The economics of Gap (Interim) or Freelance Management

We thought it about time to write an opinion piece on the dynamics (economics) around the Interim Management market, delivered from a UK perspective.

This is a purely thought piece and opinion, not support by empirical research, but grounded in economic theory and an observation of the ‘state of the current market’.

The inspiration for this is an article we published last year entitled “Increased Friction Costs“. For background on the meaning and usage of Friction Costs, please refer to the definitions used in the original article.

Let’s face facts. Interim Management was borne out of the margins of Friction Costs. Filling the gap that naturally exists where ‘full employment’ is just never possible. Highly skilled and mobile individuals. However, this is also exactly where the rub sits. IM was borne on the ‘margins’ of the bell curve and not in the middle of that curve. Whether it is natural friction or crisis friction that drives it, the fundamental principle of IM is scarcity, flexibility and mobility. Items that typically cannot be addressed in rigid Labour Market framework and market conditions.

So what has changed?

Well, that scarcity has become mainstream. Evidence for this is the IIM survey results, listing at least 600 ‘claimed’ Interim Service Providers in the REC Directory. Or, maybe the definitions have become blurred. Plenty of anecdotal evidence for this exists on and in discussions in this forum.

Too many Interim Service Providers (ISPs) and too many would be Interim Managers (IMs) have flocked to the margins of the bell curve and confused the message, for both would be clients, ISPs and IM themselves.

Calls for the EIM (Executive Interim Management) label are attempts to create another differentiator. Accreditation itself is another differentiator and this is something the IIM supports and is seeking to grow, particularly with the Agency Workers Regulations in mind.

Basically, in order to add value, we need to realise that there is a ‘natural market’ for IMs, but at the moment that natural market is flooded with confused messages, symbols, participants, etc.

Any comments and opposing views are welcomed.

theMarketSoul ©1999 – 2011

The Boardroom Incubator – The Idea explained

This discussion is a little bit of background behind the concept of ‘The Boardroom Incubator’.

We currently work mostly around Cambridge, Cambridgeshire, England. The university and some of the colleges in Cambridge have start-up incubation hubs in and around the city. These incubation hubs are spin-offs from ideas and innovation created in the laboratories of the university. Some work and some don’t.

The idea behind ‘The Boardroom Incubator’ came to me after attending an Inspired Group presentation on 14 July 2011. During the session the presenter, Mark Doyle, mentioned some training and development they were doing for women to encourage listed organisations in the UK to redress the imbalance of woman representation on FTSE250 Board of Directors. They were addressing some of the issues, but it struck me that more could be done. This is the basic idea and spark that led me to create group.

Let’s do it now, for ourselves, before the government interferes and legislates quotas and targets into the corporate governance frameworks of UK plc.

theMarketSoul ©2011

Link to the LinkedIn ‘The Boardroom Incubator

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theMarketSoul ©2011

Collaborative nano and micro business ventures

Don’t waste a good crisis” – not entirely sure who first uttered these immortal words, although a Google search on initial analysis seems to attribute it (or some very similar words) to Rahm Emmanuel, the current Chief of Staff of the White House, part of the Barack Obama administration.  The actual phrase might be attributed to an economist called Paul Romer.

However, irrespective of who uttered the words initially, it is true that borne out of crisis the spirit of innovation always seem to rise like a new Phoenix bringing both hope and opportunity with it.

That is the great gift that the ‘study of scarcity’ that is economics provides us with.

We have the chance to think creatively about new platforms of collaboration and how Charles Handy‘s ‘Shamrock Organisation’ will eventually play out.

At the moment we are conducting a research study into how nano and micro businesses might find new routes to market and sustain themselves during these strained economic times as part of the extension of the outsource provider to the Shamrock Organisation.  We will be trying to uncover some of the factors that lead to collaboration and other forms of formal and informal business structures that promote and underpin this form of collaboration.

Please watch this space for updates in the very near future.

theMarketSoul ©2010


Risk-Based Change Management

Introduction

Cost cutting has been a priority in the private sector, ever since the financial credit quake started in 2008, yet the words currently are ‘austerity measures’ and budget cuts in the public sector.

Most of the cost cutting in organisations has been along the tactical and operational lines and we believe that in the ‘age of austerity’ we are within, revisiting cost cutting from a more strategic perspective would add significant value to both the private and public sector organisation alike.

Budgeting
Budgeting (Photo credit: RambergMediaImages)

A Zero Based Approach

Within most organisations budgeting and budget setting is an incremental affair.  It is very much focused on a business as usual mentality and the status quo is rarely questioned or scrutinised with any level of depth and rigour, as long as the financial plan delivers the numbers senior managers anticipate and the investor community expects.

Yet this is exactly the kind of ‘tyranny of the status quo’ that has destroyed a significant proportion of value in organisations over the past two years.

A zero based approach addresses some of the short comings associated with incremental budgeting and financial planning.  It is by no means a perfect replacement for incremental budgeting, it cannot address all the strategic issues and it is fraught with its own pitfalls, yet we assert that a focus on some recent lessons learnt in organisations that have implemented cost cutting via a zero based approach can add value to our clients budgeting and financial planning systems.

Zero-based budgeting can be summarised as the process of preparing financial plans from a change perspective, normally building the financial plan from scratch (the zero base), viewing the process as if the organisation has not delivered the particular service of product in focus before.

Some of the lessons learnt are briefly listed below:

  • Many versus few – Instructions and the interpretation thereof by individual users

    Journal of Human Capital
    Journal of Human Capital (Photo credit: Wikipedia)
  • Focus on the Full Time Equivalents (FTEs)  and people cost early in the process
    • Check Payroll Data integrity
    • Understand thoroughly the organisational restructuring issues (get Human Resources understanding the financial budgeting language early in the process)
    • Ensure a distinction between building a Business Case versus Budgeting
    • Confidentiality (how, who, what and staff and managerial morale implications)
  • Education process and ensuring skills, knowledge and information convergence to ensure the budget is delivered as a value added ‘conversation’
  • Appreciation of management style versus timetable for budget delivery
  • Over communicate (more information is better than more or inadequate assumptions)
  • Concentrate on the budget story (strategy and changes) and ‘hang’ the budget numbers on the end of the storyline (Making the budgeting process less ‘threatening’ to budget owners)

These lessons can be separated into two distinctive themes, namely the Human Capital dimension and the Systems issues.

Themes to be aware of

As far as the Human Capital dimension is concerned the major lesson is to ensure that both the budget holders and prepares are fully cognisant and understand the language of both budgeting and what the inherent risks and concerns around a zero-based approach is.

Key issues and risk are around work stream teams from different disciplines (HR, Finance, Operations, IT and marketing) not always having a common language and frame of references for similar linguistic terms and phrases.  Ensure that potential for misunderstanding the objectives and delivery mechanisms are addressed early in the Zero Based Budgeting approach.

Foster a culture of empathy within the management ranks and never underestimate the emotional impact that getting rid of people can have on both the managers having to make the tough calls and both the staff being called upon to leave and the staff morale of the people earmarked to remain behind and deliver the business as usual processes.

As far as the Systems issues are concerned, ensure that enough time and preparation goes into the planning and delivery of the Zero Based Budgeting mechanisms and tools, as you will be running a process that has not been utilised and thoroughly tried and tested under operational conditions before.  There are risks in the following areas to be aware of:

  • Data integrity
  • Spreadsheet modelling and calculation errors
  • Documentation and the support services (handling budget holder queries and concerns)
  • Skills and knowledge of the budget holders and preparers might be limited
A diagram showing the flow of knowledge in the...
A diagram showing the flow of knowledge in the Financial Planning Profession (Photo credit: Wikipedia)

Conclusion

As was suggested in the Lessons Learnt listing above, over communicate with managers, budget holders and preparers and staff.  Ensuring that adequate information is made available in comprehensible and non-technical language is the key to success.  Too often we have seen ‘lazy’ and shortcut assumptions being made, when a little bit of extra effort, ‘digging’ and asking the right people with the operational knowledge the right questions would ensure a more robust and rigorous budget.

Finally, ensure that both the process and outcomes are well documented and articulated as they serve as your shield and defence when the reality does not turn out as the best laid financial plan might have anticipated.

We view Zero Based Budgeting as a risk-based change management tool that assists and informs the senior managers in any organisation of the opportunities and risks inherent in designing and building innovative change processes to help add value to the organisation’s overall performance.

At theMarketSoul ©1999 – 2011 we have practitioners available who can assist you on a consultancy basis to operationalise the full 360 degree Financial Management practices most organisations require in order to ensure that they remain competitive, profitable and continue to create value.

The Cost of a ‘Licence to Operate’

Reputation Risk and damage mitigation must be some of the watch words and the top priorities at BP at the moment. So how are they faring in the management this agenda item?

What ‘price’ or cost must we attach to a ‘licence to operate’?

BP Logo
Image via Wikipedia

It is interesting to observe behaviours of Chief Executives under the probing scrutiny of a congressional committee’s line of questioning and investigation.

Are we busy reshaping the competitive landscape and entrenching further oligopolistic market skewing structures? And this running in parallel with Financial Regulatory reforms encouraging more of an ‘imperfect competitive’ and fragmented (read more costly) landscape.

It is interesting how the issues and debates are being shaped by political expediency, rather than the true and honest ‘economic landscape re-alignment’ agenda we all deserve. And yet again timetables are being set to accommodate political schedules, rather than the issues and factors that we really need to address in order to encourage enlightened and informed re-balancing and redress within the economic frameworks we operate under. So the people who ultimately ‘pay the bill’ are having the fundamental issues clouded and waters muddied, with needless ill-informed debates and noise around reforms that are ill-conceived and containing basic design flaws.

We felt that there was hope back in late January 2010, when the Volcker Rule [video reference]was first muted, but as is now apparent, the agenda has been filled with noisy distractions and unfortunate detours that will ultimately deliver half-baked reforms and regulations that will sow the seeds of the next cyclical bubble of euphoria and the subsequent eye watering ‘pop’ once we come down with the inevitable painful bump. Timing is of the essence, yet the timeframes are uncertain and so they shall remain.

English: Paul Volcker, former head of the Fede...
Image via Wikipedia

The next few days and weeks will be crucial ones that will reveal what exactly the true (life-cycle) cost of a ‘Licence to Operate’ is and what price we have to attach to monitoring and managing a global reputation risk framework and infrastructure.

theMarketSoul ©2010


Short-sighted: Actor behaviour in the market for competitiveness

Competition is a good thing.  Of that we are sure.

It is one of the key ingredients of a dynamic market process, yet is competition and the potential negative consequences of short-sightedness a means or an end in itself?

Today we argue that the unfettered aspiration of competing for competition’s sake and the shedding of what is seen as non-core processes and competencies in organisation, will eventually lead to sub-optimal performance and is an unsustainable practice.

In the unrelenting search for shareholder value creation, which is the fiduciary and main responsibility of the board of any shareholder / equity owned organisation, we believe that sub-optimal decisions are being taken, both because of target operating model enhancements and short-term return of investment (ROI)

 

One of the underlying objectives of International Harmonisation of Financial Regulatory Standards (as currently promoted by the IASB & FASB) is the desire for greater transparency and ultimately more regular and frequent reporting cycles.  The view is that the greater the frequency in reporting, the less information asymmetry will be in the market, thereby eliminating insider trading and other undesirable ‘sharp’ market practices that regulatory bodies such as the SECLondon Stock ExchangeNYSENASDAQ, DAX, etc., are trying to stamp out.

 

But if we extend this logic, or rather shorten the current reporting cycles from the regular quarterly updates to say monthly, weekly , daily or even hourly updates, the already short-sighted mentality will become even more sharply focussed.  And this begs the question:  “How will CEOs and other business leaders have to ‘defend’ their decisions on a minute by minute basis under this unrelenting 24 hour news and sensationalism culture”; thus leading to an even more intense short term focus on their part.  Certainly, this must be the worst of all downward spirals and tyranny of information overload?

 

But, by logical extension, this is exactly where we are heading in a decade or two’s time.

 

So, if the focus is then on more short-term results and ‘core processes’ where does this leave the current wave of outsourcing, off-shoring or near-shoring of non-core processes?

 

We contend that the already well established trend of ‘letting go’ of all non-core processes and competencies has a negative effect on the longer-term sustainability of the organisation.

Succession planning could already be outsourced and thus not on the board’s agenda, as recruitment consultancies now fulfil the non-core ‘attraction of suitable candidates’ services, with the traditional Human Resources fulfilling a more Risk mitigation / management functions of ensuring compliance with Health & Safety Executive , employment law, equality laws, etc.

 

Another unintended consequence is the fact that because organisations more and more frequently utilise professional specialists to deliver projects and programmes, the esprit d corps is disappearing from organisational life.  It is difficult for managers to gain this motivational force of esprit de corps when they are managing ‘virtual teams’ and a cadre of temporary service providers through dysfunctional processes of ‘on-boarding’, induction, project management, quality control, motivational traps, engagement, focus, etc.

Therefore, to conclude this opening article in a new series around the ‘new labour market models [1] [2] [3], currently being practiced in the western free market democracies, let us ask the key question that is one of the foundations of the factors of production in achieving economic advancement:

“How do we recognise, incubate, nurture, develop and sustain talent and talent management in our organisation, when this critical activity is handed over to outside consultants who have a different business model and agenda to our corporate ambitions?”

We know that there are some ‘labour supply aggregators’ or forward thinking recruitment consultancies that realise that their own models of engagement has to change, in order for them to move into the value creation and value addition space, but there are still far too many ‘factories’ with conveyor belt mentalities out there.  Not to let the corporate ‘talent managers’ off the hook, because if you don’t have people and processes in place to manage the talent anymore, you only have yourself to blame when the ‘transparency machine’ of financial regulatory reform forces you down the channel of short-term decline…

 

theMarketSoul ©2010