| | By Mick James
Am I the only person
who has a sneaking
admiration for
Chancellor Darling? In
the debate about the
Northern Rock
nationalisation he was
the calm voice in the
centre of the storm, a
sane man surrounded by
hysterics, conspiracy
theorists and barking
madmen. But I suppose
you get used to that if
your professional life
is largely spent either
in the House of Commons
or the Today Programme
studios. Given the
uninformed way in which
many of the most
strident critics have
tackled the subject,
it’s hard not to end up
siding with the
Government.
Away from the inanity
of the political debate,
you have to admit that
the Government has set
itself a tough challenge
in undertaking to rescue
the Rock. New boss Ron
Sandler has so many
conundrums to wrestle
with that I suspect he’s
already feeling that his
£90,000 a month
remuneration may be a
little on the thin side.
The Rock needs to shrink
to reduce its exposure
to the money markets, | |
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| | but it also needs to be
enough of a going
concern to attract a
good price from a future
buyer. It needs to rake
in the deposits while
competing fairly under
the eagle eyes of the
EU. The list goes on.
But what concerns me
is what happens when you
take an organisation
that has, according to
its former CEO, been
growing “by 20% plus or
minus 5% for the last 17
years”, and suddenly put
the brakes on? It’s an
issue that – perhaps in
a less extreme form –
may become a pressing
one for many
organisations.
Northern Rock may be
at the upper end of the
growth spectrum, but it
is by no means unique.
Many organisations have
been growing so steadily
and for so long that
growth has become part
of the fabric of their
organisation. Many
professional people –
and by no means the most
junior ones – have never
experienced a reversal
of the business cycle.
We all like growth,
but it’s not without its
problems. The most
obvious is runaway
costs. I remember during
the last downturn asking | |
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| | a corporate recovery
expert how companies
could “turn off the tap”
and control costs. He
laughed. Most of his
clients didn’t have a
tap, he explained, just
an open-ended pipe
pouring out money.
Encouragingly,
companies – or at least
those that have been
wise enough to remain in
touch with the
consulting industry
during this period – may
not be in such bad shape
this time round.
Developing disciplines
in procurement,
accompanied at all times
by the looming threat
from India and China,
means that costs have
rarely slipped off the
corporate agenda.
But that also means
that there may be no
“quick wins” when it
comes to cost. That
doesn’t mean that
there’s nothing more to
say on that matter and
enlightened companies
may still look to the
consultancy industry.
I’m hearing a lot of
good things about
efficiencies that can
still be found when
people take an
“end-to-end” view of the
business. But that’s
quite a subtle process – | |
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| | many will just reach for
the scalpel and start
the DIY surgery, which
is about as sensible as,
well, DIY surgery.
One of the other
problems of growth is
that good times don’t
necessarily create good
managers. Booms allow
difficult decisions to
be postponed or swept
under the carpet,
problem people shifted
sideways. A prolonged
boom brings forth a
generation of “corks”,
managers who have
effortlessly risen with
the economic tide but
never outperformed the
market. When the tide
goes out, “corks” turn
into “cutters”,
targeting the bottom
line the only way they
know. Inevitably, the
axe falls on the lower
orders, and the cull is
swelled by the departure
of the ambitious, the
talented, the overworked
or the plain fed-up. To
complete the
degradation,
ring-fencing vacancies
can ensure that any
vacant roles are quickly
filled by unsuitable
internal candidates. I
once worked for an
organisation of such
staggering ineptitude
that it failed to grow | |
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| | during even the sunniest
of economic climates;
staff turnover plateaued
at 40%. At that rate an
organisation has more or
less lost control of its
destiny.
If the next few years
are to be “difficult”
then companies need to
develop strategies to
avoid stagnation.
Companies may decide to
avoid consultancy
because they “don’t have
any new projects” but an
outside perspective will
be invaluable during a
period when the company
isn’t automatically
acquiring new blood and
new experiences through
growth. Initiatives will
need to be found that
can replace the dynamic
of growth – which
doesn’t mean a period of
internal navel-gazing.
Above all it doesn’t
mean that everything has
to stop just because
“growth” has stopped.
It’s going to be a
difficult trick to pull
off, which is why
watching the unfolding
events at the Rock will
hold lessons for us
all.
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