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Carrefour, annus horribilis

Jul 12, 2012   //   by Alexander Lyon   //   News  //  Comments Off on Carrefour, annus horribilis

A Carrefour hypermarket in Sibiu, Romania at nightfall, by 7castleCarrefour’s bad year is getting worse with each new piece of information that comes to light. The “Carrefour Planet” stores have been discontinued less than a year after they started to be rolled out. Sales are down. Profitability is down. Top management has been overhauled, but the new CEO’s military approach and dedication to cost management doesn’t seem like it’ll be enough to return to previous profit levels. Carrefour has been taking a beating in urban, small-store markets at the hands of Monoprix and Franprix, whilst Leclerc’s aggressive advertising is turning up the heat for suburban, larger-store markets. Yesterday’s news was in the same vein, but felt like another nail in the proverbial coffin of Carrefour’s decline : 6% lost in market share in barely 6 months. Ouch.

How can corporate alignment techniques and methods answer Carrefour’s challenge? This article is a basic, elementary look at the type of thought process and solution that is possible.


The CFO effect

Mar 27, 2012   //   by Alexander Lyon   //   News  //  Comments Off on The CFO effect

What topic is the start, middle and end of most board meetings? What single item is repeatedly chosen by companies to evaluate the validity of a project or strategic decision? What is the overwhelming majority type of objective employees are given?

Financial. ROI, Cash Flow, CAGR, EBIT, Iso-Perimeter Growth, Productivity, Sales… Businesses make their choices essentially on financial aspects. A project that can’t show it’ll at least break even won’t see the light of day. Investments that don’t meet the ROI targets are postponed or cancelled. These metrics are integrated to employee performance reviews and contracts, helping management separate the wheat from the chaff with a simple spreadsheet.

As I was reading Economia, I came across Amy Duff’s article “Beyond Numbers“. Whilst I agree with the conclusion the article holds, the premises and the reasoning are deeply flawed. Yes, board members need to be much, much more than just specialists in their domain with little capacity to see beyond their sphere. But that’s a general remark, not one particularly attributable to CFOs. Building a strong corporate strategy is something that’s best done when given insight from all possible angles, including corporate finance. However, CFOs should not be earmarked as “#2” in corporate hierarchy, nor the “power behind the CEO’s throne”.

No purpose, no culture, no thanks.

Mar 15, 2012   //   by Alexander Lyon   //   News  //  Comments Off on No purpose, no culture, no thanks.

Lloyd Blankfein testifying in the Goldman Sachs fraud hearingsIn yesterday’s New York Times, Greg Smith penned a resignation letter to Goldman Sachs. After 12 years at the company, he feels the ongoing change in culture is more than just a threat to the continued business of the firm, but also to the atmosphere within the company and the individual motivation of employees.

In his case, the lack of culture is such that he felt the need to leave the company, not because there were insufficient financial motivators or disappointing working conditions, but because the only purpose left in the company was profit.

As humans, we look for motivators to determine what we want and what we avoid. But motivators are much more than the simple financial aspects that so many companies rely on, or even benefits such as insurance, working hours and holidays. Motivators are much more broad, and as Mr. Smith shows, one important motivator within the company is the sense of purpose, of shared culture; the idea that the entire company is working towards a common goal that each person adheres to. When this purpose erodes, not only do employees lose productivity, but they start making choices that are not in the interest of the business, the customer or the shareholders. Eventually, talented and driven employees will leave the business not because they can be better paid elsewhere, but merely because elsewhere they can have a purpose, a meaning to what they do.

Mr. Smith’s tale is a cautionary one all businesses can learn from, not just Goldman Sachs’ top executives.