Month: March 2018

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Why H2H and a sense of purpose is still what real people (not machines) focus upon!

By now you’ve probably heard a lot about wearables, living services, the ‘Internet of Things‘, and smart materials. As designers working in these realms, we’ve begun to think about even weirder and wilder things, envisioning a future where evolved technology is embedded inside our digestive tracts, sense organs, blood vessels, and even our cells.

Let’s talk about a scourge of modern times. There is so much stuff to watch, read, listen to, buy, eat or learn about. The world is available at our fingertips at any moment. It feels glorious but also horribly, paralyzingly overwhelming.

Should I wade into Spotify’s sea of every song ever recorded or give up and listen to my downloaded copy of Beyonce’s “Crazy for Love” for the 47,000th time? Psychologist Barry Schwartz called this the “Paradox of choice” in his 2004 book of the same name. Like many ideas that come out of TED Talks, it is too simplistic to say more choices are counterproductive, but I think we’ve all experienced the feeling.

Naturally, technology companies have some ideas about how to help people discover things and select among the flood of options — and make money in the process. And even they are recognising the limits of technology in helping people stay informed and entertained.

To see the future, first we must understand the past. Humans have been interfacing with machines for thousands of years. We seem to be intrinsically built to desire this communion with the made world. This blending of the mechanical and biological has often been described as a “natural” evolutionary process by such great thinkers as Marshall McLuhan in the ’50s and more recently Kevin Kelly in his seminal book What Technology Wants. So by looking at the long timeline of computer design we can see waves of change and future ripples.

The effects of technological change on the global economic structure are creating immense transformations in the way companies and nations organise production, trade goods, invest capital, and develop new products and processes. Sophisticated information technologies permit instantaneous communication among the far-flung operations of global enterprises. New materials are revolutionising sectors as diverse as construction and communications. Advanced manufacturing technologies have altered long-standing patterns of productivity and employment. Improved air and sea transportation has greatly accelerated the worldwide flow of people and goods.

All this has both created and mandated greater interdependence among firms and nations. The rapid rate of innovation and the dynamics of technology flows mean that comparative advantage is short-lived. To maximise returns, arrangements such as transnational mergers and shared production agreements are sought to bring together partners with complementary interests and strengths. This permits both developed and developing countries to harness technology more efficiently, with the expectation of creating higher standards of living for all involved.

Rapid technological innovation and the proliferation of transnational organisations are driving the formation of a global economy that sometimes conflicts with nationalistic concerns about maintaining comparative advantage and competitiveness. It is indeed a time of transition for firms and governments alike.

In the markets of the United Kingdom and the United States, we are constantly seeing ‘flexibility’ and ‘change’ to our economies; this evidence is continuing with the ‘Gig Economy,’ the millennials and a new operating business economy. There are huge advantages to inflexibility and predictability, as continental Europeans appreciate. The evidence shows that continuous re-optimisation is not always the best route to building solid, sustainable foundations for business and relationships.

People also want to be trusted and respected themselves. This requires that they have some responsibility and autonomy. Most of us like to feel we are working well or helping others, because we could not expect to be respected otherwise. That is a key element in the motivation to work, the satisfaction of the professional norm. Yet in recent years employers have used more and more financial incentives to motivate people: Performance-related pay has been creeping in everywhere, including the public service.

With all of these considerations, are mainstream economists right or wrong in how they approach our social and economic problems? Partly right, partly wrong. Here is the good part: Each individual knows more about himself or herself than anyone else does. So, there are huge gains all round if we can freely exchange

goods and services with each other, including our labour. This is especially so where markets are large and well-informed and no one affects anyone else except through the process of voluntary exchange. Indeed, economists have correctly shown that if these conditions exist and contracts can be enforced and people can start sharing within a ‘shared economy,’ the outcome will be fully ‘efficient.’ In other words, everyone will be happy as is possible without someone else being less happy. This important claim helps to explain the extraordinary success of post-war capitalism in producing material advance.

Yet, why did this advance not guarantee a rise in personal happiness? The reason is that many of the most important things that touch us do not reach us through voluntary exchange. Nor have our tastes, expectations and norms remained unchanged, and these too affect our happiness.

Values in people can also change. In the last 50 years we have become increasingly independent and individualistic. We are ever more influenced by the Internet and versions of the ‘survival of the fittest;’ Charles Darwin said, ‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.’ Describing ‘the invisible hand,’ Adam Smith said: ‘The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another. Avarice over-rates the difference between poverty and riches: ambition, that between a private and a public station: vain-glory, that between obscurity and extensive reputation.

The person under the influence of any of those extravagant passions, is not only miserable in his actual situation, but is often disposed to disturb the peace of society, in order to arrive at that which he so foolishly admires. The slightest observation, however, might satisfy him, that, in all the ordinary situations of human life, a well-disposed mind may be equally calm, equally cheerful, and equally contented. Some of those situations may, no doubt, deserve to be preferred to others: but none of them can deserve to be pursued with that passionate ardour which drives us to violate the rules either of prudence or of justice; or to corrupt the future tranquillity of our minds, either by shame from the remembrance of our own folly, or by remorse from the horror of our own injustice.’

My final thought in the matter is that the answer to technological overload is not less technology but more humanity.

Digital transformation, solving problems with technology, exponential growth through technology, the integration of humans/machines, Artificial Intelligence, Internet of Things etc. Like it or not, there is no way out, technology has taken over already: I lived without a Smartphone for a few weeks to find out that you soon get excluded from communities, groups, discussions and business.

The problem is not development of new technology, this is nothing new for humanity. The problem is the speed and the major impact it creates for us. It is paradoxical, but humans have the capacity to create innovation and technology with which, at the same time, they have problems keeping up with, technically, emotionally and as a society. We are used to slow, incremental change. Only few people can keep up with the speed and nature of change, most of us get anxious and try to row backwards.

The most important things for our survival are not digital: air, water, food, clothes, emotions, the warmth of a human body next to us. Spending time with people living in a strong connection with and in and from nature was eye opening: we do not live in and with the nature, we are a part of nature, fully integrated with it.

We should ask: “If technology was supposed to make our lives easier and better, why is everybody so exhausted?”. “How can we stay present and awake in a world of distraction and consumption?”

My belief is that a society cannot flourish without some sense of shared purpose. The current pursuit of self-realisation will not work. If your sole duty is to achieve the best for yourself, life becomes just too stressful and too isolated and lonely, and you will be set up to fail. Instead, you need to feel you exist for something larger, and that very thought takes off some of the pressure.

We desperately need a concept of a common purpose, a common vision and a sense of working together to achieve the one overall goal. Human happiness comes from the outside and from within. The two are not in contradiction. The secret is compassion towards oneself and others, and the principle of the greatest happiness is essentially the expression that can all share connections. Perhaps these are the cornerstones of our future culture.

I believe now is the moment to define our terms. Technology is fast, and fast is getting faster, fast is busy, controlling, aggressive, hurried, analytical, stressed, superficial, impatient, active, quantity-over-quality. Slow is the opposite: calm, careful, receptive, still, intuitive, unhurried, patient, reflective, quality-over-quantity. It is about making real and meaningful connections – with people not machines, culture, work, food, everything.

A great quote by Gwyneth Paltrow, she once said:

‘My life is good because I am not passive about it. I invest in what is real. Like real people, to do real things, for the real me.’

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Do we have international differences in corporate governance and conduct?

There has been much discussion of late on the values of corporate governance in companies and more importantly the international differences in governance and agenda. As we both advise on company boards, I decided to speak to my business partner in the US, Mark Herbert, and create some joint thoughts on the matter.

Some of the questions we discussed:
“How do you know a board is effective?”
“Do you balance trust with challenging discourse?”
“Is the CEO engaged enough with the board?”
“How can the board challenge management with critical questions without engagement and collaboration?”
“Do you engage in a continuous improvement process?”

As you can imagine, our discussions were quite heated on leadership and at times in the lack of engaged leadership in business today.
The first matter we considered was: “Is there such a thing as a typical board of directors, since size and composition will vary according to a company’s needs?”

Board size can range from five to eighteen board members, though the average board size across Europe stands at about nine members. Regardless of board size, there are certain practices that should be followed to achieve optimal results. Overall, it is important to establish the desired board profile for your company by identifying the types of directors needed in relation to your business goals and ambition.

The composition of boards continues to be a focus for investors, and companies are responding by paying increased attention both to who sits on their boards and to enhancing their disclosure and engagement with investors. The data reported in the 2016 Spencer Stuart Board Index on S&P 500 boards highlights emerging practices, compiled from proxy disclosure and a related survey. Overall, the trends have stayed steady from last year but represent a meaningful departure from 10 years ago.

Directors sit on an average of 2.1 boards. 74% of boards have an over-boarding policy to limit the total number of boards on which directors may serve; 76% set it at three or four boards. Only 43% of CEOs serve on one or more outside boards, the same as last year, but more than a 10% decrease from 10 years ago.

Many companies regularly review the list of skills that are desirable on the board and match them with board members’ profiles. Directors’ “softer” skills and personalities should not be forgotten as they are instrumental in establishing appropriate board dynamics. When deciding on the composition of your board of directors, you should keep in mind the balance between the number of executive directors (board members who are part of the company’s executive team) and nonexecutive directors (board members who are not part of the company’s executive team). You may also want to consider having independent non-executive directors on the board.

On average, 49 percent of board seats in Europe are held by independent, non-executive directors. Such directors can bring real value to your company by providing new business opportunities and more independent, objective advice. They also can provide constructive criticism, to an extent which is unlikely to come from within the company. When thinking about your board’s profile, you should keep in mind the practicalities related to the size of the board. In other words, consider that the effectiveness of the discussion is impaired when there are too many people around the table. Larger boards of directors are not always the best source of constructive challenge or fresh ideas.

Generally common convention suggests that a board size of between seven to 10 directors is optimal for most companies. Equally important is the issue of gender balance. This issue has received a lot of attention recently, since women tend to be under-represented on boards. In Europe, in particular, this issue is pertinent, since only about 12 percent of boards have a female board member.

While public attention mostly focuses on governance for larger and listed companies, many business leaders of smaller companies understand that the fundamental principles of corporate governance such as transparency, responsibility, accountability and fairness are beneficial to all companies, regardless of listing status or size.

Corporate governance is crucial for increasing an SME’s ability to attract funding from both direct investment and credit institutions. Good governance is particularly important to shareholders of unlisted SMEs. In most cases, these shareholders are less protected by regulators, have limited ability to sell their shares, and are dependent on controlling shareholders. Accordingly, the higher risk implicit in owning a stake in an unlisted company increases the demand for a good governance framework.

Positive corporate governance changes have the impact of improving access to investment, allowing the company’s to access facilities of equity and debt. There has also been the additional impact of helping the company position itself for an eventual exit, trade sale or IPO, as the changes help send a signal to the market about the company’s emphasis on good governance.

Corporate management is the general process of making decisions within a company. Corporate governance is the set of rules and practices that ensure that a corporation is serving all of its stakeholders. According to the Center for International Private Enterprise, “Successful development efforts demand a holistic approach, in which various programs and strategies are recognized for their important contributions to progress and prosperity. In this regard, linkages between corporate governance and development are crucial… Yet, corporate governance and development are strongly related. Just as good corporate governance contributes to the sustainable development prospects of countries, increased economic sustainability of nations and institutional reforms that come with it provide the necessary basis for improved governance in the public and private sector.

Alternatively, corporate governance failures can undermine development efforts by misallocating much needed capital and resources and developmental fall backs can reinforce weak governance in the private sector and undermine job and wealth creation.” Globalization of finance and trade has supported the widespread adherence to common underlying corporate governance principles. They are not always country-specific and have been applied in various and diverse emerging markets, adjusted for local regulations and business traditions.

Building a strong board of directors never seems to get easier. High-profile board failures, the boom in activist investing, and the disruptive forces of technology are only a few of the reasons effective board governance is becoming more important.

Start with oversight, a role of the board that, most directors would agree, is no longer its sole function. Directors are now required to engage more deeply on strategy, digital, M&A, risk, talent, IT, and even marketing. Factor in complexities relating to board composition, culture, and time spent not to mention social, ethical, and environmental responsibilities and the degree of difficulty is set to continue to rise.

Mark and I stipulated a few points to help CEO’s and board chairs, as well as executives and directors, build stronger boards, this guide synthesizes multiple areas to make quick sense of complex issues in corporate governance, while focusing on the areas that are essential for building a better board and ultimately a better company.

Corporate Management Development
Corporate management has changed over time as managers have acquired better tools for understanding the problems they face. Most corporate managers are able to quantify many of the issues they consider, in order to make the correct decision. Managers factor in costs, benefits and the uncertainty of projects they are considering.
A good corporate manager is someone who can perform sustainable functions within the company they work for, while either maximizing revenue or minimising cost, depending on the department. Since the principles of corporate management are so broad, there are often specific disciplines for different parts of a company. The way a sales team is managed differs from the way the accounting department is managed.

History of Corporate Governance
Corporate governance is a newer subject of study. In the past, many companies were run solely for the benefit of their managers or founders. A company might have outside shareholders, business partners and thousands of employees, but under older ideas of corporate governance, the company would pursue only the goals of their managers. Managers might choose to provide poor benefits for employees, knowing that these employees couldn’t find better opportunities. Managers might also pay themselves excessive salaries without paying attention to community standards with respect to such practices.

Rise of Corporate Governance
In recent years, many companies have become more conscious of the need for good corporate governance. As regulations have tightened, it has become more difficult for companies to exploit workers or harm the environment. In addition, changes in financial markets have made it harder for companies to harm their shareholders. A mismanaged company becomes vulnerable to being purchased by another firm, so managers tend to treat their shareholders better. An increased focus on sustainability as a business practice, not just an ethical position, has also affected corporate governance.

Measuring Corporate Management Success
Corporate management’s success can generally be measured in terms of numbers. If the department in question is meant to create a profit (for example, if the entity being measured is a retail store or a factory), a quantity like profit margin or return on investment can demonstrate that it is achieving its goals. For departments that don’t have such responsibility (like a shipping department, or an accounting group), many managers measure their results in terms of cost. If a department can accomplish the same functions and spend less money, then by this measure, it’s a success.

Integrating Corporate Management and Governance
In recent years, many management thinkers have tried to synthesize corporate management and corporate governance into a single discipline. Since corporate governance is meant to equitably distribute the results of good corporate management, they fit together naturally: the best situation for a company to be in is for it to have good governance and good management. Combining these can take a variety of forms, from giving workers representation in company management to pursuing more efficient manufacturing processes in order to cut costs and help the environment. The most effective companies combine these practices in a mutually reinforcing way.

Finally, we discussed one more topic that is very typical that is trust – trust is generally lacking when board members begin to develop back channels to line managers within the company. This can occur because the CEO hasn’t provided sufficient, timely information, but it can also happen because board members are excessively political and are pursuing agendas they don’t necessarily want the CEO to know about. If a board is healthy, the CEO provides sufficient information on time and trusts the board not to meddle in day-to-day operations. He or she also gives board members free access to people who can answer their questions, obviating the need for back channels.

Another common point of breakdown occurs when political factions develop on the board. Sometimes this happens because the CEO sees the board as an obstacle to be managed and encourages factions to develop, then plays them against one another. We used the example of Pan Am founder Juan Trippe who was famous for doing this. As early as 1939, the board forced him out of the CEO role, but he found ways to sufficiently terrorize the senior managers at the company and one group of board members that he was returned to office. When he was fired again following huge cost overruns on the Boeing 747 the company underwrote, he coerced the directors into naming a successor who was terminally ill.

Most CEOs aren’t as manipulative as Trippe, and in fact, they’re often frustrated by divisive, seemingly intractable cliques that develop on boards. Failing to neutralize such factions can be fatal. Several members of Jim Robinson’s American Express board were willing to provide the advice, support, and linkage he needed — but the board was also riddled with complex political agendas. Eventually the visionary CEO was pushed out during a business downturn by a former chairman who wanted to reclaim the throne and a former top executive of another company who many felt simply missed the limelight.

The CEO, the chairman, and other board members can take steps to create a climate of respect, trust, and candor. First and most important, CEOs can build trust by distributing reports on time and sharing difficult information openly. In addition, they can break down factions by splitting up political allies when assigning members to activities such as site visits, external meetings, and research projects. It’s also useful to poll individual board members occasionally: an anonymous survey can uncover whether factions are forming or if members are uncomfortable with an autocratic CEO or chairman. Other revelations may include board members’ distrust of outside auditors, internal company reports, or management’s competence. These polls can be administered by outside consultants, the lead director, or professional staff from the company.

The Rt Hon David Blunkett, Home Secretary, London made a great statement once, when he said;

“Business continuity and planning is just as important for small companies as it is for large corporations. Plans need to be simple but effective, comprehensive but tailored to the needs of the organisation. Employers have a responsibility to their staff for their safety and security, and we all share the desire to ensure that any disaster or incident – whether natural or otherwise – has a minimal effect on the economic well-being of the country.”