John Borghetti and Bob Campbell on Managing Performance

While Bob Campbell and John Borghetti are probably not quite as hard on employees as they are on themselves, both agree that anyone who manages people must manage their performance. Otherwise, as Bob points out, you end up with ‘the wrong person in the wrong job.’

As the managing director of Screentime, Bob Campbell has produced, among other hits, Underbelly and Crownies. Before starting Screentime, he was formerly CEO of Network Ten and the Seven Network, both of which employed thousands of people.

As CEO of Virgin Australia, John Borghetti is responsible for 7,000 employees and the safety of millions of employees and customers. In his view, failing to manage performance lets the whole team down. He believes that both the carrot and the stick have their place in the quality of peoples’ performance, but points out that as a carrot, money won’t get the desired result; recognition and support are appreciated more.

Source: John Borghetti, speaking with the candidates for the Masters of Screen Arts and Business at the Australian National University.

Discussion questions

How could allowing someone to continually underperform result in the wrong person in the wrong job? In what ways does failing to manage the performance of one team member let the whole team down? Why is money a poor motivator?

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London’s green Olympics

The London Olympics may not have met all of its sustainability goals, but as The Environmental News Network and the London Olympics website point out, they were certainly eco-friendly.

  • Olympic Park was constructed on derelict industrial sites containing hazardous waste and soil contamination. Cleaning up over a million cubic meters of soil before constructing the Park means that the land will be usable for real estate; and the demolished buildings were sorted and recycled or reused on site as fill.
  • Nine per cent of the power for the games was from renewable sources (short of the 20% target but better than the UK’s overall 3% renewable energy use).
  • Buildings used leading edge insulation and draft resistance and could identify unnecessary energy use through energy-efficient technology such as real-time venue energy management systems that sent notifications when energy use went beyond a trigger point.
  • The Olympic Park made good use of green spaces with walking trails and devoted large sections to natural habitat.

Discussion questions

You might want to check out the sustainability section for the London Olympics for some helpful ideas.

Stick to the knitting

Phil Ruthven’s article, ‘The secret to success’ in the February 2014 Company Directors magazine concludes that the most successful companies are those that operate either in one industry sector or operate a core business (e.g. construction, finance, manufacturing, retailing) over several industries. Successful companies also innovate, use world’s best practice and have a unique organisational culture and leadership. According to his company’s recent survey, these are the attributes of successful companies regardless of the industry they’re in.

IBISWorld analysed the profitability of 555 companies with a combined revenue of $2.1 trillion between 2009 and 2013 using the weighted average return on shareholder investment after tax (ROSF), similar to return on investment, (or ROI). It is a measure of how well a company uses shareholder funds to make a profit.

The survey showed that ‘classic conglomerates’, those owning multiple, unrelated businesses in several industries, continue to perform very poorly. (Ruthven says that ‘classic conglomerates’ now only work in developing economies.) Adsteam, which disintegrated in the early 1990s, held the record for diversification, owning companies in 82 different industries. Pacific Dunlop and BTR Nylex were each in 56 different industries before they crumbled.

Some conglomerates have whittled themselves down to 15 industries but Ruthven says that’s still too many for them to make it onto Australia’s best-performing list.

Today’s best performing companies stick to the knitting and concentrate on doing what they do exceedingly well. The top performer is Rondo, followed by Bechtel Australia, Philips Electronics, Hatch Associates, John Deere, Philip Morris Federal Express and Schindler Lifts. British Tobacco, Revlon, Mars, Pandora, Wotif.com and Apple also made it into the top 25 performers.

Diversification as a successful business model may return as part of the business cycle in due course, but until then, the message is: Stick to the knitting.

Discussion questions

Leadership seems to be a critical ingredient of a successful company. How many reasons can you think of that would explain this?

Innovation is another critical element of success. How many reasons can you think of that explain this?

How would the strategy of a conglomerate differ from that of a single-focused business?

Men need not apply

GoAir, a budget airline based in New Delhi has decided that from now on, it will hire only female cabin crew. The decision is purely financial: females, they say, weigh less than men and carrying less weight on planes chews up less fuel, reducing the airline’s operating costs. Assuming female attendants weigh an average 20 kg less than their male counterparts, this means an annual savings of 30 million rupees, or A$5.3 million.

Other measures to lighten aircraft and improve fuel efficiency include reducing the amount of water carried on board, using only one engine to taxi, and … wait for it … producing a smaller inflight magazine.

‘The rupee’s fall has hurt the industry badly. All major expenses — aircraft leasing, spare parts and fuel costs — are linked to the dollar. We are looking at every possible way of cost-cutting to remain profitable.’

said Giorgio De Roni, GoAir’s chief executive.

What’s wrong with this picture? For one thing, it seems to me that just as some women are taller than some men, some women weigh more than some men. Is GoAir going to hire overweight female cabin crew? So why not have a weight limit? Or would that discriminate against overweight people — not ok — while discriminating against men is ok?

For another thing, if India is similar to the rest of the world in respect to wages, female cabin crew may be paid less than male cabin crew. That might save GoAir even more money than the reduced fuel burn. Hmmmm…

Discussion questions

What do you think? Is there a good enough business case for hiring only women cabin crew? But let’s get serious: reducing operating costs is important in most organisations. So what could you (legally) do to tweak your operations to save money?

How to use models

Models are representations of the real world. They help you better understand the real world by breaking it into pieces, which makes them handy when you need to assess a risk or make a decision. But as Kevin Madigan points out, in an article on Property Casualty 360, a National Underwiriter’s website, no model can cater for every contingency and some models are better than others at helping us assess information about a risk or decision. The main thing is not to use models unquestioningly, for two reasons:

  1. Models are based on underlying assumptions.
  2. Models work on probabilities.

That means you need to understand both the assumptions models make and how they calculate probabilities.

First, ask yourself what your model’s underlying assumptions are and how correct and relevant are they to your organisation or decision. What contingencies are built into and left out of the model? Are the missing pieces important and if so, how can you incorporate them into your decision-making or risk management?

Next, find out how the model calculates probabilities. There are two ways: ‘classical’ probabilities and ‘subjective’ probabilities. You can be reasonably confident in classical probabilities because they are based on observation and experimentation; for example, flipping a coin or testing a drug on a target group and a control group. (Why not call them objective probabilities? Good question; too logical maybe.)

But you can’t experiment or observe elements of decisions about unusual events or problems or of catastrophic risks. That’s when subjective probabilities are used. Either you or the model need to estimate probabilities, perhaps based on observations about the past, informed assumptions about the future, and your ‘best guess’. That’s a long way away from classical probabilities.

So use models to help you make decisions and calculate risks but use them all with care, a questioning mind, and common sense:

  • Don’t take any model at face value.
  • Don’t interpret any model, especially those using subjective probabilities, as factual.

The statistician George EO Box put it well:

‘All models are wrong but some are useful.’

P.S. When you’re working with models, here’s a phrase guaranteed to impress: Don’t get caught up in delusional exactitude. In other words, be wary of models that claim to have a high degree of precision.

Discussion questions

What models do you use in your work? How accurately do they break information into pieces and represent the real world? What are their underlying assumptions and how relevant are they to the situation you’re applying them to? What type of probabilities do they use? In what ways might the models you use be wrong?

Help your team provide sensational customer service

I’ve just read a terrific blog on customer service. It makes the great point that even when you’re engaged in performing a short, specific task for a customer, it’s still important to build a relationship.

Here’s a bonus: With the best will in the world, the odd ‘customer from Hell’ does exist. If some of your customers ever ‘get to you’, check this blog out. It has some hilarious customer stories that may make you feel better. At least they will give you a good laugh and brighten your day!

Discussion questions

Ask your employees to read the Whose customer is it anyway? blog and work through the three questions at the end of the blog with them.

The ‘bad apple effect’

The importance of developing and maintaining a strong team culture that supports your organisation’s vision and values and strives for high productivity can’t be over-stressed. Part of that is your duty to turn around ‘bad apples’. When you can’t ‘freshen them up’ them, you want to remove them before they sour the rest of your team.

Let’s call this the ‘bad apple effect’: It’s a lot harder than you probably think to say ‘No’ to someone who eggs you on, even when you’re being prodded to do something you know isn’t right.

Have you heard of Stanley Milgram’s famous, actually infamous, experiment? (If not, check it out here; it’s chilling reading.) Doing what you’re told, as in the Milgram experiment, is sometimes referred to as the ‘white coat effect’ or the ‘authority effect’.

But it isn’t only authority figures we find it hard to say ‘No’ to. We don’t want to say ‘No’ to colleagues and friends, either; heck, it’s even hard to say ‘No’ to complete strangers!

A series of studies published in an article in the Personality and Social Psychology Bulletin (9 Dec. 2013), concluded that instigators of undesirable behaviour have a huge influence on others and can easily persuade them into acting unethically, such as telling a lie, committing vandalism and taking office supplies home for personal use.

(Given that people are so easily influenced to commit undesirable acts, this research has implications for bullying as well as building productive teams.)

The effect of social pressure and the reluctance to say ‘No’ may even have contributed to the global financial crisis. In 2007 Moody’s gave a poor rating to a group of securities underwritten by Countrywide Financial, the largest mortgage lender in the US; Countrywide complained the assessment was too tough and Moody’s changed its rating the very next day, even though no new information had come to light. It seems the Moody’s representative felt pressured to acquiesce to Countrywide’s request to soften its rating, with the devastating consequences to the US housing market and the world’s economy that we’re all familiar with.

It’s far easier (about twice as easy, according to these experiments) than we think for one person to persuade another to engage in inappropriate behaviour. And it’s easier than we think for one person to change a team norm and value system for the worse. Social pressure is powerful, and ‘bad apples’ pose risks that you need to address.

Discussion questions

How do you deal with negative influencers in your team? Perhaps you have witnessed the ‘bad apple’ effect yourself.