Can a birdie take off with its wings clipped? Can you rise high when you’ve nothing to stand on or more appropriately when you’re falling flat? Can you lift off without a platform underneath to stand on? Can a business grow when it is on a losing spree?
Without a runway and an aircraft, you may get as high as a helicopter, hover around and return! You’re never going to take off. And while you’re trying to make sense of it, do also ponder if focusing on a growth strategy at the expense of operations will ultimately lead you to a strategy or a catastrophic loss of operations?
And then can a person on whose watch operations suffer doomsday be trusted with a growth strategy?
Now there could be many reasons why someone would be so foolish to let go of existing operations for the sake of growth and strategy. These could be:
- A surface floater who has no intent of understanding operations because it takes a deep dive.
- A self-styled strategist who thinks it’s better to hand over the reins of the existing operations to an ages old established team and not get involved in it.
- A person who prides himself as a turnaround specialist believing established operations don’t warrant his time and attention.
- An incompetent resource who cannot make sense of the meanings embedded deeper.
All noble causes, one might say! And may as well be pretty understandable. Because that’s why we need to hire forward thinkers and strategists as top executives. To grow far and beyond and maximize shareholder wealth. Isn’t that the most significant KPI a CEO needs to have?
Certainly, that’s true, but only after the CEO has taken care of current business operations sustainability. Because:
- One can only get comfy in thinking about growth and strategy when the current business is stable and is not taking downward strides.
- One can only think about maximizing shareholder wealth through growth when the maintenance of current wealth is certain.
- One can only plot and plan about earning more when the existing business paying for the executive’s salary to be in a growth-induced frame of mind is in a state that ensures those salaries keep flowing in!
But the unfortunate part is sustainability is easier said than understood. As I have elaborated upon this perpetual tragedy emphatically here, sustainability is just another fancy buzzword. And now that we’re going to see the sustainability reporting standards in practice in the near future, the entities have already started the spadework to go around the requirements. Because to the business world, it’s more of yet another checklist to comply rather than a belief to hold and test through action!
Many years ago, during an interview I was asked a question that wanted me to specify my approach to the internal audit function of a prospective employer. Obviously, my answer focused around the internal audit definition and the systematic and disciplined approach. But I was thrown another question on this answer, a practical one, I must say.
They asked that while I will be invested in developing a disciplined approach, what about the pressing issues the organization is or will be facing in the meantime? Won’t they be an internal audit priority? and then came my moment of realization; not all prospective employers ask questions straight out of the book that you can answer from theory!
So, a pertinent question to ask these growth mongering and self-styled know-it-all executives is if they have ever understood or even heard the bird in hand principle? Would you stop feeding and taking care of the bird that you already have in your quest for more?
And yet another one is exactly the one which these executives ask when they’re confronted with losses on the existing venture; I’ve a bigger fish to fry. So, I have to ask, what’s that bigger fish to fry exactly? Isn’t that bigger fish the current business operations that are taking a toll because the executives are too focused upon growth and strategy?
The growth and strategy needs to be developed but not at the expense of:
- Impairing governance by removing focus on existing operations and business and instead highlighting efforts elsewhere.
- Degradation of existing organizational culture and especially its control environment by appointing known cheats and fraudsters to positions of influence and delegating controls to them.
- Diluting controls rather than escalating them without a corresponding evolution in the control environment.
- Deterioration of risk management and internal controls by allowing and justifying policing and procedural non-compliances and violations.
- Disregarding instances of non-conformances with control procedures.
- Decimating instances of theft, pilferages, misuse of resources, misconduct and impropriety.
- Playing down the work of internal auditors.
- Not responding to / acting on complaints on violations, non-compliances, lapses, ethical issues, etc.
And this is all the more important, especially if the current operations are already maimed because they’re no longer profitable. In fact, subdued operations are the reason why a more cautious and considerate approach towards controls is required, simply because these represent a heightened downside risk profile.
But what to do if the executives decide that they will firefight their way through the existing operations management and adopt this as a management tool? Well, the best answer is to turn their typical question about cost of exposure of discovered / reported issues in impairment of existing processes on them.
They should be asked to share the amount of investment in terms of resources, effort and time made in fighting the fire as against sustaining or improving the process. Oh, and yes, the risks too, especially the reputational ones because depending on how small a fire could be, it could still be seen from a couple of blocks away, unless they want their firefighting skills to be their profile marketing ploy!
Or is the growth and strategy focus a ploy for remaining in comfort zone? Simply because you can’t man up to the harsh realities of understanding the situation and finding corrective and improvement actions while dealing with failures in existing operations? After all, this requires reasoning and sensible head on shoulders, a rarity amongst the average executive lot!
And yet another classic executive trait of being surrounded by people who could buttress their way to the top? But then, such executives might have a habit of sacrificing these lambs when the time comes to pining the responsibility on someone. What’s wrong in admitting, “I was never given a good team to begin with!”
So, dear executives, think all about growth, strategy, diversification, once you’ve given what it takes to be top man for the job of dealing with the existing business operations, the one that’s providing for you, for you can only climb up to a higher branch once the branch you’re standing up doesn’t get cut!
Till then, the only strategy you should be concerned about is understanding and shaping internal audit strategy to be assured of your business continuity, sustenance and vitality. Rather than being thought of as an adversary, Internal Audit is your partner here. One that can allay your fears about governance, risk management and controls while you pursue your growth ambitions. But if you think otherwise, God help your stakeholders!
And the most important thing to discuss in TOWN HALL meetings is the state of existing operations and their sustainability. Unless of course you want the next one to be a ‘DOWN FALL’ meeting!
Well, my response to that second question in the interview was prompt, that we already take care of the ongoing issues confronting the organization while studying the systems, processes and risk universe and coordinating with the management and the existing audit team (if at all!) to ascertain what’s happening in real time.
But back then it was definitely an afterthought, meaning it was just a learning experience and that too in a harder way!