The Flywheel

Do owners come first? Or employees?

One of the perennial debate raging in our company leadership (which includes owner-leader, investor and myself) is whose needs should come first in a turnaround situation. The owner-leader (Owl) had a great lifestyle till end of 2003. he was the consummate deal maker, finding new sources of money whenever the business got into trouble. Unfortunately, he also never made a distinction between business and personal finances. Now, for the few months, I have him on a tight leash when it comes to the money he can take out of the business either through his salary, credit cards or other perks like car, utilities etc. Quite obviously, this is chafing him a lot and I can feel an explosion building up.

To my mind, the fundamental difference comes from our personal views about the company and its purpose. He always felt that the company exists to serve him. In a way he was right because before I took the responsibility, he was the lone ranger in the company and every body else existed to do his bidding. Since he was always required to pull the company out of trouble, he quite rightly felt that the company cannot survive without him. After I took over, I forced the company to make a complete about turn from this approach.
There were 2 reasons for this: pragmatic and ideological. As I mentioned before, I am a foreigner in this country, so obviously I cannot deploy the same wealth of contacts that the Owl had built up over the past 30 years. Instead, I have to lead through empowerment and by engaging the will and abilities of all the people in the team…sort of distributed leadership! Secondly, I am too much of a realist to think I have the solutions to every problem my company was facing. By engaging the collective talents into the task of turning around the company, I can be assured that any given problem can be attacked from multiple directions and a solution will emerge over time.

In order to engage the collective will, I have to choose who gets higher priority; employees or owners. if I want all me team to engage fully in solving day to day problems, I have to give them the confidence that the company will not marginalize them at the time of crisis. The team has to believe that the company will do everything to protect their jobs, and that experimenting is not a path to unemployment. One of the best ways to demonstrate this changed priorities was through pay checks. One of the first things I did was to setup a pecking order in payments: employee salaries come first, then current suppliers, then old debts and then whatever is left over is shared between Owl and me. While this did wonders for my company, it left the Owl in a very new and uncertain situation. We have this regular talks wherein this point comes up invariable and in spite of repeating and explaining my perspective countless times, he is captivated and enraged by the financial uncertainty he finds himself in.

We had a similar discussion once again today and his core problem surfaced that I am not taking care of him and making him happy. Now, I am not worried about my future in this company. What I do worry is that as the leader, I now have to manage the tension between owners and teams. While the owners have invested money, the team is investing their abilities. Without the team fully engaged, I do not think we stand a chance in medium to long term. Without the Owl happy and engaged, my job will become that much more harder to focus on the key issue we have today: “How do we grow profitably without investing money into markets up front?”

Interesting dilemma. Any suggestions?

English supermarkets, food tastes, economic laws & good performance

Tesco is celebrated as a model for retail success in Europe. Just as the McKinsey study which showed (paid subscription required) how Wal-Mart made significant contributions to American productivity growth, Tesco is also held up on two strategic anchors: unbeatable prices and supermarket convenience.  So when Tesco opened a shiny, new supermarket in a small town, Dominic Prince of Spectator decided to investigate. The results are counter intuitive to say the least! To paraphrase the article, not only was Tesco 43% more expensive than the neighbourhood store, it took one-third longer and the quality was way bad compared to the fresh produce from local stores.

As Dominic Prince says,

The results of my experiment were pretty obvious — we are all being done. We are being misled, brainwashed, cheated, and we don’t even know it’s happening. The trick has yet to be exposed, but there is nevertheless a very clever marketing trick being perpetrated and we are all the victims of the rip-off. The food writer Joanna Blythman has just written a brilliant exposé of the supermarket culture pervading the country. Her book, Shopped, should be required reading in every household, but you’ll have to make a little effort to get it, as the supermarkets won’t stock it. In it she argues that Britain has surrendered control over what we eat to a few powerful chains that can dictate not only what we put on our dinner plates, but also how much it will cost us to put it there.

I started to wonder why does this happen in UK? Then, I remembered an article by Paul Krugman that I read way back about English food and the laws of supply and demand.

...The appreciation of good food is,quite literally, an acquired taste--but because your typical Englishman, circa, say, 1975, had never had a really good meal, he didn't demand one. And because consumers didn't demand good food,they didn't get it. Even then there were surely some people who would have liked better, just not enough to provide a critical mass. And then things changed. Partly this may have been the result of immigration. (Although earlier waves of immigrants simply adapted to English standards--I remember visiting one fairly expensive London Italian restaurant in 1983 that advised diners to call in advance if they wanted their pasta freshly cooked.) Growing affluence and the overseas vacations it made possible may have been more important--how can you keep them eating bangers once they've had foie gras? But at a certain point the process became self-reinforcing: Enough people knew what good food tasted like that stores and restaurants began providing it--and that allowed even more people to acquire civilized taste buds.

What is the connection between supermarkets, quality of food and delivering good performance. Good performance, like good food, does not happen by chance. It has to be acquired painstakingly. It has to be demanded, encouraged and continuously monitored with regular feedback. The process by which, English food went from bland, tasteless and greasy fare to the current excellence, needs to be employed here too. This can happen only when teams get a taste of excellence by first in small tasks that are meaningful and then gradually bigger and more important jobs. Once a team member achieves that flow, he or she will never be content with mediocre results or efforts.