René Carayol: Why attitude is so much more valuable than skill in a downturn
Archie Norman, the former CFO of Kingfisher, and Allan Leighton, former marketing executive at Mars, were the dream team to tackle a billion pounds of debt at Asda when they took over in the early 90s – in the face of an unrelenting recession.
With chairman Norman as the careful financial engineer and strategist, Leighton as the flamboyant and entrepreneurial chief executive, they somehow managed risk and stimulated growth simultaneously.
They left when Asda was sold to Walmart for £6.7bn and well on the way to becoming the UK’s second largest supermarket.
Managing companies has always meant managing risk, but we have seen this challenge change fundamentally from the fairly predictable times prior to 2007. Managing risk has become more complex and more difficult over recent years. Many business leaders had no experience of leading businesses through a global recession. Many of these leaders are losing their jobs and far too many are being replaced by a chief financial officer (CFO).
CFOs are not known or built to be entrepreneurial or risk embracing. Therefore many businesses are no longer “risk ready”. In fact, while they might be better risk managed, their current strategies tend not to lend themselves to growth. The riskier the world becomes the more fearful people become, this is further fuelled by a media that thrives on negative news.
The dilemma of today is to remain well risk-managed, but somewhat perversely, not at the cost of the necessary risk appetite for growth. This can be done. Many of the greatest businesses of our time were born in and thrived during recessions; GE, IBM, Disney, Microsoft and, of course, Apple. They continue to enhance their reputations during economic downturns.
We need to look no further than the mercurial Steve Jobs in his final years at Apple. While many of his rivals decided to follow a more cautious and tightly managed strategy, he decided not just to meet customer needs, but boldly to anticipate them. In other words, he forgot all about complex risk management models to support narrow, cautious forecasting and decided instead to just make the future happen. From the iPod to the iPhone to the iPad, and the rest is history.
With the predilection of appointing chief executives with strong and proven financial acumen rated way above their ability to deliver growth, global markets will continue to stall.
The recent 2013 Aon Global Risk Management Survey bears out this significant decline in risk readiness among many of the survey respondents. The top three risks in 2013 are economic slowdown/slow recovery, regulatory/legislative changes and increasing competition. This ranking reflects the systemic nature of these risks. The much feared and talked about “business interruption” ranks only at seven, with computer crimes way down at 18, with loss of intellectual property/data down at 29.
While computer crimes, hacking and the loss of intellectual property/data appear constantly in the media headlines, the real “risk” appears to be the reduction in corporate risk appetite.
It is no wonder that businesses with a reputation for being entrepreneurial have become more cautious. It requires strong resolve in a world that’s moving faster, a stifling information overload, but most of all an unforgiving marketplace.
Far too many chief executives are putting off growth decisions because they are extremely tough. The role of the chief executive is to deliver hope, no matter how tough the times. For Steve Jobs, this contagious frigidity meant nothing but opportunity, as he bravely went where no ex-CFO would dare to tread.
Thoughtful Norman knew he needed a dynamic Leighton. Attitude is so much more valuable than skill – especially in a downturn.