Did you know that:
- if a drunk walks down a road criss-crossing the middle line statisticians could say that on average he is walking in a straight line?
- the average person has less than 2 legs? (It only takes one person in the whole population to have 1 leg to take the average down.)
According to the principal of a high school we are looking at for our son, the school is the fastest growing boys school in the region. The problem is that their definition of ‘growing’ is not clear, and this school is, in fact, the only state boys school in the region. When you study statistics it soon becomes clear that although we tend to want to find simple clear truths in their scientific accuracy, statistics can be misleading if they are misread, if the context is misunderstood, or if they are manipulated to suit a particular purpose,.
Media stories are currently full of deliberations from politicians and economists debating exactly when each country enters a recession according to the statistics, leaders desperately trying to define what it is and how to measure it. Perhaps it is becoming a bit like the misaligned focus of ancient theologians, who used to spend their time arguing over how many angels could fit on the head of a pin while the masses suffered. The problem most people face today is not related to clarity of definition or statistical accuracy. While the CEO and a few select company executives pore over the figures related to the impact of the Recession the average person can only relate to what they see hear and feel.
The book ‘The Tiger That Isn’t’ reveals that we should be very careful when trying to use numbers to explain events, especially when it comes to how people feel. During tough times it’s imperative to assess and monitor the morale and motivation of the average person in the company, and that requires connecting with personal emotions and stories rather than becoming focused on figures. When things are going well the feelings expressed and the stories shared around the water cooler are mostly positive, but when things go south the emotions and stories can change dramatically, and this can have a major impact on a company’s performance and ultimate survival when things get tough.
Morgan Kelly, an insolvency accountant partner with Ferrier Hodgson, believes one of the key indicators which will predict a company’s ability to emerge successfully from a crisis is the level of open and honest communication to all staff at all levels. Morgan has identified a number of important accounting and business management principles that can help to avoid collapse, and managing individual and collective stories is, he says, of critical importance. Although many companies will try to hide the real problems when things go wrong (Morgan is often ushered in through the back door like a secret agent when it gets to the point where he needs to intervene), he says it’s impossible to keep the truth hidden, and the unmanaged stories that may start to circulate in place of an open explanation can be much more damaging in the long run.
Habitual communication that confronts the issues openly rather than shying away from them is, Morgan believes, the key to survival. This sort of communication empowers people by allowing them to understand the problems and be part of the solution, rather than leaving them feeling powerless and alienated. Organizations that hide issues from staff usually create a negative environment with low morale and a deep mistrust that can take years to recover from, deepening the potential impact of the crisis significantly if it doesn’t destroy the organization altogether,
Morgan’s key recommendations for setting constructive systems in place to survive a financial crisis include:
- Be in business for a valid reason
Many companies have a business model that is unsustainable and one which will not weather the storms. If a company is simply propped up by unrealistic loans and has lived off the benefits of the good times rather than analyzing the sustainability of the system, it most likely will not survive over the long term.
- Challenge your business model before the market does
A successful company is aware of the potential scenarios it may face and has done some serious scenario planning to prepare for whatever may lay ahead.
- Walk towards the pain
Confront the tough issues head on and as early as possible, before the trouble starts and before they have the opportunity to escalate into crises.
Andrew Ross, another partner with Ferrier Hodgson who focuses on forensic accounting, takes this logic a step further by revealing the importance of establishing clear foundational values that will filter through the organizational structure. Andrew says that, for example, fiddling the books to artificially prop up results simply creates a false sense of security, and although this may be able to be covered up in a bull market these practices will soon become exposed in a bear market. He cites an example of a time when he was called in to deal with the collapse of a bank, and he discovered the bank had reported the exact same profit to two decimal places in two consecutive years. As implausible as it sounds, no one had done anything about it…. until the insolvency practitioners and forensic accountants were called in for liquidation. Andrew says that companies need to stop and carefully examine what they really need and how they are going to report it according to the foundational values they hold.
The company that continues to thrive will examine what it stands for and establish firm values-based principles, setting a clear direction and goals. By inviting the employees to be a part of this journey and by encouraging open sharing about both the successes and challenges along the way, morale will increase, commitment will remain high, and positive stories will be shared to fortify the positive organizational culture - no matter how bad the external pressures may be.
Through this fundamental strategy it is possible to create a strong organization that will weather the toughest of storms… one that doesn’t become trapped in statistical analysis paralysis – or simply become another statistic itself…
Watch the video interview with Morgan Kelly and Andrew Ross (part 1, 2 & 3) at www.tirian.com
Or watch them on YouTube at:
©2009 by Andrew Grant