M&S shareholders resist Chairman Rose

Big Investors at M&S are upset over Stuart Rose being given combined roles of chief executive and executive chairman. Shares have plummeted after the retailer revealed a drop in annual like-for-like sales. Rose anticipates two tough years ahead

In advance of the general meeting [Wednesday, July 9th 2008] City rumours pointed to two big investment funds (Schroders and Legal & General) as leading a shareholder rebellion.

Stuart Rose

As a corporate leader Rose ticks all the boxes. He came in to M&S as a white knight to protect the decline in the company’s fortunes, which had attracted unwelcome advances from the buccaneering Philip Green. In a few years he has justified the rejection of Green’s offer, with a turnaround in trading figures, and climb in share-price.

He was increasingly noted as a role model of a dynamic business leader. A recent award from The World Leadership Forum was based on a poll of chief executives of nearly a thousand British businesses. The clear winner was Stuart Rose.

Malcolm Turner, President of the World Leadership Forum said:

“We are delighted to announce that Stuart Rose is the winner of our Business Leader of the Year Award. He is plainly Britain’s most admired businessman, having dramatically improved Marks & Spencer’s fortunes while operating in a notoriously competitive and fickle market. We organised this award because we think that recent television programmes such as ‘The Apprentice’, or ‘Trouble at the Top’, bear little relation to the reality of corporate life. Worse still they often give young people, at the outset of their careers, an image of business which is inaccurate and damaging. We believe that highlighting the work of the best business leaders, and the best management practice, will pay dividends to the wider business world and give young people a less distorted view of commerce.”

Appointed Chief Executive in May 2004, Stuart Rose first joined Marks & Spencer in 1972. He moved to the Burton Group in 1989, becoming Chief Executive of the Multiples Division in 1994. He joined Argos plc in 1997 as Chief Executive to defend the takeover bid from GUS. He then became Chief Executive of Booker plc, which merged with Iceland plc in 2000. He joined Arcadia Group plc as Chief Executive and left in 2002 following its acquisition.

I’ve blogged on Rose a bit, but not in detail. In general he has avoided the leadership pitfalls that have been examined in Leaders we deserve.

Robert Peston neatly skewers British business leaders for avoiding the risks of exposure in tough media interviews. Stuart Rose has been an exception to the general point being made by Peston. He projects calm, thoughtfulness, and a capacity to hold on the practicalities of a story while retaining a sense of long-term corporate objectives.

But then things started turning nasty

In April [2008] Leaders we deserve reported on the decision by M&S to appoint Sir Stuart to the dual roles of CEO and Chairman. We picked up the possible problems of governance involved. The message released by outgoing Chairman Lord Burns suggested that the company was anticipating problems from its shareholders.

He was to be proved right

The reactions were largely negative, although comments suggested that the institutional shareholders might want to find some way of expressing displeasure that fell short of censoring Lord Burns or Stuart Rose.

What’s going on?

My question as the company faces pressure from its shareholders is: what’s going on?

We could assume that the institutional shareholders are motivated by concerns over corporate social responsibilities. If the customary city mindset still holds, that only seems likely where CRS aligns with self-interest.

In other words, the real goals of the shareholders are wrapped up in the rhetoric of CSR.

In which case, this another game of strategic chess.

‘We like you as a leader, Sir Stuart, but not if you weaken our influence over decisions you might make which might damage our investment value in M&S in the short as well as the long term’.

Before the battle

A day before the battle, M&S shares had slumped and then rallied slightly in modest levels of trading.

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The Search for a New leader: Now its BA and Willie Walsh

Update: The post below [May 15th, 2008] was updated [December 16th, 2009] as British Airways faced a highly damaging strike of Cabin Crew over the Christmas holiday period. Original post follows:

When a company starts looking for a new leader, rumours about the incumbent are bound to arise. The most recent case is that of British Airways and its CEO Willie Walsh. Students of leadership succession should keep a close eye on unfolding events.

The duty of a corporate board is to safeguard a company’s future viability, and that must include monitoring of its leadership. While secrecy is desirable, it may suit pressure groups to bring matters to public attention. For example, shareholder activists seek advantage for their narrower interests, which would include getting the best short-term deals on investments, but might also include the possibility of becoming king-makers for a change of leadership.

The Independent reports that

[British Airways] has appointed the recruitment consultants Whitehead Mann to find a new chief operating officer and possible successor for its embattled chief executive Willie Walsh.

The successful candidate will fill a newly created role, devised after the recent Heathrow Terminal 5 fiasco. Both BA’s director of operations, Gareth Kirkwood, and head of customer service, David Noyes, parted company with the group last month [April 2008] . The two roles will now be combined to create the position of chief operating officer.

The airline, which will publish its full-year results on Monday, is believed to have instructed Whitehead Mann to find a senior level candidate who could be considered for a position on the board within two years, and could also be a potential replacement for Mr Walsh within five years.

Opening Sacrifices?

For ‘parted company’ read sacked. Gareth makes an opening sacrifice in BA’s attempts to allay criticisms for a wave of customer service reactions. David will do for the time-being for operational failings, as Terminal 5 lumbers into action.

Later, [May 13th 2008] BAA, Heathrow’s operating organization announced the departure of Mike Bullock, its Managing Director at Heathrow, another victim of the Terminal 5 opening (or non-opening, if you prefer). At least the BBC announced it, beating the BAA web-site to the news.

The departures at British Airways seem more in the nature of opening gambits, if we want to puruse the theme of chess as a metaphor for corporate strategy.

The Times has reported that public sentiment strongly in favour of BA finding a replacement for Willie Walsh.

However, Richard Northedge argues that

Walsh ..is directly culpable too [for the recent Terminal 5 opening fiasco]. Unfortunately, BA cannot afford to lose him. It has other problems that require solutions – from its pension deficit to its industrial relations – and Walsh is the best man it has. But stakeholders require some recognition that Walsh’s acceptance of responsibility is not just hollow words: it would be appropriate if, when the remuneration committee considers bonuses, it acknowledged the need to punish Walsh.

The Walsh Legend

Mr Walsh arrived at British Airways in 2005 already as something of a celebrity. His reputation had been secured as a former pilot who aspired to leadership. He had risen through the ranks at Aer Lingus to be acknowledged as a transformational figures for the fortunes of that company.

Stories accumulated about his hands-on style, and were used to sketch his operating methods.

He was known for negotiating toughness. Successfully reinventing Aer Lingus as a profitable no-frills airline, while other established European flag carriers went to the wall, he slashed costs by 30% and shed more than a third of staff. [saying]”we make no apologies for focusing on profit” … [and that] “a reasonable man gets nowhere in negotiations”.
He is renowned for not driving an expensive car and choosing not to take on a secretary, instead writing all his own letters and answering his own phone.

Mr Walsh’s obvious toughness and eye for increased profitability no doubt caught the attention of BA’s board. After the UK airline’s long history of staff disputes, most recently the wildcat walkouts in August 2005 in support of sacked workers at the airline’s main caterer, he must have seemed ideal.

Be careful of what you want…

‘Be careful of what you want. You might get it’ runs an office-wall summary, capturing the myth of the Faustian pact. Maybe that is another version of getting the leaders we deserve. The appeal of a tough leader for BA was obviously appealing, not just to the Board, but to its major shareholders.

Students of leadership succession should keep an eye on events at British Airlines. We will continue to watch Willie, at Leaders We Deserve.

To go more deeply into succession planning

We touched on British Airways in the context of Mandrill Management .

Travolution is a useful site for wider issues of the industry

The Post Office/Royal Mail leadership succession activities were noted including attempts to have a fall-back plan if Allen Leighton were to leave.

Times Warner’s appointment of Jeff Bewkes also makes an interesting succession story.

EADS strategic issues under Louis Gallois
and also its leadership challenges have been covered.

There have stories of the rise and fall of varous sporting leaders. When Liverpool owners approached Jurgen Klinsmann, the story blew-up as a scheme to get rid of the popular Rafa Benitez.

England’s Rugby Football Union eventually appointed Martin Johnson and relegated Bryan Ashton to the bench.

Numerous posts covered the stories the longest leadership succession saga of modern times.

The transition from President Vladimir Putin to Dmitry Medvedev is offering further insights into succession issues in internationally important arenas.

Overall, the events covered in these posts indicate recurring themes within recent leadership succession stories. A thorough examination might produce a valuable contribution to understanding of the dynamics of leadership succession. They may also hint at the likely outome to the story of Willie Walsh at British Airways.

Alistair Darling plays Chess at Northern Rock

Alistair Darling has developed a counter-gambit in the chess game for the future of Northern Rock. The threat is to nationalize the company and to bring in Ron Sandler, former head and rescuer of Lloyd’s of London, to run it

The shareholder meeting is scheduled for Tuesday January 15th 2008. Shareholders have signalled their intentions of opposing plans to find a private owner at a price unfavourable to themselves. They intend to seek motions to prevent the board acting against the interests of shareholders.

These moves are understandable in view of the Treasury’s position, which seems to be committed to recouping as much as possible of the billions ‘invested’ in rescuing the back since the crisis days since September 2007.

The Treasury counter-gambit, if successful, is good for tax-payers, and also protects Darling and chums from accusations of incompetence and worse by that sharp-tongued Mr Osborne.

The Chancellor, while preferring the sale into private ownership to go ahead has to demonstrate that the Treasury is perfectly willing to accept the nationalisation option.

So it came about, that on the Saturday preceding the meeting, the news became public that the Treasury had a well-worked out plan for nationalisation. Why?

Demonstrating that you are serious

Darling has to demonstrate a convincing threat to the shareholders, the group he has identified the biggest threat to his own position, at the battle of Northern Rock. Threats are effective only if they are taking seriously, and not taken as evidence of bluster and weakness. We have written of how the most potent threats are like unsung melodies, shaping events but remaining in the background.

So Mr Darling does not want to nationalize Northern Rock. Neither do the shareholders. But if The Chancellor can convince enough shareholders that he might be forced into a nationalization by their further opposition, it may help avoid the outcome none of the main players really wants.

The threat

The threat involves several elements. A signal of intent. Evidence that it is not a shallow move or an idle threat. The signal deliberately leaked is necessary to convey the seriousness. It can be backed up in chess terms (and in military and political terms) if it can be shown that recent moves by Darling have been played to strengthen the impact of the threat if activated.

Once again, the intrepid financial journalist Robert Peston continues his high profile scoops.

So Mr Peston gets his story for the BBC. Mr Darling gets his signal accurately and prominently reported.

According to bankers close to the Rock, the Treasury has a fully developed plan to own and manage the bank, should a commercial solution be impossible.

The BBC has learned that Mr Sandler would become executive chairman of Northern Rock in the event that the troubled bank is fully nationalised.

The former boss of Lloyd’s of London is well known to Prime Minister Gordon Brown, and worked for the Treasury in developing the so-called stakeholder pension and investment products that were intended to help those on lower incomes save for retirement.

Mr Peston, through a leap of imaginative journalism, or perhaps through the way in which he had been briefed, then links the news with the upcoming shareholder meeting:

The coming week will be a crucial one for Northern Rock. On Tuesday, shareholders will attempt to restrict the ability of the company’s board to sell assets without seeking their permission.

Robin Ashby, of the Northern Rock Small Shareholders’ Group, said he would not welcome nationalization …

The shareholders’ action is regarded by the Treasury as potentially hostile to the interests of taxpayers.

Taxpayers are exposed to the Rock to the tune of £55bn through direct loans made by the Bank of England and guarantees to other lenders made by the Treasury.

A decision will also be taken imminently by the Treasury on whether to pursue a proposal by the investment bank Goldman Sachs to convert up to £15bn of the taxpayer loan into bonds, for sale to international investors.

If that proposal to raise new finance for the Rock flops, it is likely to undermine attempts to organize a commercial rescue of the Rock by either a consortium led by Virgin or by the Olivant Group.

[See how Mr Peston was also struck by the chess analogy in his recent blog where he enlarges on nationalization and partial nationalization options and implications.]

The Chess Game reaches a critical middle-game position

The chess game is reaching a critical position, rich in possibilities. To press too hard risks losing the entire game. Darling has shown he is willing to accept a gambit, and now offers a counter-gambit himself, using the Bank of England to capture Northern Rock for the nation. Making such a move may be risky to the Treasury, but it is even more damaging than other possible outcomes, for the shareholders.

[A counter-gambit: your chess opponent makes an offer as a gambit, which is expected to give you short-term gains for which you risk longer-term losses. You reply with your own gambit, which agagin offers your opponent short-term gains and for which there are the risks of longer-term losses. Playing a gambit often complicates a game. Playing a counter-gambit tends to lead to even more complex positions and greater uncertainties]

That is why I like the efforts made to demonstrate the seriousness of the threat to the shareholder forces. The announcement that Mr Sandler has been lined-up is excellent. Easy to check up on, little lost if nothing further happens. That’s what makes it quite a convincing move.

Acknowledgement

The Chess Players image is of Daumier’s masterpiece. It can be found on an excellent site on Combinatorial Game Theory

Breaking News: English Football isolated from Jose Mourinho

This was the week that Jose Mourinho was not appointed manager of the England football team. ITV ran an interesting and intelligent report on the special one. It concentrated on his charismatic leadership style as much as on his achievements.

The TV report was mostly confirmation of a much-told story. One or two of the anecdotes were new to me, and rather striking in their demonstration of a leadrship style that deserves study for its more general description of a charismatic in action.

To put the leadership aspects in context I will draw on the notions of charisma from the monumental studies of Max Weber, as interpreted as a contibution to new leadership research by Alan Bryman, and later by Rickards and Clark.

Weber in translation

Weber was not the first or last German scholar to write in a complex and unforgiving style. His name is frequently mentioned as the father of sociological thinking on charisma. It may be realistic to assume that his ideas might have lost something as they have become distilled into Anglo-American academic folk-lore.

As Bryman noted:

Weber’s writings [on charisma] are highly diffuse, sometimes contradictory, and often [lack] definitive exposition

Weber’s ideas imply that charismatic leadership is an ancient mode of social dominance. The charismatic leader wins power and authority through exceptional personal characteristics. He is indeed the special one, maybe the chosen one. At the extreme, cult leaders are ‘pure’ examples. Followers are also believers. The special one has powers of revelation. He displays symbolic evidence of his unique gifts. He is likely to have been also ‘blessed’ with hypnotising personal presence.

Jose as cult leader

The programme gave examples of Jose’s near mystic powers. Let’s not forget they were backed by meticulous prepararation. We know the mysterious powers of the ancient soothsayers derived from their acute observational powers, and even careful . This is an anticipation of scientific method, although with claims for a quite different epistemology.

One episode was impressively stage-managed. It took place at press conference before an important game in the European Champions League. The press were demanding something. (A sign from the special one?).

His response was startling, but in keeping with the wiles of the oracles of old. ‘You want me to name my team? I will do more than that. I will name their team.’ Which he did. With complete conviction. Live, to camera. He was to be proved completely correct.
[Students of leadership: discuss].

Playing chess with the media

In one interview he was asked if he played chess with the media. His reply indicates the care with which his performance is planned:

When I face the media … before or after the game, I feel it as part of the game. When I go to the press conference before the game, in my mind the game has already started. And when I go to the press conference after the game, the game has not finished yet.

Cult leaders and sacred texts

JM even has a secret document, which records his extended labours. A book of Jose, written by himself. It is said that no-one knows what’s in it. So secret is it that his words will go to the grave with him. Secret, and with the whiff of the supernatural associated with sacred texts which mere mortals are not permitted to see.

Paying penance

After one particularly epic performance by his team, he ordered the players to commit a highly symbolic act. They returned to the field acknowledging their legions of followers. The players removed their shirts. What or who was all that about? The religious symbolism persists. [Students of theology: discuss].

Righteous indignation

Another anecdote reveals the wrath of the special one if an acolyte falls short of expectations. He once publicly rebuked the Chelsea player Joe Cole for a lack of the dedication and work ethic expected of all acolytes. In a game shortly afterwards, Cole scored a magnificently-taken goal, JM gestured to him in agitated fashion from the touchline. When the player approached his manager, he discovered that he was not being acclaimed for the goal, but abused for his lack of commitment to defensive duties in the build-up to the move. The programme claimed that JM eventually succeeded in upping Cole’s contributions to the team ethic, where previous coaches had failed.

Trials and temptations

The program also examined the strained relationship between Mourinho and Roman Abramovitch, billionaire owner of Chelsea FC. The disputed territory appears to have been over the owner’s wish for success both in terms of results, and in terms of style of play. While Mourinho’s personality sparkled, his team failed to capture the imagination -say in the style of envied rivals Manchester United. Abramovitch had taken steps to intervene more directly, acquiring support staff and two expensive players that had not been part of Mourinho’s plans for the future of the club. Among the support staff was Abram Grant, personal friend of the owner, and who was widely accepted to have been installed as likely replacement for JM.

The programme featured a psychologist exploring the messages to be found at film of a press conference held shortly after the arrival of the two international stars Shevshenko and Ballack. His body language is distant. No eye contact left or right. The
The psychologist suggested a desire for ‘total control’ , and in this instance, partial loss of control.

A few weeks later the Special one was gone. ‘By mutual consent, and with great love’.

So much religious symbolism. In the programme, Mourinho ducked questions about his religion, but talked a lot about the importance of love. Like a true charismatic, he seems to have worked out his own ethical philosophy.

Footnote

Following McClaren’s departure, Mourinho emerged as the strong favourite for England manager in the media and among most football supporters. BBC Radio 5 Live football correspondent Mike Ingham said:

In many ways he would have been perfect ..The job is about giving players an extra 10% and I think he would have done that ..Mourinho ticked all the boxes bar one – I’m not sure how much of a diplomat he would have been.

He might had added on behalf of a minority of fans and English wannabe managers, “… pity he’s not English”.

The Guardian also considered that Mourinho was the FA’s first choice, though Soho Square sources say he was never offered the job and they clearly remained uncertain of his motives. The FA’s caution was borne out when talks between Mourinho’s agent, Jorge Mendes, and the FA director of football, Sir Trevor Brooking, ended with the Portuguese ruling himself out.

Three weeks later, and a complex deal was sealed, and another of the world’s supercoaches, Fabio Capello, was appointed England manager. The special one had just faded from the scene.

Acknowledgement

Image is: edcommunity.apple.com/…/38/isolation.jpg
with echoes in the post of the famous headline:
Fog over channel, Continent isolated

[To be continued …]

Leadership dreams, visions, and nightmares

The payoff from a vision dashed is a recurring nightmare. We examine recent sporting visions, dreams and nightmares during the Rugby Union world-cup

A glimpse of dashed dreams was transmitted around the world as the beaten English rugby team trudged up to receive their runners-up medals after defeat by South Africa. As if in a nightmare, the players trudged past the line of dignitaries, which included Presidents Sarcozy of France, the host nation, Brown of England (and Scotland and Wales), and Mbiki of South Africa. Weariness seemed to have damped-down despair and elation alike. The players just about managed perfunctory handshakes.

A few minutes later and joy overcame fatigue for the South Africans as they eventually got their hands on the trophy. The defining image was that of President Mbiki hald aloft not quite as securely as man of the match Victor Mayfield in the lineouts which he dominated throughout the game. Sorry, must make that clear: It was Mayfield who dominated the lineouts, Mbiki the political gestures, during the post-match celebrations.

The vision

The build-up to the final from had been a classical example of the way sport can tap into the deepest of group emotions. A popular upsurge in interest was captured and amplified through the obsessive reporting from Paris, where there seemed to be more former international players than members of the current squad.

The broad news story was that England would be a match for the Springboks. Most of the legion of elders suggested that England could win, if they played to their very best. Most reporters translated this as meaning that the match would be very close. Close? The South Africans had beaten England seriously in the earlier stages of the tournament.

The talisman

Yes, but that was before the team began its revival. Before its talisman Jonny Wilkinson returned to fitness. Before those nail-biting victories against Australia and then France.

The pre-match story began to make sense to me. There was something very important going in England culturally. This was one of those episodes which reveal how culture defines itself, and is itself defined. A vision is articulated.

We are the champions of the world in Rugby Union. We will remain champions for the next four years by beating South Africa.

How will it be achieved? Because we have the talisman. He who will not let us down. Jonny Wilkinson. He whose very presence will strike fear into our enemies. And so on.

Specifically there was a genuinely mimetic story to be heard. [Mimetics: The controversial of cultural transmission through ‘conceptual genes’ or memes.] It is consistent with a memetic approach that the story becomes become more consistent in its re-telling.

The replication process was helped by the intense appetite for ‘news’ from any-one. Celebrity Rugby has-beens were in demand. But so was the voice of the true supporter, the camp follower from the front-line. These were the voices from people close to the action. The real heroes were in silent preparation for the mighty battle ahead.

Someone articulated the achievement of the dream in a special way. It became the orthodoxy. It went something like this.

South Africa beat us, but that was when Jonny was injured.

They know Johnny is our match-winner and fear him.

Their fear will weaken their play and their resolve.

If we are only five or six behind with twenty minutes to go, their fear will play into our hands.

Although they will try to prevent it, the result is inevitable. Our mighty forwards will control the ball, battle forward, the ball will come out to Jonny.

Jonny will kick a drop goal.

That will confirm to the opponents that their fate is sealed.

And then we will score again and win.

The story has the power of all primitive atavistic expressions of fear and motivation. It is the verbal equivalent of the Hakas performed earlier in this and every tournament for over a hundred years by the New Zealand all-blacks. I have tried to report it accurately. Note how Wilkinson, undoubtedly the focal image within the story, changes the course of the game. But he doesn’t win it.

That’s one way in which the story has its power. History doesn’t repeat itself, but it has its powerful echoes. If the story just had the team winning by Jonny dropping a goal at the last minute, the story would lose power. ‘That’s just remembering what happened last time?’ someone might object, in the spirit of the lad shouting that the Emperor has no clothes. That was then. Here’s the new story of our destiny.

One moving, one clapping?

In the vision, fate decried only one outcome. But as someone pointed out, you may not be playing a game with one side moving and the other side clapping. Indeed, we might see all such battles as a contest between two stories, each of which has won over other stories in the run-up to battle. Eventually one vision triumphs, the other loses.

But the cultural loss is softened. There is always a way to find consolation. Victory denied, is also denial of defeat. We must have been robbed.

We was robbed

Yes. In those bitter and dark hours for English fans, there was the coda of being unfairly beaten. (How else?). In this case, it was the case of the disallowed try which would have brought the score into Jonney Wilkinson territory. The effort was disallowed by a fourth official. An Australian. Need I say more?

The other vision

There was another story developing. The South African dream went beyond winning a little golden cup. The symbolism was there for all to see. The nation had also had its earlier dream come true, as Nelson Mandela celebrated their earlier win. Then the President wore the gold and green shirt, which was previously a symbol associated with the earlier apartheid regime. This time the President wore a suit. But it was very convenient that the charismatic Mandela was ‘too ill to travel’.

The story, as was the one that England had dreamed of, was rooted in the past, but was also about the future. In South Africa, there is still a long road to travel, as Mandela would put it, to achieve the goals of one nation at peace with itself. The sporting win was recruited in the service of its cultural and political dream.

One clapping, one moving

I just remembered who used to talk about sport as a creative collaboration not a competition. It was Mark Izrailovich Dvoretsky, one of the greatest chess trainers of all time. I can’t find the reference, (yet) but he warned players against too much focus on one’s own strategy. Chess is not a game with ‘one player moving, and the other clapping’ he liked to say. That’s another quote in search of a definitive reference, as well as another example of chess as a source of strategic insights.

What can be learned from the ending of the Brown honeymoon?

The Gordon Brown honeymoon is over. He has seen his party’s lead in the opinion polls whither away. His handling of the non-election has been branded cowardly and inept. His rival David Cameron scores overwhelmingly in parliamentary debate. What leadership lessons can be learned from the unfolding story?

This is the current situation. Gordon Brown is widely reported as having lost the initiative he held since his appointment as Prime Minister. The fall from grace can be located in time easily.

Prior to the labour party conference, the honeymoon period was continuing, and the main question was whether a snap election could destroy not just David Cameron, by maybe the Conservative party itself.

During the Labour conference, Mr Brown’s speech at worse did not seem to damage his or his party’s prospects. Yet the snap-election story continued to build momentum. At the start of the month [October 2007] it seemed to have been settled. There would be an election within a month or so.

Then the Conservative party conference, a well-received speech by David Cameron, and the news stories piled up full of bad news for Brown. The week following the election added to his woes in and out of Westminster.

You learn a lot from what surprises you

Over the last few months I have been frequently surprised by the ebb and flow of political events. So what were the surprises? What was the learning?

Remember the passing of Tony Blair from office? I was surprised at the time by suggestions that portrayed Gordon Brown as a person psychologically unfit to lead his party, or the country. The contrast with business leaders is quite stark. The literature of the dark side of leadership is mounting, and it is easier to find examples of leaders who do not manifest symptoms of narcissism, with a dash of other fancily-termed psychotic tendencies, than to find examples of well-balanced (‘abnormally normal’?) individuals.

Then I was surprised over aspects of the so-called Brown Bounce. That nice theory was made almost impossible to evaluate, because Gordon’s arrival coincided with a particularly turbulent time, during which the New Prime Minister acted in a competent and reassuring manner. [Remember the joke that had been told about him during his personal campaign to consolidate his election campaign? The trouble with Gordon, the ironic joke went, is that he is all substance. Ho, ho. ].

The honeymoon period is now over. One surprise is that no-one pointed to the curious contrast between the bounce, and the herd-mentality that had dubbed Brown a pathologically-flawed no-hoper for Labour, prior to election. The bounce transcended all those concerns expressed in the media?

Over the last two weeks, I have also been surprised by the speed at which opinions about Brown and Cameron have swung back. The ratings are now [14.10.2007] roughly where they were before Mr Cameron hit policy problems a few months ago. Now, Cameron is as a hot a favourite for destroying Brown politically, as Brown was for destroying Cameron, a few weaks ago.

I was further surprised at the damage politically the Gordon Brown has sustained over his assertion that his decision not to call an election had been nothing to do with opinion-polls in marginal seats. The statement has become taken as evidence that the Prime Minister is irretrievably untrustworthy.

The second event, the afore-mentioned pre-Budget speech by Darling, is similarly taken as a sign of Government duplicity, specifically over Magpie politics. Specifically, like thieving Magpies, the Government has stolen the shiny baubles plucked from the Conservative lips, including inheritance tax from non-doms.

There’s enough mud for everyone to play in

The speech from Alistair Darling infuriated the conservatives, and particularly the shadow Chancellor, George Osborne. Alistair is in the Brown mould (measured and a bit, how can I put it, non-dom Scottish). Osborne is more of the smooth but menacing inclination, unafraid to take the fight to the muckier side of the farmyard. His immediate response to Darling’s pre-budget statement was a well-mounted piece of aggression at the calumny of his immediate opponent and the forces behind him, all the way up to King Gordon.

The next morning he had simmered down enough to articulate the view that the public would now be able to choose between the party of principled and honourable statesmanlike politicians, (the conservatives) and the cynical duplicitous lot on the other side (labour).

Overall he had had a good twenty-four hours, and is evidently on the way of becoming a dangerous opponent for the new Chancellor. Nice one George. Nice, in the sense of dangerously nasty.

The various outbusts of anger left me conscious of the farmyard metaphor, that there’s a lot of mud out there, likely to spread itself liberally on to all concerned. Voters may find it confirms their suspicions if they are repeatedly told that there are a lot of cynical duplicitous politicians (CDPs) out there.

On the other hand, drawing attention to this will not mean they will buy the proposition that all CDPs are to be found among the ranks of Gordon’s followers, thus enabling the conservatives convincingly to claim the high moral ground as The Principled Party.

Leadership lessons?

Some are immediately apparent. Gordon Brown contributed to the way in which this story developed. I rather think he moved back towards damage limitation in claiming responsibility for the election frenzy. (However tempting it might have been to bang on about the media).

There was another misjudgment when he insisted that he would not have been influenced by opinion polls in his decision, even if they indicated a majority of hundred after an immediate election.

The leadership principle is to retain some of that valuable commodity, wriggle room, whenever possible. Put another way, practice the art of the Delphic Oracle.

Find a creative way of dealing with the question at two levels.
Avoid yes or no answers when these are over-simplifications (which they almost always are).

No-one will get it right every time, but the frequency of poor moves, and the damage sustained, is likely to be reduced. At least, that’s if you believe leaders are made not born, and are strengthened through learning from their mistakes.

The date of the general election is fixed beyond doubt

The date of the next general election in the United Kingdom will be announced imminently. This is a belief now fixed beyond doubt in the mind of politicians and political commentators, who even believe that the day will be either the first or second Thursday of November 2007

As the Conservative Party Conference drew to a close, uncertainty over the next general election was virtually over. Professional gambling firms placed November as odd-on favourite. Commentators also shifted from ‘likely’ to ‘probable’. In the conference hall it was clear that the party activists had reached a curious and heightened state of excitement.

The story changes

At the start of the Conference season, a few weeks ago, there was little talk of a general election. Interest was mainly on whether poor old Ming Campbell was going to survive, (he did), and whether an heir apparent could be identified (Nick Clegg and Chris Huhne).

Then at the Labour party conference, the story was at first whether wooden Gordon would survive comparison with charismatic David. This notion was weakened as various opinion polls suggested that Gordon was increasingly rated as more capable in a crisis than David. At this point my own perception began to diverge from that of the emerging story, that that the new Prime Minister was preparing for a snap General Election.

What had Gordon Brown said to have left this impression? Not for the first time, I found myself reminded of the phenomena impression management and sense making. A story was developing to help those involved deal with their deeper psychological needs.

Lack of trust helps create a story

Taken out of context, Gordon Brown’s speech could be observed as a politician doing what politicians do, presenting himself and his party as favourably as possible. The reactions of the political observers and activists was quite different. Elsewhere I have written of how fear and suspicion can turn into conviction that something very bad is about to happen. The threat has become psychologically potent.

Coverage of the election by Press and Electronic media become more frenzied. To such an extent, that not saying there was not going to be an election was taken as evidence there would be one (hope you get my drift). The news becomes “Gordon Brown hasn’t ruled an election out” Or, “He hasn’t made up his mind but is thinking had about it”.

Then every statement and action of anyone offering a view is interpreted in these terms. The conference speech is demonstrated to be one designed to kick off an election campaign. For example, Gordon hardly mentioned the conservatives (or the other political parties). That’s blatant electioneering, pretending to be above such knockabout matters. He hardly mentioned Iraq. Later the conservatives quoted the puny number of words devoted to Iraq in the speech. So there, the point is scientifically buttressed.

More straws in the wind
Then, more straws in the wind. The Prime Minister’s diary is being rejigged. That clears the way for a General Election. Even if he doesn’t decide to go to the country in November, all these actions are about outmanoeuvring the conservatives, those bastards to be ground into the dust, in the typically restrained and considered words of Lord Kinnock, at a fringe meeting this week.

Why this all seems a bit hysterical

I just don’t get it. The views of political commentators have converged on the significance of a general election. Gordon Brown could have stopped such speculation if he had wanted to. Perhaps. If he could. If he had to. But not just because he could. Now, the media argue, if he decides not to hold an election, it will demonstrate he has bottled it.

The sort of mood around at present seems to me to be that of ritualized posturing that conceals nervousness. I’m reminded of herd behaviour. The combined galloping herd of media and political hacks are galloping about, instinctively sticking close together in a state of panic, seemingly unaware that ‘it’s not the election, stupid’.

If the Prime Minister now avoids an election he’s timid. Afraid he won’t win. If he does, it’s because he’s afraid that the economy will be in a worse state in a year or two. At least, that’s the analysis of former Chancellor Ken Clarke, remembering Clinton’s motto always that ‘it’s the economy, stupid’.

In the disdainful words of Margaret Thatcher many years ago, he’s frit. Challenged that she might ‘cut and run’ she responded to questions by Michael Foot and some barracking by Dennis Healy.

The right hon. Gentleman is afraid of an election, is he? Afraid? Frightened? Frit? Could not take it? Cannot stand it? If I were going to cut and run, I should have gone after the Falklands [when her political standing was at the highest it would ever be].

A political insight

Listening carefully to insiders interviewing insiders, I arrived at a political insight. The view heard, and the herd view is a genuine belief that Gordon Brown’s actions are all part of carefully prepared plan to gain short-term electoral advantage to reinforce the decision to call an election.

During the conference, we learn that Mr Brown is going to Iraq. More electioneering. On the brief visit he announces a troop reduction. Even more electioneering. Could his words be shown to be a form of stealth electioneering, this time taxing credulity?

The anger expressed by two former Conservative leaders, John Major and Ian Duncan Smith in interviews was intense and utterly convincing.

What David did next

David Cameron made a speech that was billed as significant for the very future of the conservative party. I will reconstruct my notes for a further blog. The test was now whether David’s assured style could prevail against Gordon’s weighty woodenness.

Suffice to say that the speech was reported as impressive in style. I take the BBC view, as that venerated agency still attempts to provide a balanced view of the political scene.

It was also a performance that fired up the party faithful.

He spoke without notes … warning the audience that it might be a bit “messy”. It wasn’t. It was a highly polished performance – and a lot more measured, serious and policy-heavy than we are used to from Mr Cameron. He once again tried to cast himself as the voice of optimism and sincerity – compared with the “cynical” Gordon Brown, who was trapped in the “old politics”.
Mr Cameron ended with a challenge to Gordon Brown to call an election.
Come on Gordon, make my day.
But it was exactly what the party faithful wanted to hear. He told them to “get out and fight” for the changes they want to make and they cheered him to the rafters.

Fear and threat had temporarily been abolished in the hall.

Match of the day: Branson-Murdoch Round three

The battles between BSkyB and Virgin Media continue. This round goes to Richard Branson, as the competition commission rules that the Murdoch move which acquired a stake in ITV was anti-competitive.

According to The Guardian

Sky could be forced to sell its 17.9% stake in ITV at a substantial loss after the Competition Commission said this morning that the holding restricts competition and is against the public interest … It is likely to please Sir Richard Branson, who last year attacked Sky’s “reckless and cynical attempts to stifle competition, and secure creeping control of the British media”.

In a provisional ruling, the commission said that the shareholding, which has been fiercely criticised by rivals, would allow the satellite broadcaster to weaken ITV or prevent it competing fully with BSkyB.

In an earlier post I noted that

Both companies have a capacity to damage the other’s competitive position. As a complete victory for one side seems unlikely, the organizations will have to find ways of co-existing and collaborating, as well of competing

That has not stopped a bitter feud deepening between both organizations.

Earlier in the year Virgin’s TV subscribers were caught in the crossfire. Virgin lost an estimated 40,000 of its 3 million-plus subscribers when BSkyB pulled the plug (or at least, the dispute resulted in loss of BSkyB content to Virgin subscribers.

Both parties have continued to react energetically in the fast-changing media market-place.

This week Richard Branson launched the new TV channel Virgin 1, which even if planned otherwise will now fill the gap left by the loss of the Sky channels.

A day before the competition ruling, BSkyB yesterday unveiled Picnic, a new subscription service for Freeview digital TV, which initially will offer three channels (Sky One, Sky Sports 1 and Sky Movies).

Setanta Sports, originally positioned as viewing for Irish ex-pats, has muscled itself into a more visible position in its advertising campaign for cheap monthly subsriptions. In the UK, the most recent sale of transmission rights of Football matches has illustrated how what’s right for the Competition Commission may not be right for viewers wanting to follow their favorite team, and who now have mind-boggling calculations to make in view of the multiple bundling possibilities on offer.

What’s going on?

Here we have a developing story of some appeal to wannabe leaders. Is it a war-game? Are there rival teams of grand-masters planning move and counter-move?

While my favorite notion of Chess as a source of strategy insights offers a starting insight to the complexities, maybe a deeper study is required. One colleague suggested the various theories of Industrial Organization economics. These are even more complicated than the Branson Murdoch battle. A nice introduction can be found in the review by Kathleen Conner. Although not covering more recent work, it explores various theories, with particular attention to the Resource Based View of the firm. This remains a way of understanding how a firm’s competitive position may defined by a “bundling” of unique resources.

BA backs the Bus and the Dreamliner

British Airways splits its future plane purchases between Boeing and Airbus. Although earlier statements suggested that the company was not interested in a Superjumbo sized carrier such as the new generation A380, Willie Walsh and his team show a chess-like grasp of strategy

Speculation in Seattle was pretty much right. A week before any official announcement, Industry insider James Wallace noted

The campaign is a key showdown between the A380 and 747-8 Intercontinental and the 787 and A350 . So far, only Lufthansa has ordered the passenger version of the 747-8. But Airbus also needs another major international customer to back the A380. It has repeat orders from Lufthansa and Singapore Airlines, but Airbus has long sought to bring BA into the A380 fold.

Jefferies & Co. analyst Howard Rubel told the AP he believes investors are expecting British Airways to split its order between the two aerospace rivals.
“I think B.A. wants to bring a little competition into the mix,” he said.
BA Chief Executive Willie Walsh has visited Boeing and Airbus for briefings on their planes.
The airline recently ordered more 777s.
Even though British Airways early on said the A380 was too big for its needs, Walsh has said the airline is now interested in the big Airbus jet, which will enter airline service next month with Singapore Airlines after a two-year delay.

Wallace’s blog also attracted a remarkable set of speculations about the prospective decision. Most seemed to be based on ‘sources close to Boeing or BA’. The following was typical

Posted by unregistered user at 9/20/07 9:21 a.m.
I’ve heard 10 A380’s + options on 10 more , 20 787’s + 10 options and 10 A350’s + 10 options

When the news of the decision was formally announced it was widely replicated from news agency sources. I took this from The BBC, but found it on all the main news feeds.

BA will buy 12 Airbus A380 superjumbos and 24 Boeing 787s, to be delivered between 2010 and 2014, for a reported $8.2bn (£4.1bn). The group also has options to buy seven more A380s as well as a further 18 Dreamliners from Boeing.
Further negotiations will occur so that BA can replace its remaining 747-400s. This appears to be between the 787-10 and the 777-300 ER from Boeing, and the Airbus A350

The Boeing reaction was between gritted teeth:

The Boeing Company [NYSE: BA] is honored that British Airways has selected the 787 Dreamliner as a key element of its long-haul fleet renewal

What’s going on?

Leadership geeks may be tempted to see unfolding a story of strategic leadership. If so, it is a story which has to place leadership with a wide cast of strategic players. We may start by thinking of Willie Walsh as the dominant decision-maker in the story, with some billion pounds/dollars to invest in the future of his company.

The evidence of Mr Walsh’s leadership style suggests that he will have been very active in the processes building up to the decision, internal to British Airways. At present we can only speculate. However, the decision has enormous significance. It will impact on the travelling lives of millions of people some more directly than others. Arguably it will impact on the future of employees of Boeing, EADS, and a myriad of suppliers and sub-contractors including Rolls Royce who will supply the engines. At another level, the debate on political influence and subsidies to Airbus and Boeing continues to bubble away.

However charismatic and autocratic his leadership style, Walsh will have been flying in tricky conditions and with a chief pilot’s usual near-overload of advice and chatter. Advisors, and advisors of advisors will have examined assorted risk assessments from in and outside BA into which data will have been fed from numerous sources. Somewhere in these the influence of various governments and global institutions will have been factored in, as well as the much-publicised production delays at Airbus and more recently at Boeing for the A380 and B787 projects. Willie Walsh keeps sane by following what the great Herbert Simon called satisficing, or simplifying the decision through a set of personal mental filters.

In an avalanche of articles and books since the 1950s, Simon ..focused much of his attention on the issue of decision-making – and [developed his theory of ] “bounded rationality”. Agents, he claims, face uncertainty about the future and costs in acquiring information in the present. Thus .. they have only “bounded rationality” and are forced to make decisions not by “maximization” by “satisficing”, i.e. setting an aspiration level which, if achieved, they will be happy enough with, and if they don’t, try to change either their aspiration level or their decision.

I have taken the view that such processes are those which chess-players also have to make. In this chess-game, BA wants to avoid fixing the position, when there is much to be said for keeping options open. So the overall decision on replacing the fleet of aging 747 400s may or may not have been made. It makes sense to keep options open, even to the extent of splitting up the decision between the two giant contenders for the business. That is partly why decisions also involve options as well as firm commitments.

Those with a liking for logistics theory can debate the merits of smaller planes and P2P (point to point) strategy, and larger ones with a Hub-based strategy. Whatever.

A judicious mix of planes of differing size keeps both strategic options open. A judicious mix of ‘top-down’ leadership actions, and ‘data driven’ analysis may also be appropriate.

Tactics for a general election: The significance of Kerr’s Folly

The next General Election may be several years away. It is already shaping the thoughts and actions of the main political parties. While the new European Treaty may be of secondary importance to voters, it could play a vital part in the outcome of the election.

Conservatives and Labourites alike should be thinking beyond the obvious regarding the treatment of the New European Treaty. The issue is very much on the political agenda. The Government stands accused of breaking an election pledge. So how damaging might it be to Gordon Brown?

Background.

This week all the pressure seemed to be on Gordon Brown. Two unions, The GMB and RMT, are calling for a referendum by tabling motions for the TUC annual conference. This adds from the left to calls from the Conservatives and UKIP parties from the right. Presumably the pro-Europe Liberal Democrats would also welcome a referendum. This suggests that the government faces opposition from inside and outside its ranks to its decision to avoid a referendum.

Kerr’s Folly

A classic paper in the Academy of Management Journal in 1975 by Steven Kerr drew attention to ‘the folly of rewarding A, while hoping for B’. The essential point made by the author is that the key to effective implementation of plans is understanding how reward systems work. Or, as Bill Starbuck memorably put it, ‘it’s the reward system, stupid’.

According to Kerr, numerous examples exist of reward systems that foul-up because the types of behavior rewarded are those that the rewarder is trying to discourage, while the behavior desired is not being rewarded at all. He explores this in various social, economic, and political fields. The paper leads us to the notion that politicians are all too-aware of the process through which the electorate wishes to obtain one thing and might appear to be of rewarding the politicians by voting for them. However, experience has shown that the electorate may wish for one thing and punish the politican by voting in effect to deny the policies approved of. Specifically, in politics, policy is couched in a deliberately vague manner, lest the electorate punish the ‘honest’ politician for spelling our any unpleasant consequences of that policy.

The [American] citizenry supposedly wants its candidates for public office to set forth operative goals, making their proposed programs clear, and specifying sources and uses of funds. However, since operative goals are lower in acceptance, and since aspirants to public office need acceptance .. most politicians prefer to speak only of official goals, at least until after the election. … The [American] voter typically punishes (withholds support from) candidates who frankly discuss where the money will come from, rewards politicians who speak only of [policy] goals, but hopes that candidates (despite the reward system) will discuss the issues [revealing potential pain to the voter].

In other words, Kerr’s folly indicates how we get the political behaviors and elect the politicians we deserve

The Behaviors we Deserve

It becomes the received political wisdom for a political leader to find ways of presenting policy with avoidance of mention of its costs, leaving that to the opponents of the policy. This happens to be one of the strengths of an open society. For example, in the UK, Conservative policy for releasing citizens from the burdens of taxation have to be justified increasingly with specific explanations of funding for maintaining social institutions such as the Health Service.

The Treaty, The Election and Kerr’s Folly

A knowledge of the theory of Kerr’s Folly might not win an election. But it explains and perhaps helps predict political ‘moves’.
Let’s see how it might be working at present. Gordon Brown is pressed ‘to stick to an election commitment’. He is benefitting from being seen as a ‘Not like Blair’ statesman. He is thus vulnerable to accusations of behaving in a Blair-like way, involving a bit of ducking and weaving. Thus he risks the displeasure of a proportion of the electorate, demonstrated by a slump in opinion polls.

In its original form, Ferr’s Folly suggests that the electorate may want to punish a politican for avoiding any tricky behavior, spin, or obfuscation. But if so, the folly is that the self-same people appear to deprive themselves of evicting such politicians by discounting the undesired behaviors, and when it coms to the vital vote, cast it on different grounds. In other words, if the electorate thinks a referendum will not really make much difference presumably to self-interest, a slump in opinion polls interpreted as disapproval on general grounds moral grounds will ultimately not count for much.

So, should David Cameron choose to fight over the principle of Labour’s broken promise? Probably not. One of the reasons is that there is still considerable ‘wriggle-room’ for the Government. The finer details of the logical or even moral case are not so critical as the evidence of personal disadvantage of the issue to voters.

The Knight’s Move

But battles are rarely predictable. A sudden unexpected surprise, like a devious Knight’s Move in Chess, changes the entire game.
Suppose Mr Cameron does go big on this attack on Mr Brown and his failure to stick to the Manifesto of the last Election? This may present the Prime Minister with the opportunity to be ‘forced’ to accept a call for an early election. If so, be sure it will be at the time of his choosing. It is not unknown in the heat of battle to drive the enemy into a more favorable position.