| | 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, 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 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 –
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
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.
| |
|
Previous Page 