During 2012 “lots of problems arose from bosses that tried to overcontrol their companies. A boss who creates too many rules, and lacks faith in the ability of his or her staff is asking for trouble,” management training company executive, Liza van Wyk of AstroTech Training said.
Internationally JP Morgan found that a $2 billion loss, just a minute make that a $5bn loss, no, scrap that, a $9 billion loss, made them a global laughing stock and damaged credibility. BP was fined $4 billion for its Gulf of Mexico oil spill. And scandals, firings, and unhappy staff wracked venerable Aunty BBC.
Locally mines saw share prices plummet after violent strikes, ratings agencies downgraded South Africa and economic growth slowed. Some executive heads rolled, while other execs took their squabbles to the media.
The Johannesburg-based company, which serves southern Africa, is one of South Africa’s most respected and established management training companies. They see new managers, CEO’s, and government department heads come through their doors, or ask for off-campus training in their own offices.
“Strikes often happen because employers pay too little attention to their employees, or they treat unionists with contempt, which can create a situation where you have wildcat strikes out of control of unions, and that creates a dangerous situation for companies because they are now dealing with people who have no negotiations expertise, and ignore employment laws. And then you get the rules-obsessed boss, “ van Wyk added.
“And the rules obsessed boss wants to know every time you leave your desk, scrutinizes every call you make, lines of reporting are increased, and with it the amount of paper work to get a job done. Employees become frightened to make decisions in case the boss doesn’t like it, and so production slows, innovation dies, and workers become increasingly frustrated and unhappy.”
The BBC provides a classical example, the New York Times reported that “the management team under Mark Thompson, director-general from 2004 through mid- September 2012, added more guidelines and put more emphasis on form-filling and safety checks… the editorial guidelines are now 215 pages long.” It is now being claimed that this excess of bureaucracy made staff fearful of pointing out flaws, which enabled the present scandal.
In another example, Harvard Business Review recently reported that when Tony Hayward became CEO of BP, in 2007, he vowed to make safety his top priority. Among the new rules he instituted were the requirements that all employees use lids on coffee cups while walking and refrain from texting while driving.
Three years later, on Hayward’s watch, the Deepwater Horizon oil rig exploded in the Gulf of Mexico, causing one of the worst man-made disasters in history. “He micro-managed,” van Wyk said, “He paid too much attention to unimportant things, and took his eye off what really mattered.”
She said, “In high-risk situations like the present financial crisis managers become so frightened of bad news that they sweat the small stuff. They become too afraid to lift their heads and make real decisions that impact the long-term. Drawing up lots of rules and enforcing them too often overtakes risk management. It can sometimes drown staff in needless bureaucracy, and ensure good staff become frustrated and leave.
“At AstroTech Training we teach executives that a number of things are essential for good management – emotional intelligence, sound recruiting – and then leaving good staff to get on with the job, persistently understanding what staff are doing and thinking to ensure conflicts end before they flare up, ethical business practices, and ongoing training of staff so they learn the best business practices.”
AstroTech’s views accord with those of HBR, which advises manages to thoughtfully manage risks in three categories:
Internal risks, for example, “employees’ and managers’ unauthorized, illegal, unethical, incorrect, or inappropriate actions and the risks from breakdowns in routine operational processes.”
Van Wyk said these are the sorts of risks J.P. Morgan, and other banks, have encountered by traders gambling on the markets, and losing. “It may also be an employee using bribes to get government business, or giving lavish gifts that could be seen as bribes.”
A company voluntarily accepts some risk in order to generate superior returns from its strategy. Good strategy risks enable companies to take on higher-risk, higher-reward ventures than competitors with less effective risk management.
Some risks arise from events outside the company and are beyond its influence or control. Sources of these risks include natural and political disasters and major macroeconomic shifts. Because companies cannot prevent such events from occurring, their management must focus on identification (they tend to be obvious in hindsight) and mitigation of their impact.
Van Wyk said, “This has been a very difficult year for business with weak foreign direct investment, an angry workforce in some sectors, difficult trading conditions in the marketplace, and exhausted, and often out-of-pocket consumers and clients. “These are the times where those who manage well can become very rich, and very successful on the failures of others. But they have to have the business education and innate wisdom to manage with a light touch, and neither a whip, nor a noose.”
LIZA VAN WYK, CEO ASTROTECH TRAINING