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Interesting. I don't see how a board could be convinced by arguments a consulting company hired by management; how could it work more than once? If you found th

Interesting. I don't see how a board could be convinced by arguments a consulting company hired by management; how could it work more than once? If you found they were doing stupid things you wouldn't report them, would you?

crdb 11y ago
Well put it this way: you're 65, you've led a few companies but now sit on 10-15 corporate boards of multi-billion dollar companies in your spare time, flying around the world for the meetings, there's another 10 people like you in the room, you're meeting the consultants and management after a long lunch (possibly boozy), you have a hunch about why the company is losing sales, but then the consultants put forward this extraordinarily well documented case of why there's 6 other explanations which combined have led to the decline in sales. So you doubt yourself, a little bit. There ARE after all 400 slides in the deck. And all these numbers, and the immense effort the consultants put in, and the way they have convincing answers for everything. At the time, it looked like a cool bet and could have paid off well if it had worked out. Earnings were through the roof for over a year too, so it did pad the treasury. Can't go against fate, right? Oh well, there's still 14 board seats left. And the acquisition is better than nothing, looks like a good price. Even if your hunch is right, what's the point of punishing a team that's halfway out of the door anyway for a set of bad decisions that can't be reversed? Once you reach that conclusion, you switch off, let the German drone on in his thick accent, and think about what you'll get your granddaughter for her 5th birthday next week in Milwaukee - what is a good German souvenir that a 5 year old would enjoy? You're lost on the meeting from now on. As for bad management, well, is it their fault? Was it part of their "schooling"? (There's a saying in trading that losses are "tuition fees") Were there extenuating circumstances? I can name (but won't, because I'm a nobody and you never know when you might need connections) a series of well known political and business figures in California, for example, who have provably run large companies to the ground (as far as my humble, not-very-profitable, not-that-learned opinion is concerned) and now enjoy exceptional careers - it's amazing how far being born in the right place and with the right network can carry you. Since one is allowed to criticize one's own politicians, look at Sarkozy, who was voted out and replaced by what is probably the least attractive, least popular, least "presidential" candidate the left ever put up, as a protest vote more than anything, who somehow still clings to the leadership and has even managed to make himself favorite for 2017 on the right (he even had the balls to rename his party after the US Republicans). No-one, in his own party or its membership, has the balls to pull the trigger. People don't rock the boat. They make excuses, and things just decay slowly. Accountability is hard work and without help, usually leads to the loudmouth getting shot down. I remember someone once saying that one misgiving of youth is to think you have to be exceptional when really, just doing the job properly is often enough to make you exceptional compared to your peers. I do think that business performance is naturally high-dimensional with very sparse data (high-p, low-n, with non-linear behaviour) which makes it very difficult to understand, more than people expect. For example, a LOT of companies are just levered beta - they go up faster than the market, and go down faster than the market - which makes whoever is in charge look like a genius during any extended boom, and remain a genius if he retires before the bust (putting the blame on the new guy, naturally; I'm not at all thinking about a certain company with a blue logo and two initials, or a certain "American" insurance company with three). Experienced business people are at least instinctively aware of this and avoid making too harsh judgement calls based on simplistic evidence. Of course all I've said applies to my own conclusions. Maybe my team members and I were overworked and slightly paranoid or annoyed and saw what we wanted to see. But I'd say the probability on that one is pretty high on the side of "management screw up".
- meatysnapper 11y ago
  I'm convinced Francois Hollande is France playing a cruel joke on itself. As (I think Zappa) said, "Politics is the entertainment division of the military-industrial complex".
  - crdb 11y ago
    The way I read it from 6,000 miles away and little caring (after all I'm unlikely to ever go "back"), DSK had cleared the field of any decent competition and was going to take the election in a landslide. With enormous international experience, the IMF experience to show that he was a "nice" socialist, not one of these bad "reds" who'd have the Russian tanks in the Champs Elysees on day 2, and Sarkozy's unpopularity, it was a done deal and he was focusing on aligning interests. Except Sarko's side managed to get the evidence out somehow (Sofitel is owned by pro-Sarko interests, etc.) and destroyed him much as Herman Cain was destroyed when he got too popular - via allegations of sexual misconducts (here, unlike with Cain, justified by later events). It left us scratching our heads at how DSK could be so stupid so close to the finish line (after all, you can do it all you want in France, where the police and media will cover up for you, but to do it in the US which has clean rule of law? insane). Hollande kind of got leadership by default, and Sarko STILL lost. Honestly, Hollande is doing what he can. I have some sympathy for him and I thought he handled crises remarkably considering low expectations. I savour the irony of the systematic destruction of individual rights occurring under the PS' watch, arguably the "good guys" on that front.
- darkmighty 11y ago
  I unfortunately don't have much work experience yet, still in school. But I do know measuring performance is hard, and if you're too strict you leave out learning opportunities -- all good points. But still I would only trust a consultancy in an adversarial setting (board hiring to check management), or if there was a firm that could establish a reputation of being ruthless (seems hard to make work due to inherent reward conflict). So the existence of this kind of thing shows, to me, those boards are either incapable or ineffective.

crdb 11y ago

Well put it this way: you're 65, you've led a few companies but now sit on 10-15 corporate boards of multi-billion dollar companies in your spare time, flying around the world for the meetings, there's another 10 people like you in the room, you're meeting the consultants and management after a long lunch (possibly boozy), you have a hunch about why the company is losing sales, but then the consultants put forward this extraordinarily well documented case of why there's 6 other explanations which combined have led to the decline in sales. So you doubt yourself, a little bit. There ARE after all 400 slides in the deck. And all these numbers, and the immense effort the consultants put in, and the way they have convincing answers for everything. At the time, it looked like a cool bet and could have paid off well if it had worked out. Earnings were through the roof for over a year too, so it did pad the treasury. Can't go against fate, right? Oh well, there's still 14 board seats left. And the acquisition is better than nothing, looks like a good price. Even if your hunch is right, what's the point of punishing a team that's halfway out of the door anyway for a set of bad decisions that can't be reversed? Once you reach that conclusion, you switch off, let the German drone on in his thick accent, and think about what you'll get your granddaughter for her 5th birthday next week in Milwaukee - what is a good German souvenir that a 5 year old would enjoy? You're lost on the meeting from now on. As for bad management, well, is it their fault? Was it part of their "schooling"? (There's a saying in trading that losses are "tuition fees") Were there extenuating circumstances? I can name (but won't, because I'm a nobody and you never know when you might need connections) a series of well known political and business figures in California, for example, who have provably run large companies to the ground (as far as my humble, not-very-profitable, not-that-learned opinion is concerned) and now enjoy exceptional careers - it's amazing how far being born in the right place and with the right network can carry you. Since one is allowed to criticize one's own politicians, look at Sarkozy, who was voted out and replaced by what is probably the least attractive, least popular, least "presidential" candidate the left ever put up, as a protest vote more than anything, who somehow still clings to the leadership and has even managed to make himself favorite for 2017 on the right (he even had the balls to rename his party after the US Republicans). No-one, in his own party or its membership, has the balls to pull the trigger. People don't rock the boat. They make excuses, and things just decay slowly. Accountability is hard work and without help, usually leads to the loudmouth getting shot down. I remember someone once saying that one misgiving of youth is to think you have to be exceptional when really, just doing the job properly is often enough to make you exceptional compared to your peers. I do think that business performance is naturally high-dimensional with very sparse data (high-p, low-n, with non-linear behaviour) which makes it very difficult to understand, more than people expect. For example, a LOT of companies are just levered beta - they go up faster than the market, and go down faster than the market - which makes whoever is in charge look like a genius during any extended boom, and remain a genius if he retires before the bust (putting the blame on the new guy, naturally; I'm not at all thinking about a certain company with a blue logo and two initials, or a certain "American" insurance company with three). Experienced business people are at least instinctively aware of this and avoid making too harsh judgement calls based on simplistic evidence. Of course all I've said applies to my own conclusions. Maybe my team members and I were overworked and slightly paranoid or annoyed and saw what we wanted to see. But I'd say the probability on that one is pretty high on the side of "management screw up".

meatysnapper 11y ago
I'm convinced Francois Hollande is France playing a cruel joke on itself. As (I think Zappa) said, "Politics is the entertainment division of the military-industrial complex".
- crdb 11y ago
  The way I read it from 6,000 miles away and little caring (after all I'm unlikely to ever go "back"), DSK had cleared the field of any decent competition and was going to take the election in a landslide. With enormous international experience, the IMF experience to show that he was a "nice" socialist, not one of these bad "reds" who'd have the Russian tanks in the Champs Elysees on day 2, and Sarkozy's unpopularity, it was a done deal and he was focusing on aligning interests. Except Sarko's side managed to get the evidence out somehow (Sofitel is owned by pro-Sarko interests, etc.) and destroyed him much as Herman Cain was destroyed when he got too popular - via allegations of sexual misconducts (here, unlike with Cain, justified by later events). It left us scratching our heads at how DSK could be so stupid so close to the finish line (after all, you can do it all you want in France, where the police and media will cover up for you, but to do it in the US which has clean rule of law? insane). Hollande kind of got leadership by default, and Sarko STILL lost. Honestly, Hollande is doing what he can. I have some sympathy for him and I thought he handled crises remarkably considering low expectations. I savour the irony of the systematic destruction of individual rights occurring under the PS' watch, arguably the "good guys" on that front.
darkmighty 11y ago
I unfortunately don't have much work experience yet, still in school. But I do know measuring performance is hard, and if you're too strict you leave out learning opportunities -- all good points. But still I would only trust a consultancy in an adversarial setting (board hiring to check management), or if there was a firm that could establish a reputation of being ruthless (seems hard to make work due to inherent reward conflict). So the existence of this kind of thing shows, to me, those boards are either incapable or ineffective.