Juanita and I in our new book and in our "WIN! How to succeed in the new game of business" masterclasses talk about the need to give autonomy to our people, to trust them and to not micro-manage them. But – and it's a big BUT – what we must never do is forget what we learned probably in our first ever position where we had people to manage –
You must never trust anyone 100%.
We all make mistakes, we sometimes have rushes of blood to the head, we sometimes go off the rails completely and sometimes there is unexpected malice and fraud.
It is our job as a manager - whether a first line supervisor or a CEO or Chairman of the Board - to provide, on the one hand a safety net to make it as safe as possible for people to make mistakes, but also to carry out all the regular checks and balances on what people are doing in order to protect the company and all its stakeholders.
That’s our job.
We need to do regular, random “audits” of what our people are doing - ask questions, do checks, look at analysis - everything to be reassured and confident that what is being done is what you want to be done - but, of course, without micro-managing or being over bearing.
By the way when it comes to financial irregularities - be they minor or major - we can never assume that we can safely delegate that responsibility to the auditors and rely on them to pick up any wrong doing. They simply don't.
Of all the businesses I have run, or had responsibility for, over the years I can think of four separate occasions when we discovered major financial wrong doing. In each case it was my finance director and I who uncovered it not the auditors.
Those of you based in the UK will know that Patisserie Valerie was a coffee and patisserie chain in the UK with around 200 shops and 3000 people. It had been bought by Luke Johnson in 2006 and floated on the stock market in 2014 and with Johnson retaining a substantial shareholding and appointing himself ‘Executive Chairman’.
A word about Luke Johnson: he is a ‘serial entrepreneur’ and media darling with – to this day – columns in national newspapers, and seen as a guardian of corporate governance practices. Although Chairman of PV was apparently one of 33 positions he held!
Trading in Patisserie Valerie shares was suspended in January 2019 because two £10 million unauthorised overdrafts had been discovered. This later turned out to, in fact, be a £40 million black hole. Also, there was significant malpractice and fraud uncovered that had gone over on over a number of years - resulting in both sales and margins being significantly overstated.
The finance director was arrested and the CEO under Johnson left.
It has now been announced that the liquidators are suing the auditors Grant Thornton for £200 million for negligence.
However if you look at the business management, both the CEO and the finance director had worked for Johnson previously in two other companies. As “Executive Chairman”, of course, Johnson was in reality the “chief” executive and the buck for such top level malpractice must clearly and completely rest with him.
Was he doing the fundamental basic checks and balances of the people under him the we talked about earlier as ‘chief’ executive? He cannot have been - he clearly had abrogated his responsibilities by over trusting people he had worked with for many years.
Apparently, over a number of years, the gross margins reported byPatisserie Valerie were significantly better than those being achieved by the class leader of that sector - Starbucks. That should, surely have rung some alarm bells. A simple seven line, three year P&L analysis (as we advocate in Staying in the Helicopter®) should have led him (and indeed the auditors!) to ask some fundamental questions.
As a result of those questions not being asked 1000s of people have lost their jobs.
So – what’s the message? It really is quite simple. It is our responsibility as business leaders to look after the interests of all our stakeholders and the buck stops with us.
We cannot and must not assume that we can trust everybody to do the job we want them to do 100%.
It is our responsibility to do the necessary checks and balances no matter what position the person holds, no matter how well we know them or how close we are to them.
We must always keep the interests of all stakeholders head and shoulders above every other consideration.
I remain convinced that 2021 is going to be a great year - eventually!
The very best,