By Nimroth Gwetsa, 26 November 2015.

In the article “How To Detect Shady Deals Masqueraded As Good Deals”, we noted how developing companies could learn from and adopt sound principles from big businesses.

Not all big business behaviour should be copied owing to their destructive nature.

This article aims to identify some deplorable behaviour by big business to be avoided by emerging companies. This, to ensure emerging companies could one day rely on the power of their brand to attract business opportunities.

Bankruptcy and foreclosure is understandably generally associated with small and medium-sized businesses. Big companies are not supposed to fall. At least that’s the thought held by some people. This doesn’t mean dismal failure is the preserve of all others but big companies. Our reluctance to associate failure with big business stems from our understanding that big business earned its status over time. Big business did not become big overnight. Persistence, sound principles and focus on delivery enabled them to develop into giants they have become.

Such giants are understandably not expected to fall easily. Even if they were to fall, their fall is supposed to be gradual and not sudden. The story of David and Goliath shows that #giants can fall. More perturbing is that their fall could be orchestrated by something insignificant and easily trivialised.

Many lives depend on successes of big businesses. This explains the stance by some governments readily bailing them out to lessen the devastation they could cause. Depending on the extent of the rot within those giants and the timing of detection, bailouts may be ineffective.

Drawing so much attention from many sectors of society, why have notably large companies fallen so dismally? How could big companies with a long and colourful history of continuous profitability suddenly face liquidation?

It’s hard to imagine reasons for their fail, especially when, unlike small companies, such companies have had many highly qualified and experienced leadership and management expertise at their disposal. Enron, Arthur Andersen and closer to home: African Bank and 20twenty among others, come to mind.

Some ills attributable to the demise of large companies

I am not an expert on the reasons for the foreclosure of the likes of 20twenty and so on, but it would not be far-fetched to attribute some of their failures to the presence of one or more of the following ills:

1. Arrogance – Ignoring or suppressing good views considered worthless, owing to the thought that the company is too big to fail and can pay its way out of trouble.
2. Tokenism – Appointing people for other reasons other than for sharing and spreading responsibilities, thereby centralising power and decision making away from people fulfilling those roles.
3. Favouritism – Sometimes as an outright display of prejudice and autocratic tendencies, especially when such people are founders or possess deep tacit knowledge and insights about the company’s operations, having people appointed because of their relationships with incumbent leaders than on the merits of the roles filled.
4. Silencing of critics – As there can be constructive and destructive criticism, this referring to the silencing of good voices from critics, both internally and externally, and seeing criticism as a form of attack as opposed to an opportunity for growth and improvement.
5. Pay-Forward Rewards – Quickly rewarding based on promises made as opposed to tangible performance results achieved.
6. Populism – Giving prominence to loud-mouthed people, often lacking deeper technical understanding of the business but being rewarded or given attention because of their expressiveness.
7. Greed – Pursuing and wanting success at all costs, even if this means employing creative selling and accounting practices.
8. Pride – Failing to acknowledge mistakes or seeking help.
9. Protectionism – Relying on dominance or increased regulation to sustain business.
10. Impiety – Being a law unto oneself and ignoring good governance principles.
11. Pliable leadership – Collusive board or leadership structure pursuing self-interest goals.

Blessing of corporatisation

Corporatisation is a blessing. It remains an aspiration to be attained by many emerging entrepreneurs. Companies that attained it can generate revenue on the sheer weight of their brand.

Corporatisation is also the breeding ground for polarising politics and slates to emerge. When politics trumps principles in the management and leadership of the company, keen observers would know that the company has now been afflicted with the deadly cancer of corruption. It would only be a matter of time before the rot manifests and devastation unfolds in that company.

In every story, there are at least two sides: the story from the perspective of incumbent leadership and from the critic’s.

From incumbent leadership perspective

True leaders are vision driven. The passionate pursuit of such vision blinds some from seeing other possibilities or dangers lurking around. Such leaders often become too engrossed in the detail of their plans and want nothing but achievement of those envisioned goals.

It’s hard for anyone to say “no” to such leaders especially when their past is filled with successes from their many daring efforts. Those leaders can become more daring because they have gained everyone’s trust and respect. Anyone seen to be issuing warnings against pursuing their strategies could be seen to be a hindrance and consequently summarily dispensed with.

How good leaders handle criticism

Humble and listening leaders accept advice from critics. Even if they do not back down from their plans, they try to factor in mitigating factors against threats identified. Such leaders would even invite critics to get closer to them to help them refine their ideas. Such leaders are often confident, knowledgeable and readily admit that they cannot know, or do everything alone. Their knowledge is not necessarily technical or formal, although it often is. Their knowledge could also be natural.

Such leaders admit when they are wrong and avoid repeating similar mistakes. They empower others, yet are decisive when deviations to agreed plans occur. Although they thrive under praise, they rarely take credit for successes achieved. They prefer working behind the scenes and taking time raising profiles of their protégés. However, they take responsibility and assume leadership in a crisis.

Even when such leaders fail, most people become understanding and more forgiving to them. Their failure is often not outright, but gradual. As a result their failure can be easily corrected before much damage could be realised.

Example of bad leadership in handling criticism

Good and bad leaders alike genuinely believe they are on the right track and have the best interests of the company at heart. The methods and approach they employ often leave a lot to be desired.

Although the extent of their education is often a factor for consideration, it is generally immaterial, for there are less educated leaders with higher levels of emotional maturity and natural wisdom. Conversely, there are highly educated leaders with lower levels of emotional and cultural maturity and their irrational fear wreaks havoc hampering them from seizing situational leadership opportunities.

Educated or not, unless leaders can balance divergent views, they often become autocratic and factionalist. This reflects their insecurity and sometimes their pride in refusing to acknowledge when they are wrong. Their insecurity often results in purging of opposing views and the emergence of polarising political environment in the company.

The unpurged would be forced to “suck up” to them, with their promotions and rewards granted because of the factional support given.

It won’t be long until the above ills manifest in the company. It would be a matter of time before we either see the end of such leaders in the company or the demise of the company.

From critics’ perspective

Many rising stars and talented people from some big corporates I have coached found their careers prematurely reaching a ceiling. Their careers stagnated because they dared speak up on the rot they saw setting in and the company deviating from sound governance principles.

Having risen (rapidly) to higher positions of responsibility by being principled, results and team driven, they now find later in their senior roles that relationships and being on the right side of the winning faction counted more in their career progression.

Because politics trumps over principle, victims find themselves entangled in a web of lies, distortion and slate politics, because maintaining the truth might negatively expose the leading incumbent and would therefore not be tolerated.

Critics’ blameworthiness

Critics are sometimes, often to blame for the ill-treatment they are receiving. As observed in the article “Poor customer service levels: Is the increased focus on risk and legal compliance hindering or advancing businesses?“, I wrote that “I’m yet to meet an Obama-styled ‘Yes you can’ compliance officer, consenting to a business request for approval to carry out investment decision.”

Critics are often hardnosed, seeing life only through a black and white lens. They would make an issue of small matters forgetting that people at the cold face of delivery and business leadership tend to know a little more about real issues and nuances of business than they, as insulated risk and compliance functions, would know.

But not all objections from critics should be considered theoretical and ignored.

Critics’ lack of diplomacy often results in their core message being lost and those criticised finding themselves focusing on and their anger turned towards them.

Critics should therefore not lose sight of important things and ensure their message is conveyed clearly without grandstanding, condescension and intolerance. After all, they should be interested in ensuring the company is well governed and managed than trying to show up incumbent leadership as inept. They shouldn’t use their findings to try proving their worth or gaining credit by publicly naming and shaming others so they could look good.

From independent observer perspective

In an era where there is heightened prominence of audit and risk functions in companies, why do these functions appear helpless and ineffectual in combatting wrong behaviour? What happened to conducting business honestly, serving customers and earning a good buck that we now see more prevalence of making huge profits at all costs? By all costs, this implying the pursuit also of shady deals.

Leadership cannot claim ignorance

Leadership caught in such malaise cannot claim to be unaware of the issues raised by critics that brought the downfall of the company.

I have witnessed this myself and have “counselled” many aggrieved technically and highly knowledgeable people. They took the trouble escalating their concerns to senior leadership only for their legitimate cries to fall on deaf ears. Not because companies cannot afford to heed their advice, but that what critics were concerned about, was the company’s money spinner. Few people were willing to tinker with money spinners.

Messenger victimised

Instead of resolving issues and risks raised, those issues are ignored and played down. The aggrieved seeing issues remaining unresolved and fearing becoming scapegoats later when all come tumbling down, they continued advocating, to their peril, that issues be resolved. Critics then found themselves either being demoted or pushed to other departments where their expertise would not be fully utilised. At worst, they found themselves subjected to constructive, if not outright dismissal experiences.

Why does this situation occur in big companies?

The full armour

To ensure your company continues succeeding and is seen to be socially responsible and rated by employees as the best to work for, watch out for the presence of the ills described above.

Furthermore, ensure that arrogance does not set in especially when the company becomes large and turns over large profits.

Do not trivialise the importance of transformation and this, referring mainly to having a diverse set of complementary skills. Putting inexperienced people in leadership positions hoping to mitigate risks by centralising power is a worthless exercise. The company might be too large for important functions to be managed and controlled centrally without sacrificing good performance. Avoid fatigue and the risk of running the company on crisis mode, by making the right appointments and having the right development plans in place.

Avoid rewarding and promoting people based on the eloquence of their speeches or promises, but by proven performance and results achieved. Otherwise, doing so can be likened to paying forward without guaranteed buy-back.

Be humble to recognise poor performance earlier on. Otherwise, difficulties might arise in meeting performance expectations.

Find a way of leveraging insights from critics. Even if critics employ wrong measures in raising awareness of wrong behaviour in the company, try focusing on their message than their personalities. After all, if what they are saying is true, you would have the most to lose by ignoring their message. Focus on developing communication skills of your (internal) critics. This doesn’t mean acceding to their demands, but genuinely reflecting on the issues raised than ignoring or silencing critics.

Take aways

Corporatisation should remain the aspiration of emerging companies. Borrowing from Luke 13:19, it too can be likened to “… a mustard seed, which a man took and put in his garden; and it grew and became a large tree, and the birds of the air nested in its branches.”

From this verse, we could see good aspects of corporatisation. These being the growth and spreading influence of the company. The large tree in the verse could be seen as a beautiful picture of a growing company, large enough to provide refuge for many people.

We could also see the bad side of corporatisation if not well managed. And this being the emergence of corruption. The unnaturally large mustard tree harbouring birds, could, however, also be seen to be symbolising corruption and associated bad elements attracted to it.

As for the aspirant entrepreneur, go on to write your own happy story. Remember though to stick to the truth, good governance, delivery performance and customer service principles if you want your company to be around many generations later.

Yours need not be the giant that fell.