There’s a terrible, yet powerful saying in business: “Kill your babies fast“. Usually applied to new product ideas, it’s also applicable to other areas of business innovation and expansion. As you develop those new ideas, they suck in resources - people, money and the most precious commodity of all, time. While strong determination , persistence and even sheer bloody-mindedness are important characteristics of successful innovators and entrepreneurs, the best also kill projects as soon as it’s clear that they are unlikely to succeed, both in absolute terms and by comparison to other projects in the portfolio.  That means you can concentrate your resources where they’ll have most effect; classic strategic thinking.

Killing projects is hard.  Once started, they seem to get a life independent of you. which gets stronger with every month and milestone passed.  The later the stage of development, the harder it is to cancel them.  “We’ve invested too much to stop now” and “It’s starting to show some promise” are phrases you’ll hear a lot, from the project team, the project sponsors, the CEO or the board.  No-one wants to admit to what others will think of as failure, and so the project continues in the vain hope that it might still pay off, ignoring the benefits of switching resources to more promising opportunities.  You end up with numerous projects on the go, all inadequately resourced, often getting in each other’s way, and probably too late for the market opportunities originally targeted. Or you’ll have made one big bet on Day One, which is even harder to kill.

Sometimes there’s an alternative to infanticide. At the risk of taking the analogy too far, you might consider adoption - selling the project to someone else with a better fit for what the project offers.  It might be another business, or the project team itself.  You might get paid handsomely for the effort to date; you might retain an investment in the new owner.  Indeed, being a “baby factory” is a legitimate business model for some innovators.  But be wary of investing too much time and resources on securing a new parent - that’s as bad as spending them on the project itself.

 ‘We do not take Isambard Kingdom Brunel for either a rogue or a fool but an enthusiast, blinded by the light of his own genius, an engineering knight-errant, always on the lookout for magic caves to be penetrated and enchanted rivers to be crossed, never so happy as when engaged … in conquering some, to ordinary mortals, impossibility.’
–The Railway Times

It is Isambard Kingdom Brunel’s 203rd birthday, and to mark it, I thought I’d look at one of my hero’s failures.  Oh yes, he had them.  Contrary to what commentators with perfect hindsight might have you believe, you need to take risks to be a successful entrepreneur and innovator, and sometimes those risks go wrong.

By 1844, Brunel was highly respected and admired for his Great Western Railway, his steamships Great Western and Great Britain, and his wonderful bridges and tunnels.  He began work on his next project, a new railway in South Devon, England.  Because of the rugged terrain - always challenging for railway route design and motive power - he decided to adopt a radical technology developed by Clegg and Samuda. Instead of self-propelled steam-engines to move rail wagons, they used air pressure from a pipe laid along the track. A fixed air pumping station at either end of a short railway track in Ireland created a vacuum in the pipe ahead of the train. One wagon was attached to a piston inside the pipe, and the air pressure difference moved the piston and the train forward.  The system was very powerful, meaning steeper gradients could be climbed, and the trains were very quiet and clean.

Unfortunately, Victorian materials were not up to the task.  The connection between the piston and the train passed through a slot which ran the length of the pipe. To maintain vacuum, the slot was covered by a greased leather flap which the connector pushed put of the way as it moved forward.  Unlike in Ireland, the flap quickly deteriorated in Devon’s warm coastal air, needing frequent repair and disrupting train schedules.  Also unlike the short Irish track, the much longer South Devon railway needed multiple pumping stations. Because of vacuum loss through the flap and not knowing when the next train would enter its section of track (a telegraph was not initially installed), each pumping station ran far longer than planned, consuming more fuel and requiring more maintenance.  Instead of being competitive with conventional rail operations, Brunel’s Atmospheric Railway cost 3 times as much to run, and switched to conventional self-propelled steam-engine traction.  Of course, the newspapers of the time lambasted Brunel for this failure.  Brunel shrugged, and moved on to his next venture.

Air-powered public transport is an idea whose time may yet still come.  MDI in France has developed a range of vehicles driven by compressed air, including a road train. Ahead of your time as usual, Isambard. Happy 203rd birthday.

How many companies employ less than 10 people, less than 20, 50, 100, 200, 500, 1000, 5000, etc? Look at most countries’ industry statistics and you’ll see a common pattern.  There’s a pyramid - lots of micro-businesses, tapering up through mid-sized businesses to a few large businesses.

Putting aside companies used for administrative purposes and the myriad of small businesses which won’t ever grow, why don’t more companies with good market offers grow larger?

• Some market offers have limited appeal.
• Some business models simply won’t scale.
• Sometimes the business is too risky or unpredictable, so funding growth is difficult (especially now that we’ve seen the downside of risky investment!)
• Some owners and managers reach a point where they have achieved what they want - a good income and a solid business.  I can’t criticise them for wanting an easier life enjoying the fruits of their earlier risk-taking and hard-work.

But assuming none of those are a factor, what holds growing companies back?  In two words - executive skills. Many small and mid-size companies can’t grow because their owners/managers don’t have the skills to build and operate a bigger business. There’s a naiveté in business thinking and an unfortunate tendency to under- or over-bureaucratize. I’ve seen many promising businesses plateau for those reasons, plus one other factor. I have a pet theory - the biggest problem is that many previously-successful small and mid-size business leaders simply don’t know how to manage managers.

• 10 people = 1 layer of management = you. You call the shots, you know everything, you direct everything.
• 10-50 people = 2 layers of management = you plus team leaders (say development, sales, fulfilment, business support). You still drive the ship and your team leaders take care of operational detail within your control. The first plateau point - can you manage through team leaders?
• 50-100 = 3 layers of management = you plus a team of specialist and regional managers plus their team leaders.  You’re still the hands-on leader, but you’re likely to be constrained by the skills of your managers and the unsophistication of your business processes.
• 100 -200 people = still 3 layers of management, but with more highly skilled managers and more complex processes. This is often an inescapable plateau point, maybe with several stops as you re-design your business and your team to handle growth.  And you have to achieve unity of purpose and action through intermediaries who have initiative, brains and minds of their own (that’s why they’re in the role).
• 200-500 people =  4 layers of management, with your executive team capable of developing and driving their divisions strategically and operationally, and indeed of doing your job.  Yout businesses model is working, but the business is much more complex and the challenge of achieving unity of purpose and action has gone up another order of magnitude,
• After that it starts to get easier - the issues are the same, but you’ve learnt how to deal with them.  You’ll continue to be challenged by competitive and economic pressures, multiple lines of business, multinational operations and so on, but you’ll know how to manage managers.

That 200 person barrier seems to be especially challenging.  Many companies do well until they reach that scale, but then seem to bounce around at 150-250, never quite breaking out, falling back in tough times, then growing again only to repeat the cycle. Given all the complexity, risk and frustrations of running a bigger business, it’s no wonder many businesses owners decide to stay where they are.

I talked recently to a couple of business owners about sharpening up their business management.  After the usual discussions about working on the business as well as in the business, and doing the things they said they’d do, we got round to the subject of internal meetings.  People were being called into internal team meetings, internal systems meetings, staff reviews, and so on. Meetingitis was getting worse, and it was chewing up revenue-building and revenue-earning time.

I gave them a simple rule concept:

“Prime time is customer time.”

“Prime time” in any business is whenever most externally-focused activity takes place, whether development, selling or executing.  Any internally-focused activities should not intrude into prime time.  In most day-time businesses, prime time is between 10am and 4pm. Apart from dedicated internal support people working on their actions (ie. not meetings), internally-focused activities should end by 10am or not start until after 4pm.  Obviously externally-focused activity  can occur outside prime time, but prime time is absolutely dedicated to it.

As business leaders, it’s important to set the standard for the rest of the team, and do your own internal stuff outside prime time as well.  The mantra “Prime time is customer time” is an easy one to promulgate, and everyone quickly learns what it means.  If someone tries to set up an internal meeting in prime time, leaders should set the example by telling the organiser where to go (in a nice way), and backing others who do so (especially against managers who haven’t got the message yet).  It won’t take long for the behaviour to become part of “how we do things around here”.  Your people will thank you for it, as will your customers and shareholders.

PS.  “Prime time” may seem to be in conflict with my earlier thoughts on creating family-supportive workplaces, but teams can usually figure out a solution that works for their situation.  It’s about principles, not rules.

PPS. I vary the rule principle slightly for board meetings (bigger multi-subject agendas and out-of-town directors), but we spend the bulk of board time on how to make the future happen - planning, discussing, questioning, approving.  Discussions on monthly reports and previous minutes happen last, not first.

Right now, talent shortages probably aren’t high on your agenda, but they will be sooner or later.  That demographic bubble of retiring executives and directors isn’t going away.  You’ll need all the talent you can muster in the post-credit crunch world.  So why are half the population substantially less represented in the upper echelons of management and in our boardrooms?  UK economics columnist Tim Harford writes:

Flick through any copy of the Financial Times and you’ll see a lot of chaps in suits. There’s a reason for this: there are many more men than women in the boardrooms of the world’s great companies. Explanations range from the politically correct (women are held back by the oppressive patriarchy) to the sexist (women aren’t up to the job).

While I accept that some gender-bias still exists, I’ve actually seen very little of it in the businesses I’ve known. I have heard all kinds of suggestions for the lack of women in corporate board rooms, such as women aren’t as competitively-minded as men, women prefer working in smaller businesses, women aren’t ruthless enough to be effective senior executives, and other hogwash.  My own experience, now backed up by Tim Harford, tells me that there’s a much simple explanation:

[Economists Lawrence Katz and Claudia Goldin], with Marianne Bertrand of Chicago’s Booth School of Business, have now produced a new study, examining the experience of Booth’s MBA alumni – a high-flying group from whose ranks one would expect future CEOs to emerge. The outstanding feature of this research is the very detailed data available on this group: their pre-MBA experience, the courses they took and the grades they earned, their career progression afterwards, and the timing of their families. Women did achieve worse grades, and avoided hardcore classes in finance: but the differences were tiny. Far more important was what happened when children came along. If you look only at promotions and earnings, childless women are all but indistinguishable from men. The moment children arrive on the scene, a big gap opens up.

“The penalty for career interruptions is huge,” Bertrand told me in a recent interview. New mothers are derailed from the fast track in investment banking or consulting, and their potential earnings fall by about 40 per cent.

It’s really simple; the fundamental reasons that there are significantly fewer women than men in boardrooms are because fewer women have both the desire and the experience to be there.  Babies interrupt high-flying women’s careers, often just at the time when they otherwise would be at their peak of executive development, gaining vital management and leadership experience with rapidly increasing responsibility.  To exacerbate the issue, a significant number of mothers do not return to the workforce, or return with changed priorities such as not over-committing to work, which unfortunately is usually a prerequisite if you want to reach the top.  Hence we have a significantly reduced cadre of women still on the career track to the top.

So what  can be done?  I doubt we’ll overcome the changed priorities of many ex-fast-track mothers (nor would I want to), but we can support those who do want to rejoin the fast-track. Firstly, let’s accept that women have as much potential to be in the boardroom as men. We can, within the limits of practicality, provide family-supportive workplaces, part-time work, etc, so women with children can keep on track.  But the most important action we can do with returned mothers (and the few fathers who take that route)  is the same we do with the men and women who don’t take time out for families - give them bigger responsibilities, and stretch them.  If they’re up to it, if they deliver results (and like men, not every woman has got what it takes) then you’ve got another potential executive or director in your talent pool.

I’ve done several company makeovers, always with a weeding-out of existing management whom I’ve replaced with a combination of new hires and bright talent from further down the organisation.   Working mothers have often been part of that new leadership team, and I’ve rarely been disappointed by their performance and subsequent career track.

Update: Supporting statistics from the UK.

Some days ago, I shocked you with the news that half of you are below average; yet I was prepared to make a small wager that, in just about any organisation, the average staff appraisal assessment is some synonym for “above average.“  In the same vein, I’d be prepared to make a small wager that, across all mid- and large-scale companies who undertake some form of payroll planning (and they all do), the average target salary range is “above average” too.

At pay review time or when you’re hiring someone, you need some idea of what the market rate is for your people.  Most mid-scale and large organisations subscribe to  one or more pay surveys relevant to their industry, location and job types. While you’ll have some stretch for lesser or superior skills and performance, your organisation almost certainly has set its job pay bands with midpoints linked to some benchmark percentile of market pay rates.

• “We pay upper quartile salaries to attract and retain the best talent in our industry;” translation: midpoint set at 75th %ile.
• “We pay competitive market rates;” translation:  midpoint set at 50th %ile.
• “We want above-average people who can deliver above-average performance;” translation: midpoint set at 65th %ile.

Outside of startups (which use equity deals to attract people), I can honestly say that in all the years I’ve been a manager, executive, director and advisor, I have only ever seen or heard of one established mid-size or large company that deliberately set out to pay below average market rates. They offered something else attractive - basically sun, fun and sex!

While it’s possible that bigger firms pay better than smaller ones on average, it also tends to be bigger firms that participate in salary surveys, nullifying that bias.  Add all participating organisations together and I’ll bet that their combined target pay rates are above the market average.

Tracking the market has a ratchet effect, with employers chasing each other up in payroll costs. At first glance that looks great for employees, but it isn’t great for shareholders, customers and taxpayers, unless those increased costs are met by increased real value-add (productivity).  Instead you get inflation and increased business failure. When the government issues an edict to its departments to lift pay rates to attract more IT staff as employees, it gets a temporary lift in recruitment, but the long term effect is simply to drive up the average cost of IT people across all sectors. As Stephen Franks points out, the ratchet effect is a major factor in top executive salaries too.

Right now it may not be a problem for you, but times will get better, and then watch out! Unfortunately, I have no easy solution.  Just be aware of the danger in blithely tying your pay rates to some market benchmark.

“How does a Kiwi businessman get a million dollars? Give him a billion and wait.”

After the 1987 share market crash and its aftermath brought down several high-flying New Zealand entrepreneurs, my Australian acquaintances took great delight in telling me endless variations of that old joke. Today, the latest Forbes’ Rich List of the world’s billionaires is being greeted with snide satisfaction in the boardrooms of New Zealand.  At #110, the richest man is Australasia is Kiwi citizen and resident Graeme Hart, respected for his astute acquisitions and large-scale turnarounds. Oz-born, but officially now a US citizen and New York resident, Rupert Murdoch is #132.  The highest ranked Ozzie citizen, Frank Lowy is way back at #234.  Schadenfreude isn’t the right word, but it’s the nearest I can think of.

PS. The Ozzies will claim bragging rights over a US citizen living in Australia who tied with Hart at #110, but of course that doesn’t count!

Yesterday, I looked at assessing people for past performance and future potential:

How well did you perform?

1. Significantly and consistently below expected level
2. Below expectation in some aspects
3. At expected level for someone with your experience, training, remuneration, grade, peer group and time in the role
4. Above expectation in many aspects
5. Outstanding; consistently and significantly above expected level

What is your future potential?

1. None; future outside the organisation
2. Less demanding role
3. Current or similar role
4. Next level of responsibility and continuing progression to higher roles
5. Next level of responsibility with rapid progression to significantly higher roles

Using these two ratings, I map my team on a grid like this:

The different box sizes are deliberate.  Hopefully you only have a few people whose performance is sub-expectation or whose potential is a lesser role or outside the organisation!

The point of doing this is to focus on the people needing your attention.  Your aim is to build a team coloured Green and Blue. Sadly, the Reds and the Oranges tend to get most managers’ attention (especially the high maintenance category of high performance/outside potential: superstars constantly threatening to leave) while the Greens and Blues are neglected.  It should be the other way round!

• Reds: Get them out now!
• Oranges: Transform them to red or green, quickly. Don’t muck about - fix fast or fire!
• Blues: Do what you said you’d do and these people will drive themselves. You’ll see them a lot anyway because they are your stars.
• Greens: This is where your attention should be.  They’ll respond to your increased time and focus on their ongoing development, they’ll be quietly glad you sorted out the people who held the team back, and some of them will turn into Blues.

PS. There’s a useful online talent management tool called Sonar6, which does a nice job of capturing all this and more, eg. reviews and action plans, remuneration mapping, succession planning, etc.

People are fond of castigating public servants in Parliament, the media, and in the pub.  Today my eye was caught by this cri de coeur from an anonymous public servant:

…. Years of habit and cover-your-arse have developed a generation of public servants who live by meetings, committees and reports. And a bunch of auditors who NEVER say “it was pleasing to see that processes were not followed unnecessarily, thereby saving the taxpayer X million dollars”.

So here’s the thing my fellow citizens. In a democracy you get the government you deserve.

There are lots of us that want to get on and make things better. But we’re never going to do it while these beat-ups carry on. When people like the over-worked probation officer …. stuff up, bear in mind that that event is going to result in a plague of new paperwork that probably won’t make any practical difference….

…. Because only when the normal, sane, silent majority …. make themselves heard will we start to unravel all the crap law and policy that has built up like fat in a middle aged artery over the last twenty years. We need to be able to sprint at the moment, and it just ain’t happening.

Now I just need to wait while they hunt me down…

I suggest you read the full text; you’ll pity and admire the poor soul who’s written it. It’s from NZ, but it easily be from Britain, Australia, North America, indeed anywhere; and I’ll bet it’s already pouring into public service email inboxes across the world.

I’m no fan of bureaucracy, but neither do I blame public servants.  Most want to do a good job, but are stifled by rules, political correctness and the realities of operating in a environment of blame. I’ve written before about the need to reinvigorate the public service ethos and its sense of purpose and utility.  An organisation’s true attitude to its purpose, obligations, processes (and its use of money) is driven not by compliance, but by the culture and learned behaviours of the people who work there. They learn those from the demonstrated behaviours of their leaders (managerial and/or political) and the feedback they receive from the public (and the media).

We want an efficient and effective public service; given the chance, many public servants want that too.  It’s time for a new way; maybe the current parlous state of the world can be a catalyst for positive change.

Disclosure: I am on the board of the NZ Tertiary Education Commission, which coincidentally is currently considering the elimination of a large number of jobs, but the views I express are my personal ones, and not necessarily those of the TEC.

I’ve heard several people recently mention their concern or exasperation at the distraction or rudeness of people texting and emailing during meetings, or worse, taking phone calls.  It’s a real issue for newer members of the workforce who may have developed the habit of using their phone or laptop anytime anywhere.  Some thoughtful people worry that the remoteness and lack of humanity shown by some intra-office emailers (flaming someone whose desk is ten metres away) will spread into broader human interaction.  No doubt some workplaces and some people will fall into that behavioural mode, but then again, look at how quickly it’s become commonplace in some countries for smokers to no longer inflict their habit on others in the workplace, pub or home, evolving through asking permission to now taking themselves outside.  That societal pressure to adopt better behaviour  is called “good manners”.

On starting my first job I was given a list of explicit do’s and don’ts.  I was also assigned a “buddy” whose primary role was to answer my newby questions and to teach me the unwritten rules. Some were quasi-political (eg. interacting with the powerful or the quirky), but most were just good manners. Those rules evolved over time, as did society and the workplace.   Some fell by the wayside, some new ones become part of the norm.

Here are a few technology manners I try to abide by:

• Switch your phone to silent in meetings (and other shared events), and don’t take or make calls (unless you’ve told everyone beforehand that you really are expecting an truly urgent call, and apologised beforehand; update: and leave the room so people can carry on without you disturbing them).
• Likewise, don’t check (or answer) your text messages, email or voicemail during a meeting or when talking to someone (in person or on the phone).
• Don’t browse the internet or do other online tasks when in a meeting or talking to someone, unless it is something related to the meeting, with the intention of sharing it during the meeting with others present. An exception is co-workers talking casually while doing their normal job, but if it turns into a proper conversation, stop one thing or the other.
• Don’t text or email someone in a conversation more than twice.  After that, call them.
• Don’t copy all and sundry on email, and don’t play the “I’ve copied your boss” game on emails. If you have a gripe, say so, and if necessary, approach the boss, ideally together, with a clear complaint and options.
• If someone complains to you in a text message, email or voicemail, call them.
• Don’t use foul, intemperate, offensive or defamatory language (or pictures) in business communication, including email, text messages, voicemail and phone calls. Mild swearing is acceptable in voice conversations between mates, but don’t inflict it loudly on others within earshot.

How to enforce these? First and foremost, demonstrate them in your own behaviour. And tell people when they join that these are part of the way things get done around here. If someone breaks the rules, tell them politely, briefly and firmly not to do it.  Usually that’s all it takes, but if they persist, you have other tougher decisions to make.

The basic principle? Do unto others as you would have them do unto you. The people who give you their time deserve your undivided personal attention, and vice versa; and always interact with people as if they are with you in person.

Here’s a simple mindgame in corporate accounting. Imagine you’ve decided to borrow money by issuing a bond.  Let’s say the bond is for $1000. You now have $1000 cash (an asset), and you owe the bondholder $1000 (a liability). The person who owns the bond can sell it to someone else, but you still owe the money. Now fast-forward through time to a point where the market is in meltdown, and the going price for your bond is now only $900.  Does your liability change? No. Unless you buy that bond back, you still owe $1000. So when it’s time to report your financial results to your shareholders, you show that liability as $1000, yes?

Er, no; not according to leading UK bank Barclays. In its financial statements for 2008, it’s applied the current accounting standard of “mark to market” to its corporate debt obligations, ie. money it owes to other people on its own account (as distinct from money held in customers’ bank accounts). Has it bought back the debt? No. Does it still have to pay the full value of the debt when it falls due? Yes. But Barclays has written down the value of its own debt and magically booked a profit of £1.663 billion (yes, billion). One assumes that the Barclays board took professional advice.  The auditors signed off the results without demur. But how can the financial statements be said to give a true, fair, and meaningful summary of Barclays’ financial position?

Respected economist and Financial Times columnist Willem Buiter is worth reading on this one.  His opening paragraph signals his opinion right from the start:

Either accountancy rules in the UK are generically nuts, or Barclays PLC’s accounting conventions are idiosyncratically nuts, or both are (nuts, that is).

Given that Australia and NZ accounting standards are usually in line with the UK, it makes you wonder about the reported profits of our banks downunder.

We’ve all experienced it when we’ve taken something faulty back to a shop.  Probing questions which imply that you’ve been at fault rather than the product; slipperiness on who’s responsible for a solution; evasiveness on how the problem will be fixed and who to contact on progress; further inconvenience for the customer in having the goods returned and extra cost if you’re not local.  So when you come across a store that doesn’t engage in these behaviours, it’s actually refreshing, and transforms the initial disappointment into a pleasant experience.

It’s with great pleasure that I recommend Tom Foolery of Muswell Hill, London to you.  I purchased some rather nice designer jewellery there, as a Christmas present for SWMBO.  Unfortunately one of the earring clasps didn’t grip tightly enough and tended to fall off.  Taking the item back to the store just before New Year’s Eve, Nicki Kaye said “Oh I am sorry. Let me resolve that for you.  I’ll return it to the jeweller because he’ll want to know what’s wrong, and I’ll send it to you when it’s fixed.” No questions, no evasiveness.

“We’re flying back to New Zealand in two days,” I say.  “That’s alright,” said Nicki. “Just give me your email address and I’ll let you know how we’re getting on and when we’ve sent it to you; here’s my name and email address in case you have any questions.” An email from us was answered within 12 hours, and two days later, another email advised us that the jewellery was on its way back to us in NZ, along with a tracking code for the package and a brief description of what the jeweller had done.  The package arrived (a very sturdy little packing box) and the earrings work perfectly. Do you think we’ll go back to Tom Foolery? You betcha.

An old Wellington retailer’s catchcry was “If it’s not right, we’ll put it right; and it’s the putting right that counts.” It’s as valid today as it was then. Well done, Nicki Kaye and Tom Foolery.

The NZ business community was rocked with today’s news of Lloyd Morrison’s illness, which has resulted in him stepping aside from all roles for 3 months while he undergoes treatment for leukaemia.  The founder of merchant bank HRL Morrison and infrastructure investment company Infratil is one of NZ’s most respected business people.  Fortunately for Infratil and HRL Morrison, Lloyd has an excellent understudy in COO Marko Bogoievski, the former CFO of Telecom, who joined the team last year.

I’ve known Lloyd since 1993, when I ran power company Electra and Lloyd was making his first forays into the electricity sector.  He’s truly one of life’s gentlemen (and one of its snappier dressers).  He’s passionate about encouraging others to succeed and is a tireless champion for NZ business.

Get well soon, Lloyd; we need you in these turbulent times.

Disclosure: My family trust owns Infratil securities.

If your company website includes a blog, user forum, or message board, whether public or just for staff, you risk being sued for defamation. It may be a small risk, but you need to be aware of the possibility and to think about what, if anything, you should do. Via Iain Dale, I’ve been reading an article in the UK’s Law Society Gazette on how the internet is changing the role of lawyers. The article quotes  lawyer Ashley Hurst:

‘If a defamatory statement appears on one of these forums or online customer reviews [JDD: as an original posting, a link, or a comment] , the company responsible for the website could be liable. Journalists and newspaper lawyers are used to dealing with the risks of libel, but an in-house lawyer … may be more familiar with commercial contracts than overseeing libel and privacy complaints arising from the company website.’

Although much of the article is relevant in all jurisdictions, it is framed in terms of English law, so you need to talk to your own legal advisers. For example, should you monitor your website? 

Hurst says: ‘If companies don’t monitor their forums and just respond to complaints they may have a defence of innocent dissemination. Under section 1 of the Defamation Act, a website operator may have a defence if it did not publish the defamatory statement itself and did not know that its website was facilitating the publication of a defamatory statement from one of its users.

‘Retailers, for example, may want to monitor the discussions on their websites to maintain their integrity and ensure users are not causing any damage to the brand. But by monitoring, website operators are unlikely to be able to rely on the section 1 defence, as they would struggle to show they were not aware that it was facilitating publication.’

I can’t think of any company that would not monitor its websites, blogs and so on, not because of any paranoia, but just to keep an eye on brand reputation and the tone of the conversations (eg. staff morale, customer satisfaction).

One key thing you must do is to establish house rules for both articles and comments, and make sure your staff and outside users know and understand them. You should also think about an easy and quick procedure to make and respond to complaints about content, including the removal of offending remarks. Your house rules should also cover commenting on other sites (see my earlier post on responding to blogs). Staff members making defamatory comments on sites may expose their employer to being dragged into an action, especially if they have an managerial or representative role. Staffers may think they’ve posted anonymous comments, but there’s no such thing except for the technically astute. If you make a comment on this site, I can see your IP address (the unique number that represents your PC) and the name of your host network, so I can usually track you down, at work or at home.

Another way to keep an eye on things is to have a moderation stage in website postings (including comments).  For example, all comments on this blog must be approved by an authorised person (ie. me) before release to the live site.  Just be careful that you don’t turn the moderation process into heavy-handed content sanitisation or you’ll destroy the benefit of the forum. I have only rejected one comment since starting this blog nearly two years ago.

In summary, you can put in place some simple measures to protect your company from defamation actions.  Don’t let concern over  defamation put you off running company blogs and forums.  They are powerful ways to connect with staff and customers, and the risks can be easily managed.

“One Picture is Worth Ten Thousand Words” Fred R. Barnard , Printers’ Ink, 10 March, 1927

Whether you are interested in economics, information design or graphics, you’ll find much to enjoy at Wallstats.com, the website of Jess Bachman, a young US graphics designer. and the creator of Death and Taxes, an annual one sheet poster explanation of the US Government budget, for which he’s become famous. In addition to his D&T poster sales, Bachman makes his living by rendering complex information understandable in graphic form. Some examples:

• A visual guide to the financial crisis
• The scale of the US beer market
• Various ways to visualize $1 billion
• The fall of GM

Just about every time some financial catastrophe occurs (especially if wrong-doing is involved), it’s usually followed soon afterwards by a cry of “Hang the auditors!” because surely they must have been complicit in malfeasance, or at least incompetent.  While, very rarely, individual auditors are complicit or incompetent, as a general rule the vast majority are not. The recent Madoff fraud revelations provoked typical demands for “better supervision of auditors”, whatever that means.  After an opinion piece in that vein by accounting commentator Richard Murphy, fellow accountant and blogger “Dennis the Peasant” wrote a vitriolic response.  While DTP isn’t one of my usual reads, in between the invective he does provide a useful lesson for shareholders, regulators and boards on what auditors actually do and don’t do. It’s worth a read.

Disclosure: Although not an accountant, I was a partner in Ernst & Young, in the days when it had a strategy consulting and performance improvement practice. EY took professional standards extremely seriously. They even made me join the Institute of Chartered Accountants, for which I received much ribbing from my non-CA mates. 

Welcome back for my first article of 2009.  It’s a nice easy one. Courtesy of Andy Lark, here’s a useful guide on responding to blogs, from the United States Air Force.  You can easily adapt this to your own business.

Today marks the 100th anniversary of New Zealand physicist Ernest Rutherford’s award of the Nobel Prize for Chemistry.  Rutherford is the father of modern atomic physics.  He first discovered  radioactive decay, which led to his discovery of the structure of the atom, which in turn led to the achievement for which he is most famous, “splitting the atom”. As Einstein said, Rutherford “tunnelled into the very material of God”. Rutherford’s rueful comment on having no funding for scientific research has become a proud, if ironic, maxim for Kiwi innovation and entrepreneurialism.

“When you are up to your arse in alligators, it is difficult to remind yourself your initial objective was to drain the swamp.”

I’ve had 3 conversations in the last 2 days about making change happen with core business processes.  There’s so much noise going on, especially if it’s a problematic customer-facing process, that you spend all your time trying to put failures right and don’t have time to fix the root cause (product design, business process, skills, whatever). Likewise you’re pretty much guaranteed a failure if you put people onto the change project who aren’t ultimately responsible for the new process, who aren’t skilled and talented, who can’t make decisions on design and implementation, and who are tied up in doing their day jobs.

Here are 10 rules learned from running or helping several organisations to effect change in difficult circumstances:

1. The project team should be drawn from the best people in the organisation, the ones who will drive the new way, and will likely hold leadership roles in it. Don’t staff projects with your third-rate cast-offs. Don’t rely on contractors for roles that should be held by business experts.
2. The naval officer on site in the dockyard overseeing the construction of a new ship is ideally the officer who will be its first captain.   The best person to lead a change project is the person who will run the new process afterwards.  Failing that, get someone even more qualified and powerful, not less, to be your change agent.  Sitting on a governance committee is not enough.
3. The change leader and the change team must have been indoctrinated into the new way of thinking, and be passionate, effective advocates as well as good at their jobs.
4. Don’t treat change as an IT project, even if largely based around new IT systems.  It’s a business project.  The best businesses train their business managers in smart project management, process design and change management. These are not IT skills, they are business skills.  Having said that, good business-savvy IT people can make great business change people if you also follow rules 1, 2 and 3.
5. Be ambitious but realistic about what you can achieve with the money, time, resources and ownership support you have available to you. Despite knowing this, I too have sometimes fooled myself or been pressured into going ahead on over-ambitious projects without adequate resources, with predictable results.  Heroism, hope and luck are not reliable ingredients for success.
6. Give the change leader the power to decide, as far as possible, and have fast access to higher decision-makers when necessary.  There is no value-add and much cost from constantly briefing and waiting on uninvolved decision-makers.
7. Like any major change proposal, nothing will happen unless you dedicate resources (people, time, money)  to make the change happen.  Expecting people to design and implement a major change while doing their day jobs rarely works, especially when their core process is broken. Put your best operational people onto the change project; here’s where you can usefully deploy contractors - to fill in for them in the operational teams.
8. Avoid highly structured project management methodologies. I recommend a much more agile, lo-tech approach. Don’t try to specify everything before you start.  Have a high level “architectural” concept to guide you, but get going!
9. Keep the alligators at bay, but focus on the swamp draining. Don’t worry about dealing with the current stream of problems - that’s the job of the operational teams.  Put in place some holding plan, but concentrate your best resources on creating the new model that will work.  Get it working, put all new customers, and new transactions onto it, transfer all customers without problems onto it, and then, last, not first, deal with the problem backlog.
10. Notwithstanding rule 9, try to deliver value quickly, in chunks, rather than going for the big bang. Incremental success builds support.
11. Bonus rule: communicate, communicate, communicate; up, down, across, inward, outward.

My Vista lunchmate Jack Yan has just introduced me to the ideas of black libertarian scholar Dr Thomas Sowell, of Stanford University.  This quote rang a lot of bells for me:

“… the ignorance of Ph.D.s is still ignorance and high-IQ groupthink is still groupthink, which is the antithesis of real thinking.”

I’ll have to read this guy.