees are motivated and retained.  That said coaching is a long term investment and not suitable for everyone.  The relationship with the coach is key, and must be properly bounded and managed on both sides ……. wherein lie some skill.

?  How well are you supporting your managers effectively through these challenging times?

Next Steps 

•  Our free white paper ‘Performance Coaching and Mentoring’ email us at coach@theperformancepractice.co.uk , provides guidance on using business coaching to the maximum effect and what to avoid.
• Talk to an expert member of our team jay@theperformancepractice.co.uk about how coaching will help your teams perform  

Tags: business coaching, executive coaching, performance management
Posted in Ideas Blog