Stress & the CEO: What role for the NED?

There’s no doubt its a tough job being a CEO, but it goes stratospheric when you have to manage a game-changing situation that has the potential to destroy or seriously damage the size and shape of your organisation.  Take the challenge of access to capital for instance, as it is one of the top concerns for scale-up entrepreneurs and SME CEOs and consequently one of the top stresses. Which is hardly surprising when its quite usual for the process of raising finance to be more lengthy, more onerous, more incomprehensible and less within the CEO’s control than anyone had forethought.

I read recently that some financing professionals claim the rigorous and stressful process of raising capital ensures that only the best companies (i.e., those most likely to succeed) receive funding. There may be some truth in this, as I’ve certainly seen companies produce clearer, more thorough and more strategically robust business and financial plans as a response to external scrutiny and criticism. But, if only it’s a perfect world, as for every good outcome of the process of raising capital, I’ve also seen a bad one:  spurious demands for data, reports and analysis; legal documents full of irrelevant clauses (only inserted to be negotiated out); and, worst of all, processes that seem to be going swimmingly only to be derailed just when nearing the finish line. Go figure that persistence and resilience are considered the most vital qualities needed by CEOs of companies trying to raise capital.

It also means that money, or the lack of it, becomes the focus of conversation around the Board table and, consequently, as the CEO bears responsibility for raising capital, they face mounting pressure. We also expect them to shield employees from this pressure and to retain a calm, positive and contained exterior for fear that otherwise others in the company will get stressed and performance will go downhill.

Crikey, who’d take on that job?

This is a good reminder to NEDs: the CEO is only human and more than likely the situation is causing them extreme frustration, irritation and disappointment to the extent that they are probably wondering what possessed them not to take the sensible job which was on offer at Google. So allowing the CEO time to vent is imperative, especially because those who hold the power over the investment cheque can make unexplained decisions perceived as unjust and unfair. Its elementary human psychology to want to be listened to, and so it is crucial that Non-Execs don’t just jump in with ‘solutions’. Neither should they suggest inane actions that have already been pursued, nor should they express opinions such as “if only the CEO had spoken to so-and-so” if they themselves have not offered any practical help to introduce the CEO to this seemingly very important person known to them.

So once the gripes and frustrations have been aired, the team needs to constructively turn their attention to “if not this, then how else?” and when the leader of the company is experiencing significant stress, NED’s need to be allies not critics. Studies have shown that to build resilience, you need to buffer collective stress and support is essential for stress management within groups. While you don’t need to be the best friend of everyone around the Board table, you do have to work together and cultivate a collective belonging and belief in the talents of the team to get through this crisis.

The good NED then brings perspective, experience, wisdom, clear thinking and contacts. We all know the importance of being forced to pause and reflect when in the thick of a fight and this is where intervention from the NEDs can be so helpful, using the clarity that comes from not being in the day-to-day miasma. They can identify strengths that may be being overlooked, focus the executive team on being data-driven (as the enemy of anxiety is good information) and offer practical help. NEDs should deliver a dose of realism, but they should not be unduly negative as openly reflecting on the dire nature of the situation and being a harbinger of doom helps no-one.

Adding to some CEOs stress is, of course, the underlying concern that the Chairman of the Board can ultimately sack them. Believe me, though, it also adds to the Board’s heightened anxiety that the CEO ultimately can resign! Either way, you will always find pundits who want to introduce someone new to boost the chances of improving a business’s fortunes.  Realistically, finding a CEO replacement at short notice for a company that is strapped for cash is nigh-on impossible, but introducing additional firepower is certainly an option that everyone involved should entertain as anything that helps the company live to fight another day is worthy of being explored.

Times like these are extraordinary so they call for an ‘all hands to the pump’ mentality.  This will help a business raise the capital. For instance, NEDs can introduce possible new investors from their networks or behind the scenes they can use their influence with the external decision makers or, just simply, they can add credibility to the plan by publically voicing their support for the CEO and executive team.  The stress on the CEO will only be worse, and the outcome less favourable, if the resources around the Board table aren’t used and this stress can become toxic and highly unproductive so the absolute last thing your CEO needs in this circumstance is a ritual beating.


Of course, I hope all the CEOs out this predicament weather the crisis, but realistically there are times when it just doesn’t work out.  In these cases, having NEDs on your Board who have experienced it before can help with the practicalities of winding up a company, but when they also have the capacity to be phlegmatic, reflective and supportive it could be the difference between giving up your entrepreneurial dreams or trying again.


Avoiding and managing a “Iwan Thomas” in your workplace

Every so often I get snared by popular TV and, shamefully, this month I’ve been glued to watching Bear Grylls’ Celebrity Island.   This extraordinary exposé of cringe-worthy team dynamics, painful character flaws and conflict has been riveting with the most entertainment undoubtedly coming from Iwan Thomas, former Olympic athlete, whose ‘self-appointed’ leadership caused pretty much all of the aggravation.  Of course, we don’t endure starvation, tropical storms, marauding mosquitoes and zero facilities in our workplaces, but what it showed is how difficult it is to have successful group dynamics when you have no expert knowledge, no-one knowing their particular roles and no means for conflict resolution.

Since leaving the Island, Iwan Thomas has admitted he was a bit of jerk.   A recent McKinsey study identified 62% of respondents saying they had been treated rudely by a work colleague at least once a month.  It’s not rocket science to see that this damages morale and so isn’t good for productivity and efficiency in your workplace.  But what was additionally frustrating about Iwan’s behaviour, was that he made decisions without any expertise or knowledge and led the group repeatedly into making the same mistakes.    It took the full four-weeks before the group started to acknowledge each other’s strengths and weaknesses, leading to more defined roles and responsibilities based on true capabilities and, unsurprisingly, the endless the cycle of failures was broken.

Celebrity Island is a crude analogy but it reminds us of why it is so crucial to recruit the right people and provide them with job descriptions with set expectations and boundaries.  Working with CEOs as I do, I cannot stress enough the benefit that comes from having the right team around you.  Do interview candidates hard and if you need a certain skill set, test them on it.  Recently I was asked to explain a cash-flow statement in a Non-Executive Director interview.  That surprised me, but my being financially literate obviously was very important and putting me on the spot was better than just assuming I could because my CV suggested so.  For senior roles, interview multiple times and in different settings, both social and formal, and ask your team how this person has interacted with them outside of the interview.    Take up references and where possible informally reference too and don’t just listen to referees spout on about how good the candidate is, ask them to give examples.  Finally, be wary of trusting your own instinct as we are all plagued by unconscious bias which happens when our brains make incredibly quick judgments and assessments of people without us realising. Our biases are influenced by our background, cultural environment and personal experiences and they generally will hinder you from making the best hiring decisions.

On the Island we saw lots of conflict and, if I’d been there, it would have tested every conflict resolution skill I’ve ever learned from the mediation training I’ve done and from life (as I have two small children, need I say more?).  I’ve lifted this from a recent article by Lionel Valdellon, titled, “Team Conflict & Conflict Resolution: The 2-Minute Guide” as it is a great synopsis of things everyone can do to manage team conflict:

  • Keep calm. If you’re agitated, you will resolve nothing.
  • Stay alert! If you’re attentive, you can read the situation and interpret verbal and nonverbal communication.
  • Communicate without threatening.  Talking like a fascist dictator will only frighten everyone more. No one will listen to you. Your nonverbal communication is as important as your words.
  • Respect all differences. Keep language and tone neutral, and avoid disrespectful words. Problems aren’t solved by calling people “idiots” and “drama queens.”
  • Use humour carefully. A well-timed, non-insulting joke can defuse a situation faster than anything.
  • Be generous. Keep in mind that resolving the conflict is more important for the working relationship than “winning” the fight. Which is why generosity is needed. Know when to let go of grudges. Know when to forgive and forget. Learn to hear the apology that was never said.

So, my advice is to avoid hiring a ‘Iwan Thomas’ in the first place by careful selection of your team, but, not wishing to be too derogatory about poor Iwan (who did almost redeem himself on the programme), people can be managed by good conflict resolution skills and these skills are hugely useful in business because, however hard you try to avoid it, you are going to have someone at some point behave like a jerk in your office.

Equity allocations. How do you keep it fair?

The allocation of equity in start-ups and scale-ups is fraught with issues and so I was interested to read Mike Moyer’s book ‘Slicing Pie’ to find out his take on this thorny problem.  Mike’s philosophy that is “a person’s % share of the rewards should always equal that person’s % share of what’s put at risk to achieve those rewards” and the book puts forward a ‘formula’ to calculate this.

My first objection to Slicing Pie, when I encountered the concept a year or so ago, was that I couldn’t see how it would work in the UK’s legal and tax system but Mike put me in touch with lawyers Maxine Chow and Deborah Griffiths and, hooray, they have cracked this problem (see

So, given dynamic equity splits can work legally and be tax efficient, what is my view on Slicing Pie?

Well, firstly, in a world where entrepreneurs probably have never heard of other ways of allocating equity aside from fixed initial allocations, ‘buying’ in and share options, Slicing Pie offers a thought-provoking alternative.   Entrepreneurs, both those inexperienced and experienced, will benefit from simply reading the introduction to this book.  At the very least this will make you more thoughtful about dividing up equity.  Entrepreneurs and advisors who have ‘been around the track’ will all cite situations where the equity didn’t reward the right people; where those who deserved to make a pile of money lost out to those who undeservedly had been able to hang onto equity from earlier allocations where the company looked markedly different.

So I really like the concept of ‘dynamic’ equity where allocations change over time and hangers-on don’t take a disproportionate share of the spoils and Slicing Pie provides a solution to the problem.  To me, the scenarios where it must work well are those with strong teams, all of whom are doing their fair share of the ‘sweat equity’ thing.  For example, I know a duo who have a baking company where they would have benefitted from the Slicing Pie approach as they both care 110% about the business and are of a similar experience level, but they have different strengths and can put in differing amounts of time into business.  Where I think where it starts to break down is when the people are not all in the same mindset or there are big capability and experience gaps in the team.   A single entrepreneur who ‘employs’ her team, albeit with lower wages than they’d get in a corporate, has less reason to do Slicing Pie in my mind and would be best using share option packages as equity incentives.

The real value in the Slicing Pie book is the ‘formula’ that Mike has developed for actually calculating the share split, but this is where it ends up reading a little like a manual to set up a spreadsheet, which will suit some people down to the ground but irritate others.    Generously, Mike is at pains to point out you don’t have to use his formula, but once I’d read the whole book, trying a DIY version felt insurmountable to me but I do know some entrepreneurs who would joyously do this and create some type of Slicing Pie hybrid.  On his website,, he has downloadable software and I’d advise this to be the place from which to start.

I work with a wide range of companies at different stages of growth, so I’m not often in the thick of the ‘sweat equity’ moment which is where this book fits.  I’d personally find it very interesting to see the reactions to the book and its philosophy from start-ups in  UK incubator or accelerator programs as I am left wondering whether the scenarios he describes of people working as “grunts” for free are much more prevalent in America.  The book is very Amercian, but business is business and you can get over the terminology.

I’d wager dynamic equity splits will increase in popularity as there is an inherent sense to them, so entrepreneurs, it is worth reading this book, especially in the absence of anything with a more British slant, although if there are home-grown versions of the idea I’d love to hear about them.






The Greatness of Price

How good are you at pricing?  How often do you think about how you are pricing your goods and services?  Probably not often enough and certainly not as often as is best practice.  If you haven’t noticed, pricing has got a whole lot more sophisticated and moved on immeasurably from the relative simplicity of train fares costing more at peak times.

Just to get you thinking about price, let’s start with senior citizen discounts.  Mull them over for a second and before long I’ll wager you’ll query whether such discounts based solely on age should apply to all, especially when you consider the median income of UK pensioners at £394 per week is now higher than the median income of the rest of the population at £385 per week (October 2015, Institute for Fiscal Studies ).  This is an example of generalised price discrimination that, on reflection, seems a little “unfair”.

Consumers perception of “fairness” in pricing is hugely important.  We are turned off companies if we perceive the price we have paid is unfair, for example, apparently, the price you pay for app purchases from a Safari browser can be higher than the price paid for the same app purchases from a Firefox browser.  Now it doesn’t take a genius to work out what generalised assumption is behind this and I find that pretty annoying, even if it is true.

If I am paying a different price for the same product I want that price difference to be justified, I want to feel it is fair and, better yet, I’d like to feel it is to my advantage.  On that last point, there are some creative geniuses out there doing some extraordinary good pricing promotions that customers love.  Enjoy the simplicity of the transparent and fair pricing achieved by New Zealand Airlines auctions for upgrades New Zealand Upgrades and see how Starbucks ’snooze button’ app Starbucks snooze resonates.  Intriguingly, the Starbucks idea wasn’t actually made by or taken up by Starbucks but, regardless, I love it.

What I don’t want to feel is taken advantage of.  Did you know that Mattel’s “Barbie I can be” apparently costs a different amount depending on which career Barbie you choose?  They are tapping into parent aspiration because we’d prefer to buy Vet Barbie than Hairdresser Barbie for our daughters so we are prepared to pay more for her.  Well, yes, but really?  Similarly, let’s talk Pink Tax and whilst I’ve never really complained about paying more for clothes and toiletries, now that it has been pointed out to me that sometimes I pay more for exactly the same thing, let’s use the example that it generally costs more to dry clean a woman’s blouse than a man’s shirt, I am incensed.

So should prices perfectly mirror our willingness to pay for something? This is where we are going with technology, towards ever more personalised pricing.  Well, I do want this, but only sort of, because there is a very fine line between understanding how much I am willing to pay for something and how much I would like to pay for it.  Psychologically, I love getting what I perceive to be a bargain; I feel a little sense of joy and I get a bounce in my step.  But here’s the thing, I think best practice pricing in the future will know this about me as academics like Marco Bertini are researching the human psychology of pricing in such depth that it is entirely possible my preference for getting a bargain will feature in my personalised pricing profile. I’m reminded of dog training here (keep with me!) as you’ll get a dog to come back to you if occasionally you provide a huge treat, unpredictably, when they do so.

Winston Churchill said, “the price of greatness is responsibility” which led me to my title because if I change the words a little I get “with great prices comes responsibility”.  The data is there to analyse the heck out of individuals purchasing decisions but the winners will be those companies that add a dose of psychology to the mix when they price.  None of us like being second-guessed all the time, so please companies surprise and delight me with your creativity in pricing and be responsible with my data because if you annoy me, I won’t be buying unless, of course, you’ve deceived me, but that’s a whole other story.

I am indebted to Tim Ham from Pearson Ham for providing the inspiration for this article.  foxtrot-0

Are you an effective NonExec Director?

Do you have what it takes to manage a CEO like Camila Batmanghelidjh?4282

The article in today’s Guardian,”Camila’s Kids Company: The Inside Story review – both damning and vindicatory” by Sam Wollaston  accurately summarises my feelings on watching the fascinating BBC programme last evening about Camila Batmanghelidjh and Kids Company.  It was a extraordinary exposé and very revealing – if you are interested in running businesses do watch it.

I am left reflecting on how important it is that Trustees, Non-Executive Directors and Board Governors really, truly scrutinise the operational decisions of management and how difficult it can be to do this with a charismatic, single minded CEO who, no doubt in Camila’s case, brushed off probing questions and deliberately kept information away from the Board.

It strikes me that to get it right, the Board needs to be not just seen as additive but actually is additive to the company.  In addition, they must overtly demonstrate they have the same common interest as management, namely delivering the mission of the business and safeguarding the interests of the stakeholders.  This makes sure the relationship with Board Directors is positive and supportive so that CEOs and managers are confident about bringing bad news to the Board table – Board Directors are not parents to tell the management off which is how I think Camila saw it.

It also intrigues me that she tried to hide behind the audits and because they were ‘clean’ everything was therefore fine.  Given what we now know this not only reveals her own inadequate financial understanding but begs the question why didn’t her Finance Director explain it to her.  Interestingly the TV programme doesn’t show any of the finance professionals in the business – they must have been there but obviously they were so way down the ranks of importance in Camila’s mind they didn’t merit featuring on the documentary.  I think CEOs not seeing (or demoting) the value of the finance function is always a bad sign and the Board should have treated this as a warning and investigated it.

And since when are we expecting moral judgements from our auditors? Auditors make sure money is properly accounted for, which is entirely different than passing judgement on how its used, unless, of course, it has been used illegally.  It was the job of the Board to query the brown paper envelope payments to individuals which would have been documented in the accounts as ‘food vouchers’ and similarly the Trustees needed to decide if splendid interior of the “White House” home (paid for by Kids Company for psychotherapy) was appropriate, as the accountants would have signed off ‘costs of refurbishment’.   This also speaks to having Trustees who are qualified to do the role.  The financial mismanagement at Kids Company is now well documented – unrestricted reserves in the 2013 accounts of less than £500k when benchmarks suggest this should have been nearer £4m – and yes, in this case I would have expected the auditors to alert the Board that the reserves were too small, so were the Trustees sufficiently financially literate?

The list of the Trustees of Kids Company looks good, indeed it looks impressive.  Actually this list was quite hard to find; Alan Yentob is referred to all the time in the media but I had to dig into the Fourth Report from the House of Commons Committee to find the list of the other Trustees in Annex A.   One can only surmise that these, on the face of it, well qualified business individuals just didn’t take the time to get close enough to the business; that were they just ‘stuffed shirts’.

The lesson to CEOs is there’s no value in having stuffed shirts around your Board table: you need to get over any delusions of grandeur you have that you don’t need oversight because you do.   Board Directors or Trustees should be selected on the basis that they will both do their job well and work with the management team effectively.  In my mind, there is no doubt Kids Company could have been saved if the Trustees had done their job properly.

David Bowie: the Great Innovator. Should businesses follow his example?

Looking back at David Bowie’s career I’m struck by his astonishing ability to be constantly and consistently ahead of trends.   It isn’t always clear if he was the cause of certain trends or just an early adopter thereof, but what we do know is he made genres of music, used technologies and wore fashions before others did.

To many his outlandish characters from the early 1970s with their ambiguous gender and flamboyant fashion symbolise these gifts he had as an innovator. Yet there is much more to it than Ziggy Stardust – just watch Bowie performing Young Americans in 1974 and he looks like a ‘80s New Romantic ten years before his time. He evolved again in 1976, bringing the sound of synthesisers and electronic music to his fans years before this became mainstream. No one better personifies innovation than Bowie as a technical pioneer, musical experimenter and visionary.

In business we seek innovation to drive value and growth so is Bowie a role model to emulate? There are similarly business heroes who have earned the title “visionary” for their innovative genius – Steve Jobs, Bill Gates, Mark Zuckerberg to name a few – all whom have invented a product we had no idea we needed and now we can’t live without. But for every successful trend-setting invention there are zillions of wannabes: entrepreneurs and manufacturers creating gizmos that fail, retailers gambling on and losing out to fashions, developers designing tech that never gets adopted. Crudely, finding life on Mars might be simpler than it is to actually create a product or business innovation that changes the world.

As an example of how easy it is to not get it quite right, in the mid 1990s Motorola visited my Business School and conducted focus groups seeking views on their prototype for an integrated mobile phone, pager and electronic organiser. Looking back, they were innovating in the right place, the pager became text messaging and our phones now seamlessly integrate with diaries and address books. But we now know it was styling as well as functionality that truly would revolutionise the mobile phone industry. The prototype we saw looked very similar to the black plastic phones of the day.   To be truly trend-setting Motorola needed to think more radically which, of course, is was what Apple were doing. Additionally a focus group with Business School graduates was probably a mistake as, I am embarrassed to say now, we didn’t get the concept and were very dismissive of it, which shows just how tricky it is to product test when your idea is ahead of your consumers.

If the risks of getting innovation wrong are so high what does this mean strategically for businesses? Well, continuing the Bowie analogy there were many bands and singers who became successful by picking up on Bowie’s ideas, copying them and then varying and improving upon them. Luckily, in this information age, gaining understanding and knowledge of the trends impacting your business has never been easier. Setting time aside for some business reading is a quick win. A little more effort is required to grow a work culture that cleverly uses business data and data analytics to make good decisions. Start by first asking the right questions to identify customers, markets and influencers; then regularly and systematically collect these data, analyse them and look for trends. Combine this with regular reviews of competitors and a sprinkling of innovative thinking and you’ve a good recipe for success.

One final point is, of course, that it’s very blinkered to give all the credit for his success to Bowie’s visionary genius. He recognised the need to work with other people and he sought out and collaborated with those who had expertise in specific musical genres and technology. In the same way, businesses who seek the expertise of sector gurus and who hire talented individuals to expand the company’s knowledge capital do so to their advantage.

It’s true that constant reinvention and innovation in a Bowie-esque way could deliver stratospheric returns (indeed you could be saying hello to Major Tom) but it’s a hugely high-risk. A different strategy, especially for small to mid-sized businesses – those who might not want to bet the ranch – is to be just one-step behind the pioneer and learn from them. As Bowie said, “I believe that I often bring out the best in somebody’s talents”.