Expert View: Goal-oriented thinking outside the box

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The Independent Online

Orwellian "newspeak" has taken over UK plc. Chief executives invent corporate plans with sobriquets like Unilever's "Path to Growth". Results statements require very careful reading: last week's from Austin Reed reported a 72 per cent slump in profits but held out that "early results from changes already implemented are showing some encouraging trends". And you can tell a company that damages the environment these days by the number of pictures of trees in its annual report.

Orwellian "newspeak" has taken over UK plc. Chief executives invent corporate plans with sobriquets like Unilever's "Path to Growth". Results statements require very careful reading: last week's from Austin Reed reported a 72 per cent slump in profits but held out that "early results from changes already implemented are showing some encouraging trends". And you can tell a company that damages the environment these days by the number of pictures of trees in its annual report.

But sometimes, even amid all this gobbledegook, I come across a mission statement that is simply ridiculous. One company recently stated: "We as a management team embrace change, we thrive on it with constant changes in key personnel, capabilities, know- how and processes." Really? If this makes management feel warm, investors might shiver.

Some years ago, I was part of a stock-picking team that invented the "Investors Warning System". This was a screen of all the factors we had discovered over the years that could endanger a company's performance. High up on the list were: "a change of more than two board directors"; "a change in accounting policy"; and "a major reorganisation". As we applied this system to our portfolios, we found we'd hit on a surefire "sell" strategy, particularly with these change factors. Something over 70 per cent of the sell signals were correct.

What so many firms fail to see is the difference between adaptability to external change, which is a prerequisite for success, and an obsession with reprocessing, tinkering and hire and fire - the internal change that is a harbinger of failure.

Where does this obsession with change come from? In a book just published, Henry Mintzberg gives us a clue. He says an MBA in the wrong hands is a lethal weapon, and that the corporate world has been transformed for the worse by the dominant influence of the qualification. In 1958 there were 4,000 MBA graduates in the US; there are now over 100,000. Too much emphasis is put on pseudo-management science rather than experience, and on the dangerous concept that management skills and processes are learnt, and then can be transferred and imposed.

There is an even more serious side to this. You can see, in some of the recent US corporate failures, how much the management had caught the change bug and were dominated by MBA-type thinkers. Enron was packed with them (including Harvard Business School graduate Jeff Skilling) and, during probes into its collapse, a persistent claim of those honest people who didn't see the fraud was that constant reorganisation and personnel changes made it impossible to keep up.

Long-suffering shareholders in Invensys (aka BTR) have had the knife twisted in their wound one notch deeper in recent weeks. I dare say the decline and fall of this once-great FTSE company is being taught in a business school somewhere right now.

I recall a meeting with the finance director some years ago when I fired question after question on subsidiaries but none could be answered. Eventually, I was told that with so many recent changes in systems and structures, along with some people changes, it was hard for the FD to have a close grip on the business.

Quite. I suggested it might be wise to stop moving the goalposts and to start scoring goals. I'm sure an MBA would have said it differently.

christopher.walker@tiscali.co.uk

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