The Postal Strike and the Horsemen of the Economic Apocalypse

June 29, 2007

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The twenty-four hour postal strike in the UK is the type of ‘little local difficulty’ large enough to require an immediate response from a new political leader. Even with his formidable energy, Gordon Brown could do without confronting an industrial dispute so soon into his leadership. There are echoes of the Airbus conflicts that captured the attention of Nicholas Sarcozy in the first week of his Presidency.

Why strike? Why now?

The strike, which began at 3 am on Friday June 29th 2007, involved some 130,000 members of the Communication Workers Union who have issued the following statement

The CWU’s Negotiating Team met with the Royal Mail’s Chief Executive Adam Crozier, and his Senior Management Team yesterday. The CWU reiterated to Royal Mail that it was prepared to reach an agreement that would move forward both the Union and Royal Mail’s position … The CWU impressed upon the company that there was no possibility of Royal Mail management successfully transforming the business unless both parties could reach an agreement that galvanises the workforce too. During the course of the meeting the Union set out its position and expressed its genuine concern about Royal Mail’s business plan and how it would result in a spiral of decline for the company, and the workforce … The CWU reminded Royal Mail that the Union was not alone in severely criticising Royal Mail’s business plan. A recent all-party Select Committee criticised Royal Mail’s leadership for lacking vision.

Chief Executive Adam Crozier, responded by rehashing all of his previous statements and refused to enter into meaningful negotiations with the Union.

The strike on Friday 29th June 2007, will go ahead.

Technology and jobs

The old debate about technology and jobs continues. Innovation accompanies creative destruction, like Horsemen of the Economic Apocalypse. Maybe ultimately the job losses are compensated elsewhere. Which is no consolation to threatened workers. The perceived grievances of Royal Mail workers are easy to identify. As with Airbus, competitive pressures have triggered plans to reduce costs which threaten jobs.

The Royal Mail leadership team

Royal Mail has a high profile leadership team within the UK business world. Chairman Allan Leighton has been persistently linked with stories of his intention to head a lucrative buy-out initiative. In an earlier post I noted:

Allan Leighton has an appetite for self-publicity, as inspection of the Royal Mail website reveals. He presents himself as a dynamic (and somewhat terrifying) leader. In public he attempts to soften the image by implying he is very much one of a team, operating closely with CEO Adam Crozier.

Their styles remind me of an earlier high-profile double act, Lord King and Colin Marshall at British Airways. The pugnacious King had also been confronted with an ailing BA facing vigorous competition. Like Leighton, King presided over job cuts on a similar scale, and had serious internal morale issues and Union conflicts. Colin Marshall, like Adam Crozier, had a more urbane style.

Since his arrival, the Royal Mail has cut 30,000 jobs, shut thousands of post offices, and moved away from record annual losses that had reached £1bn. The various changes have been forced through against considerable opposition internally and externally.

The changes have not resolved the fundamental problems of the corporation which remains in dire financial circumstances. It recently announced that the gap in its pension funds would be tackled by ending the corporation’s final wage pension scheme, another unwelcome move and one described as unilateral bullying by its Union leaders.

Amazon and The Economist on-line

In preparing this post, I held off from ordering a book from that well-known e-business Amazon. It could wait. Co-incidentally, Amazon could not wait for a better deal from The Royal Mail, and has recently switched a lucrative contract away. If the management’s resolve needed stiffening, that would have done the trick.

Yesterday, those nice people from The Economist sent me an email. It apologized for any inconvenience caused by today’s postal strike, pointing out that I am eligible as a subscriber to access their on-line version, if I can’t wait for the delayed delivery through the Royal Mail.

Globalization as economic apocalypse

Royal Mail employees, like the rest of us, are facing an economic apocalypse. The current wisdom of the tribe is that we are seeing consequences of globalization. My examples illustrate some of the threats and opportunities cropping up, as the horsemen of the apocalypse gallop about, and technological changes sweep the countryside.

Card-carrying optimists hold to the view that the human spirit, creativity and morally-grounded leadership will help us through the crisis.


All in the same boat: Teamwork theory in the 153rd boat race

April 6, 2007

_41514288_cambridgesad203.jpg_41514106_oxford2203.jpgOdds-on favorites Cambridge University lost last year’s boat race against ancient rivals Oxford. This year, the light-blues have been advised to follow Business School theories for coping with the heady mix of individual ambitions and team spirit. We assess whether the ideas hold water.

Last year Cambridge lost the annual varsity bragging rights on the Thames. Defeat sometimes sharpens the appetite for new ideas. According to this week’s Economist, Cambridge Coach Duncan Holland has been assisted by Mark de Rond from Cambridge’s Judge Business School.

Mark is an American strategy theorist who is tipping his toe into more behavioral waters here (I can’t get away from aquatic imagery at the moment). The article goes on to mention a recent idea on how members of organizational work teams relate to one another.

Competent Jerks and loveable fools

The basic idea, by Casciano and Lobo, originated in the prestigious Harvard Business Review last June. Their work examines the relationships between managers with differing levels of competence and of likeability. Details of the work can be found in a summary by AsiaOne Business:

The authors studied four organisations – one which is profit-motivated, one non-profit, another large and the fourth, small. No matter which organisation they studied, they found that everybody wanted to work with a lovable star and nobody wanted to work with an incompetent jerk. They say things got more interesting when people faced the choice between competent jerks and lovable fools … surprise, surprise, the two researchers found out that the reverse was true in the four companies they analysed.

“Personal feelings played a more important role in forming work relationships – not friendships at work, but job-oriented friendships – than is commonly acknowledged, even more important than evaluations of competence.”
The competent jerks represent an opportunity for the organisation because so much of their expertise is discounted.

Evaluation of the research: The popularity of the ‘two-by-two matrix’

The research study is presented in the form of the two-by-two matrix. As a teaching and diagnostic tool the two-by-two is among the most popular ways of helping people escape the ‘either-or’ trap and think in more dimensions. After a while the experienced management trainer becomes adept at turning any relationship between two variables into a two-by-two format for teaching purposes. (Try it for yourself, if you don’t believe me).

For example, in the famous management matrix by Blake and Mouton we can explore more deeply the interplay between task-oriented and supportive preferences of leaders.

This new two-by-two contrasts high and low likeability and high and low competence. As with the Blake and Mouton matrix, this immediately makes sense to many people. The four boxes are nicely labeled. The simple idea simply expressed has another nice wrinkle. It gets to the trade-offs and dilemmas when people have to chose between workmates they believe to be one or two dimensions short of being a likeable and competent star.

Will the model stand the test of time?

Casciano and Lobo have got their idea off to a good start. It has every chance of being a fashionable concept which works its way into Organizational Behavior (and Organisational behaviour) textbooks. After which there is a mimetic force at work. Does the theory extend or challenge sound organizational theory? Not really, but that is to be ungracious. At least, it has several features of earlier successful ‘thought leadership’ stories. The publication in the prestigious Harvard Business Review will do its prospects no harm.

Will it help Cambridge win the boat race?

I can’t quite see it. In the boat race, the rowers have all already have been selected as highly competent. There’s no rowing incompetent among the candidates for the top boat. Actually, the article implied that there was, mentioning one rower who is a not the technically most-gifted and yet who is much liked and a motivational character. I’m not sure how the Cambridge business coach got that message across (unless, of course he is himself a highly competent and likeable star; neither a competent jerk nor a likeable fool).


Stefano Pessina: Friendly insider at Alliance Boots (update)

March 13, 2007

The friendly bid for Alliance Boots could hardly be friendlier. It is led by the company’s deputy chairman Stefano Pessina, in conjunction with private equity giant KKR. Friendly as in Cuckoo in the nest? (Updated).

Update

The Economist (March 17th 2007) examined the likely acquisition of Boots (as it described Alliance Boots). It noted the on-going debate on the merits of private-equity firms, pointing out that Boots was benefitting from effective management, and that the case for change was unconvincing.

It took its characteristic free-market stance to interpret the situation, accepting the story that Mr Pessina had been prompted to act by the sluggishness of performance post-merger. In short, Mr Pessina was not so much a cuckoo in the nest, as a rational agent responding to an entrepreneurial opportunity produced by sub-optimal performance. It added primly, that Mr Pessina might have been partly responsible in that he had failed in part of his well paid job to explain to the market its under-estimating of the value of the company …

My Earlier Post:

The leap in share price tells it all. This week the Alliance Boots pharmaceutical and health-care company was talking to itself. Part of the board considered a ‘friendly bid’ put together by the famed private equity company KKR. Another part of the board, led by its own deputy chairman Stephano Pessina, was spear heading the bid. The rest of the board faction has politely responded ‘thanks very much old friend, but do you think you could possibly find some more cash?’. The shares galloped up close to the proposed £10 level.

What’s going on?

Ambitious company insiders are increasingly aware of the potential of private equity support to mount a bid for ownership. The benefits of such a bid are obvious. The inside knowledge makes due diligence a rapid and relatively risk free process.

In this case, the historical events might almost have suggested that such a takeover was on the cards. It has been less than a year since Alliance Boots was created from the merger of health and beauty retailer Boots, and drugs wholesaler Alliance Unichem. After the merger, the new company retained a board strongly representing the somewhat larger Boots organisation, but with a curious-looking side-arm for deputy chairman Stephano Pessina.

Stephano Pessina

Although difficult to extract the information from the company’s official web-site, Stephano is a highly successful Milanese entrepreneur who in effect is the owner of Alliance Unichem, and thus, a thirty percent personal stake in Alliance Boots. He was the force behind the conversion of his family firm to an international organisation. A nuclear engineer by profession, he is believed to be disappointed at post-merger progress in the newly merged firm.

Cuckoo in the nest

The debate about private equity companies continues. Influential journalist and blogmeister Robert Peston of the BBC has been to the fore in bringing the debate to a wider audience. In simple terms, KKR is but one of a growing and influential group of financial consortia who have been developing innovative means of acquiring companies and capitalizing on their assets. (It is already in the news in the UK for part of a Consortium interested in the Sainsbury retailing organisation). Opponents of such firms portray them as asset strippers, impervious to human anguish and long-term social goals. Supporters argue that they rescue firms from flabby and ineffective management and return them to economic health. Examples of both kinds may be found. What is clear is that the ambitious entrepreneur within an organisation has a new way of seeking to achieve personal ambitions.


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