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Brexit Britain and the Dunkirk spirit

Article 50 has been triggered. Britain is leaving the EU. Companies in the UK, Europe and beyond, will now be poring over every twist and turn of negotiations and every shift of political opinion to determine the likely impact on their processes and strategy. The FT’s chief economics commentator, Martin Wolf, brilliantly sets the scene for what might lie in store for Britain. ‘Economically, it will lose favourable access to by far its biggest market. Politically, it will create great stresses inside the UK and Ireland. Strategically, it will eject the UK from its role in EU councils. The UK will be poorer, more divided and less influential.’ Injecting a dose of economic reality, he adds: ‘The evidence on modern trade is clear: distance is of enormous importance. The supply chains that link physical goods and services together work best over short distances.’

Brexit advice

Now that the Rubicon has been crossed, how will companies cope, especially regarding the movement of EU labour? FT | IE Corporate Learning Alliance will offer tailored programmes of operational and strategic guidance to clients, using a unique, news-based perspective to help companies frame the challenges, interpret fast-changing developments and ask the right questions. During the next two years, companies will have to decide when to act, when to prepare to act later, and when just to 'wait and see'. They will have to discern what is credible news and what might be happening behind the scenes. And they will have to view Brexit through the particular prism of their own sector, as they lobby for preferential treatment. Brexit is unique. There are no ready-made answers.

Are we more stoic than we admit?

This FT book review of Svend Brinkmann’s Stand Firm: Resisting the Self-Improvement Craze, is a welcome antidote to the promise of positive thinking. It will certainly prompt executives to reflect on, and refine, their work and career expectations.  According to this ‘refreshingly gloomy Dane,’ says the FT’s Miranda Green, we are ‘addicted to quick-fix career solutions which give us the illusion of control.’ The author rails against ‘enfeebling pop psychology’ at a time when executives need to ‘build an inner core of resistance and integrity.’ He adds: ‘Being yourself has no intrinsic value whatsoever.’ Far better ‘to cultivate mental toughness to prepare for our economically unpredictable future.’ As FT columnist Lucy Kellaway recently wrote, ‘the biggest reason for unhappiness is that we expect too much….The corporate obsession with happiness is part of the cause of our unhappiness.’ ...

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Britain’s accidental managers

The case for better corporate learning has been made, perhaps inadvertently, by Bank of England economist Andy Haldane. While it has long been known that Britain suffers low productivity, Mr Haldane asserts that a major cause of this is the country’s mediocre management. In this FT article, Ann Francke, chief executive of the Chartered Management Institute (CMI) notes that unlike in Germany or the US, ‘managerial skills are not being taken seriously and not being valued’ in the UK. Much of the problem lies with Britain’s 2.4m ‘accidental’ managers who are promoted thanks to their ‘skills in the job, not because of their aptitude or experience managing people.’ Unsurprisingly perhaps, a 2012 CMI survey found that 43 per cent of members polled ranked their own managers as ineffective.

Aside from a small group of dynamic, often London-based, ‘frontier companies,’ typical shortcomings include: deficient operations management, inadequate performance monitoring and target-setting, and poor talent management. But companies can raise their game with on-the-job management apprenticeships; pairing and mentoring with more productive organisations; and encouraging managers ‘to spend more time with their direct reports’ Ms Francke says.

Re-emerging markets: is the optimism justified?

Are investors right to feel more optimistic about emerging markets? C-suite decision makers and talent managers need to keep track of a rapidly changing, and often ambiguous, outlook. The FT reports several signs of improvement. Overall, emerging market GDP surged 6.4 per cent in January year on year, its fastest monthly rate since June 2011. The net capital outflows of recent months have slowed significantly while the purchasing managers’ indices have picked up. Shipments from China, Brazil and South Korea are all growing strongly in dollar terms this year, while average container shipping costs from East Asia to South America have soared six fold since last year. Optimists believe that US President Donald Trump will not be able to implement his protectionist measures which would stifle emerging markets growth. Some put their faith in China playing a bigger trade role in Asia. Others are displaying a new appetite for Asian debt.

However, if the short-run emerging markets story seems positive, the medium term outlook appears shakier. Much depends on rising commodity prices and China’s efforts to boost domestic demand, which has involved further inflating the housing market. Is a major emerging market correction on its way?

Longer term, India and China—forecast to be the world’s largest economies by mid century—cannot be underestimated. Martin Wolf reflects on their dramatic economic transformation  of recent decades. China’s GDP per head is now 26% of US levels, while India’s is around 11%. India is now the more open to the global economy with a trade-to-GDP ratio of around 45%. Much of China’s dramatic and ongoing change is evident in its soaring wage growth. Pay has trebled in a decade. The average manufacturing wage has overtaken those in Brazil and Mexico, and is rapidly catching up with Greece and Portugal. Investors in China say that jobs will shift to lower wage cost countries, but its huge domestic market will support local manufacturers for a while yet. Moreover, China’s ageing population is likely to add further upward wage pressure. The bigger long term question, for both China and India, is whether the world economy will be able to accommodate these countries' ongoing growth.



Challenging talent myths and realities

Recruiters should focus less on CEOs and millennials and more on overlooked talent

We often hear about the rarity of top talent, and the difficulties of recruiting, rewarding and retaining the best. But are companies looking in the wrong places? While the debate rages over justifications (or lack thereof) for high executive pay and the difficulties of retaining footloose and starry-eyed millennials, companies may be missing other talent pools through lack of imagination, inflexibility and prejudice.

For years, companies have been falling over themselves to attract millennials (i.e. those in their 20s and early 30s) who we are told will skip jobs at the slightest hint of corporate conventionality. Although some younger staff do look for experiences and personal development, the FT reports that millennial job-hopping may be a myth. A Resolution Foundation study reveals that over half of today’s millennials remain in the same job for more than five years (compared with 43% of young employees born a decade earlier), resulting in lower pay rises of some four percentage points. The financial crisis appears to have accelerated a trend that began before 2008, with a Manpower survey in 25 countries showing that for the vast majority of millennials job security is paramount...

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Re-learning old lessons about failed mega-mergers

The FT’s ‘Big Read’ on Kraft Heinz’s failed bid for Unilever contains many lessons for senior executives and their advisers about the dangers of mega-mergers. The highly-leveraged, US$143bn offer, that would have created the world’s number two consumer goods company, breached many of the fundamentals that underpin any effective merger.

From the start, crucial signals were missed. The initial meeting between Unilever CEO Paul Polman and Alexandre Behring, chairman of Kraft Heinz, was not as friendly as the latter believed. Early misunderstandings between corporate leaders typically sours the deal later on, often when it’s too late to stop it. In this instance it was particularly important given that Warren Buffett, who formed part of the buying group, avoids hostile bids.

In a true merger, as opposed to a hostile acquisition, both sides must see the benefits—especially when a target company is so much larger than its acquirer. But the deal logic appeared one-sided: much of its justification lay in the scope for ‘rationalising’ Unilever’s packaged foods business. As the FT reported, one person close to Unilever observed: ‘The deal made perfect financial and strategic sense for them, but absolutely none for us.’

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How CEOs become isolated

Asked what ‘keeps them up at night’, few senior executives would answer honestly: 'how I can get my boss’s job' or, more likely, 'how I can stop rivals stealing my job'. But if this sounds familiar, Margaret Heffernan’s FT article Fear of losing top spot at work will hinder you holds valuable insights for HR and L&D professionals as well as top executives. She speaks to social psychologist Carol Dweck, author of Mindset, about how ‘people with a fixed mindset who find themselves at the top of an organisation prize their elite status so much they are consumed by the fear of losing it.’

‘Their immense achievements created celebrity and wealth but instilled fear and isolation,’ Heffernan writes. ‘These leaders knew that they were surrounded by others who were very capable. They acknowledged privately that their gifts were not unique. And so they withdrew, becoming isolated, unable to connect with clever people all around them who now appeared as threats.’

Nor is this a problem for just CEOs. The article refers to GE’s infamous, now abandoned, annual ranking of executives and its firing of the bottom tenth. But milder versions of this practice persist in many organisations. Professor Dweck notes that it ‘stops colleagues from sharing insights or contacts and helpful information. Instead of becoming more dynamic, companies can become sclerotic and defensive.’ For HR readers, the solution may well depend on far-reaching cultural change within the organisation. But by just recognising the existence of such a trait is an important step.

The growing shareholder revolt over executive pay

The battle against egregious executive pay packages is heating up again following last year’s ‘shareholder spring’. Much of the anger is inspired by the new populist mood in the US and the UK. The FT reports that Barclays ‘is proposing to freeze its chief executive Jes Staley’s maximum pay package for the next three years, which amounts to about £8m a year.’ A third of shareholders at travel company Thomas Cook last week refused to support pay plans. Cigarette maker Imperial Brands had to amend remuneration plans in the face of shareholder anger. More pressure is expected from major institutions such as BlackRock, Fidelity International, Aberdeen Asset Management, Standard Life Investments and the Norwegian oil fund. Long term incentive plans are no longer deemed fit for purpose. But while most people would agree there should be no reward for failure, should CEOs also be awarded big bonuses for success that they are paid to achieve anyway? The executive pay debate holds many lessons for corporate leaders. Most importantly, they should consider carefully on what grounds they deserve their packages. Getting this right is not just a PR or governance issue. It goes to the heart of fairness in business.

Computer says ‘maybe’

A question that will increasingly dominate C-Suite conversations is how far machines can replace humans. A Japanese restaurant recently tested out a robot chef to much customer amusement. But is this the answer to staff shortages in the hospitality industry? Aside from concerns about human redundancy, the experiment raises questions around technology, HR, customer service, marketing and more. Although the restaurant customers found the robots’ clumsy movements to be fun, there are more serious psychological barrier to overcome especially in sectors that value personal interaction. The FT reports that ‘respondents were almost evenly divided over whether they would use hotels where the receptionist was a robot,’ though 40 per cent did not mind robots carrying out cleaning and other non-customer facing tasks. That distinction may prove key for San Francisco-based start-up Momentum Machines whose robot can autonomously produce 400 burgers in an hour, equivalent to three human flippers. L&D executives might now consider in which business areas their own customers would welcome or reject automation.

Trump as natural disaster

Managing government relations in the US is now like “dealing with a natural disaster” says one corporate leader. No-one is sure where the President might strike next and its impact on the share price. It’s forcing senior executives to rewrite rules on government relations and PR at the highest level.

Getting on the right side of the administration is complicated when parts of your international workforce and company brand values stand in stark opposition. Gillian Tett, the FT’s US managing editor, urges CEOs to make their voices heared. But how? Some executives are accused of ‘acting like a collaborator’; others insist that ‘We don’t know what Trump will do, but we need to get involved!’ John Gapper, the FT’s Chief Business editor, suggest companies ‘fight back, both in the courts if Mr Trump breaks the law and for public support; they must also be willing to suffer his abuse’ he writes.

Some are now taking the latter course. Uber CEO Travis Kalanick quit Trump’s business advisory council in the face of a viral social media campaign urging users to #deleteUber in protest against Mr Trump’s immigration order. But such decisions might prove trickier, for example, for finance chiefs relishing executive orders aimed at dismantling much of Dodd-Frank banking regulations. That said, ‘Mr Trump’s honeymoon with the C-suite extends only so far.’ What happens if the administration targets skilled-worker visas next?

So companies are developing a variety of tactics: repackaging existing plans in line with the Trumpian mood; negotiating their way out the direct line of attack; or simply praising policies wherever possible to make the President look good, and secure political access on the way.

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