As a business that advises organisations on how to achieve stretching growth, we work with a wide spectrum of organisations – from blue-chip multi-nationals to start-ups with little more than a couple of founders and a dream. Given our broad client base we’re often asked what lessons can be learned from others. Most commonly it’s the biggest businesses that ask us what they can learn from SMEs and start-ups. They have a warped view of what it’s like to work in such an environment and misinterpret the realities behind the strong growth that smaller organisations can achieve. So, when we outline what we think the most helpful lessons are for them, they can be somewhat unexpected. In no particular order, here are the 10 most valuable lessons I think big businesses can learn from SMEs…
One of the biggest challenges for big businesses is the sheer number of ideas and projects being worked on at any one time. With resource comes a lack of focus and this can seriously compromise your chances of delivering step-change growth. Conversely, SMEs tend to be better at focusing on doing one or two things brilliantly, as they typically don’t have the luxury of big budgets and teams of people. In big companies, there is a palpable feeling of risk associated with just doing one or two things and there is perceived safety in numbers – the more we do, the more chance something will be a success. Wrong!
- Stay Lean
The other big advantage of not having access to significant resources is that it forces individuals and teams to think more creatively. In our experience, too much resource can lead to complacency and even laziness in big organisations. There is a sense that money can be thrown at a problem to resolve it, but in truth, that is rarely the case. When resources are restricted you have to think your way around problems and compensate for lack of budget by having bigger and better ideas. This is something SMEs often use to their advantage. Limiting the resources allocated to a project team in a big business can significantly improve the creativity and quality of that team’s outputs.
- Mitigate risk
In our experience, the smaller the company, the greater understanding there is of the risks involved in doing or not doing something. SMEs tend to be better at understanding risk and mitigating it because everyone is so much closer to the bottom line. Interestingly, when you ask big companies what they admire about SMEs and start-ups they always talk about their desire to take risks. This is a misunderstanding: it’s highly unlikely smaller companies seek out risk given the consequences could mean the end of the road for the business. Rather than taking more risk, big companies should spend more time assessing and mitigating risk – not just of projects they do work on, but also the risk of doing nothing.
- Share the spoils
If you want your employees to be motivated to deliver your vision and growth targets, then they need to know there are different outcomes for them if those targets are successfully delivered. Incentivising individuals via significant upside is much more difficult to do in bigger organisations, where HR is focused on implementing and adhering to rigid bonus schemes. Equally, we find the corporate world less adept at using other non-financial ways of recognising performance and a general reluctance to single out the contributions of any particular individuals. The best SMEs are much more willing to share the spoils with those who delivered them and understand the power of the annual company away day or Christmas party to motivate as well as galvanise.
- Be courageous
SMEs are more likely to ‘play to win’ whereas big businesses are more likely to ‘play to not lose’. The bigger you get, the more you have to lose, and this can drive conservative attitudes and behaviours. For SMEs, the potential gains are always so much greater than the potential downsides of trying something and failing. This is one of their advantages – they have a ‘challenger mindset’ that so few big businesses manage to adopt. The increased focus on short-term goals in big companies also restricts their ability to make courageous decisions that may only payback in the longer-term. Employees need to know what kind of behaviours and decisions are appropriate and be given the ‘freedom to fail’ knowing there will be no negative consequences.
- Be agile
From first-hand experience, we’ve witnessed how quickly decisions can be made within SMEs. During a workshop with a small, fast-growth business, we saw a critical strategic decision made during a cigarette break – one that determined the future direction of the company. Perhaps quite rightly, given what’s at stake, this could never happen in a big organisation. However, decision making and planning in big business tends to take an unreasonable amount of time and involve an awful lot of people. There are huge gains to be made by becoming quicker at making good decisions AND acting upon them.
- Learn & adapt
The other advantage of being small is the ability to learn and adapt quickly. If a marketing plan or new product launch is not going to plan, then SMEs seem more adept at finding out why and intervening quickly. They tend to be closer to the market and to their customers, whereas sitting in the ivory tower of a Corporate HQ can give a sense of being detached and distant from the real world. Learning tends to be more formal, involving expensive and slow research, which means by the time the learning has permeated the business, it can be too late to act to rectify the situation. On the other hand, SME’s approach to learning is usually more informal – some conversations with key customers to inform the assessment of the situation, rapidly followed by a plan to fix things before it’s too late.
- Have a purpose
We all need to know why we get out of bed in the morning and come into the office. More than just the motivation of money, we want to feel like we are devoting 40+ hours a week to a cause we understand and believe in. Whilst corporates try very hard to do this, their expensively researched corporate ambitions tend to be so high level and distant from employees, that they are paid little more than lip service. Given SMEs are so often owner-managed businesses, there is a direct and immediate reminder of why the business was set up and what it aims to achieve. The motivations of these key individuals are inherent in everything the business does, so it cannot fail to rub off on the work force. And if anybody does not buy into that mission, the chances are they will not stay for long anyway.
- Don’t try to do everything yourself
Invariably, when a big business spots a market opportunity, they dedicate resources to creating a new product, service or offer to exploit it. They have a strong bias towards working autonomously to developing an appropriate solution – even if the more logical solution would be to partner with others who already have part of that solution or the skills to develop it on their behalf. We find that small businesses are much more open to joint ventures, collaborations or licensing options that get them to a fit-for-purpose solution quicker, and without huge development investment. They realise what their strengths are and play to them, supplementing additional capabilities by inviting others to work with them. Big businesses could learn a lot from this more pragmatic and collaborative approach.
- Enjoy the journey
One of the most exciting things about working in an SME is being able to contribute to, enjoy and benefit from the growth of the organisation. You are much more able to enjoy the journey – which is often dynamic and stimulating. Most big organisations have existed for some time and they are well into their journey. Often the focus is on not going backwards or just keeping pace with market growth rates. The journey is less tangible – if there is one at all. Whilst this may be true at an overall corporate level, there is no reason why the leaders of teams or departments cannot create this sense of journey and allow all team members to contribute to and enjoy it.
So there they are, 10 key lessons, many of which are clearly inter-related. The challenge for big businesses is they cannot just pretend they are small and act in this way – they have too much at stake. Instead, they must understand the implications for their organisation and focus on emulating a few of the advantages that SMEs enjoy as a consequence of them lacking scale.
Justin Wright is co-author of ‘Stretchonomics – the art and science of success’ and co-founder of innovation and growth agency,Mangrove.
Honest services wire fraud and the need for caution on multilateral development bank projects
By Joshua Ray, Legal Director, Rahman Ravelli www.rahmanravelli.co.uk
A recent court case extended US prosecutors’ extraterritorial reach for tackling corruption. Joshua Ray explains the implications for those accused of wrongdoing on multilateral development bank (MDB) projects
Imagine the following scenario: You are an executive for a Paraguayan construction firm that has just secured a contract with the Paraguayan government to build a hospital in that country. The scale of the project means you will need to hire a number of subcontractors and, as you are in charge of choosing those subcontractors, you decide to seek bribes from those wanting the work. Such action is ill-advised and morally problematic. But as commercial bribery of this sort is not illegal in Paraguay, you may have breached your company’s code of conduct but you have not committed a crime under Paraguayan law.
Yet, unfortunately for you, the funds for the hospital were loaned to the Paraguayan government by the World Bank via a wire transfer from its Washington DC headquarters. And under a recent decision from the US Second Circuit Court of Appeals, United States v. Napout, you may have just committed “honest services” wire fraud under US law—even though you never stepped foot out of Paraguay and did not break your home country’s laws. The Napout decision is important as it expands the extraterritorial reach of US prosecutors’ anti-corruption efforts. For the reasons that I detail below, it has significant implications for foreign businesses, especially those engaged in projects sponsored by multilateral development banks (MDBs), whose financing comes from the US.
As they did after the 2008-2009 financial crisis, the World Bank and other MDBs are counteracting the current virus-induced global economic downturn with plans to deploy hundreds of billions of dollars in loans, primarily to governments in the developing world. Much of this will be parcelled out to private sector entities to construct hospitals, testing facilities, sanitation systems and other important infrastructure. Such projects carry the risk of corrupt local officials and business leaders siphoning off such funds for themselves. MDBs are mandated by their charters to take all reasonable steps to combat fraud and corruption on MDB-financed projects. They do not have law enforcement powers but they satisfy their mandate by building provisions into their contracts with direct borrowers (e.g. governments) that compel the borrowers to adhere to the highest ethical standards during the execution of MDB-financed projects. MDB contracts require borrowers to give the banks freedom to audit any of their books and records that relate to MDB funds.
This right of an MDB being able to audit the books extends to any indirect beneficiaries of MDB funds for a project, such as suppliers, consultants and contractors. Such third parties must also agree to submit to the MDB’s jurisdiction to investigate and sanction them for corruption, fraud or other misconduct. Punishments imposed by MDBs can be harsh, and can include debarment; where a company is prevented from bidding on MDB-financed projects for a number of years or even indefinitely. When an MDB uncovers misconduct through its own investigations it can – and often will – refer its findings to national law enforcement agencies; which can mean even more serious problems for those investigated.
The significance of the Napout decision regarding such situations is that it enables US prosecutors to pursue MDB-related bribery even when the purported wrongdoer is not subject to the US Foreign Corrupt Practices Act. Prosecutors can now pursue suspects for such bribery even if that suspect is not a US company, issuer or agent and has no other connection to the US.
The Second Circuit’s Decision
The appellants in Napout, Juan Angel Napout and Jose Maria Marin, were two former executives at football’s world governing body, FIFA. They had been convicted of using their positions to obtain millions of dollars in bribes relating to the sale of marketing and broadcasting rights. Napout had been president of Paraguay’s national football federation and Marin held the same post in the Brazilian football federation.
They both appealed on the basis that their convictions were the result of impermissible extraterritorial applications of the US honest services fraud wire statute. The crux of their argument was summed up by Napout’s counsel, who argued that the US had no authority to police the relationship between a Paraguayan employee and his Paraguayan employer and an alleged scheme involving South Americans that took place almost entirely in South America.
The issue of whether the honest services fraud wire statute had been improperly extended to extraterritorial conduct was then reviewed by the Second Circuit. It concluded that as long as a wire fraud scheme involves a wire transmission from, into or through the US that is “essential” or more than “merely incidental” to the overall crime, the extraterritorial application of US law was permissible.
The appellants argued that honest services wire fraud was a materially different crime than regular wire fraud, as the focus of honest services wire fraud was not the use of the wires but the bad-faith breach of a fiduciary duty owed to the scheme’s victim. They argued that as the actual conduct underlying an honest services fraud scheme occurred abroad, it could not be prosecuted in the US solely because it used US wires. But the Second Circuit disagreed: all that was required to uphold Napout’s and Marin’s convictions were facts showing that the use of US wires in their case (transfers of bribes in and out of US banks) was “essential” to their scheme. On that issue, the Court easily determined that the wires were essential: at least $2.4M of Marin’s payments were sent to his New York bank account and $2.5M of Napout’s were paid in US dollars generated by wire transfers originating in the US.
Implications for Participants in MDB-Financed Projects
The decision in Napout is relevant to MDB-financed projects as it clarifies the breadth of the honest services wire fraud statute and shows the ease with which US prosecutors can use it to target conduct that occurs almost entirely abroad.
The “honest services” variant of wire fraud is somewhat unique to US law and it is not universally recognised: a main piece of Napout’s defence, for instance, was that honest services bribery in a commercial context was not illegal where his conduct took place. But in the Second Circuit’s view, this fact was largely irrelevant. The Court ruled that the men had violated the statute by knowingly violating their duties to FIFA under the organisation’s code of ethics.
So, what does this mean in practice? The Napout decision confirms that the reach of US anti-corruption efforts extends far beyond the bounds of the FCPA; which applies only to bribes paid to “foreign officials” by US issuers, domestic concerns or their agents. Using an approach based on honest services fraud, all that US prosecutors need in order to have jurisdiction is for an “essential” US wire to be used in the scheme. As several of the main MDBs are based in the US – including the World Bank and Inter-American Development Bank – a fraud or corruption scheme involving MDB money could easily make “essential” use of a US wire transmission; thus rendering the offenders subject to possible US prosecution.
This is an important point for companies and individuals participating in MDB-financed projects to keep in mind: even if commercial bribery is legal (or at least widely accepted) in the country where the project takes place, if the ultimate funding is flowing from the US then extreme caution must be taken to ensure that US wire fraud statutes are not violated. This is particularly critical for projects taking place in developing countries where accepted business practices have not yet caught up with norms elsewhere.
Do your contracts and policies stand up to the Covid-19 test? A view from the UK
By Amy Cooper of Ius Laboris UK firm Lewis Silkin
The coronavirus pandemic and lockdown have stress-tested employment contracts and policies, with some showing signs of strain. What should you do now to make sure your employment documentation is ready for the post-Covid future?
A host of new issues for employers has arisen out of the pandemic, from health and safety concerns, to handling furlough and unanticipated homeworking. Employment contracts and policies were not drafted with the current situation in mind, yet restrictions on how people live and work could continue until a vaccine or effective treatment is found, possibly for years. And it seems likely that, as we gradually emerge from the shadow of coronavirus, it will be into a different world of work where home and flexible working is standard.
Furlough and changes to hours and salaries
In March, the UK government intervened to protect millions of jobs with its Coronavirus Job Retention Scheme, encouraging employers to furlough their staff rather than make redundancies. But most employers did not have any contractual right to ‘furlough’ or lay off staff. The concept of furlough leave was completely new and lay-off clauses in employment contracts are unusual, as are flexibility clauses that might allow an employer to reduce employees’ salaries or hours.
As a result, many employers have had to seek explicit agreement from employees to vary their terms where furloughing or changes to hours or salaries have been necessary to avoid redundancies.
Working from home
For those businesses that unexpectedly had to ask employees to work from home, there have been numerous other concerns. These include the health and safety of employees working in their homes, over which employers have little oversight and control.
Also problematic is the protection of personal data where employees are more likely to be using personal devices for work or work devices for personal reasons. And another issue is information security and confidentiality. This is more difficult to manage where employees are hosting calls and meetings at home with family members or housemates in earshot, or they do not remember to lock away any devices and documents.
Finally, grievances, disciplinaries and performance management problems may still need to be dealt with, albeit remotely. Most employers’ policies did not envisage or provide for this eventuality.
These concerns need to be managed in the short term, but they may also become longer-term issues for those employees who opt to work from home for the foreseeable future. Employment contracts should be updated as necessary, and certain terms such as place of work may need to be renegotiated.
Some employers may also wish to reconsider salaries. For example, some employees are paid a premium to work in central London: it may be decided that such high salaries are not justified if they do not need to live in London or spend thousands of pounds commuting. Conversely, if employees work from home, they may wish to be provided with home office equipment and possibly recover other expenses.
Some work cannot be done from home and employees, such as those who work in factories, supermarkets or on building sites, have in many cases continued going to the workplace throughout lockdown. These employers have different problems, such as implementing new health and safety measures in the workplace and ensuring employees abide by them. They may also have new data protection issues as they seek to collect more health data about employees, which might require new policies or changes to their privacy notice.
An increasing number of employers will face issues of this kind as they start to plan for the return of staff currently furloughed or working from home.
Employers’ policies on sickness absence and sick pay are unlikely adequately to cover employees who are self-isolating in accordance with government guidance but not unwell. Although we hope that Covid-19 will not be with us forever, it would be good practice to amend sickness absence provisions to set out expectations for employees who are either suffering from the virus, shielding or otherwise self-isolating. Alternatively, a temporary policy could be introduced covering these matters.
What should employers do now?
Some problems employers are facing will only require short term solutions, while others might need permanent changes to contracts and policies. Bear in mind that we may see a second wave of coronavirus in the coming months which might result in another lockdown, or there could be local lockdowns or further requirements for vulnerable employees to shield. Employers should think about whether they need any of the following:
- A temporary homeworking policy dealing specifically with health and safety, information security and data privacy, supervision and management, provision of homeworking equipment or how to expense any necessary items. If employers think employees may wish to work from home much more in future, they should start considering what sort of permanent homeworking policy they may require.
- An updated health and safety policy or a return to work policy that considers relevant matters in the workplace (e.g. masks, 1m+ distancing, safety equipment, cleaning, shared spaces, one-way systems) and also how to manage employees’ commute so as to reduce risks. A return to work policy could also deal with data privacy issues and new conditions on processing health information.
- Revision of disciplinary, grievance and performance management procedures to cater for remote working, for example, holding meetings by video conferencing, accompaniment, conduct of investigations.
- A temporary change to sickness policies to deal with employees who are not sick but are self-isolating, quarantined after returning from abroad, or ‘shielding’ because they are clinically extremely vulnerable. Employers may want to pay employees sick pay in these circumstances even if they’re not ill, for example, to prevent those who may be ill from coming into the workplace and infecting others. They may also wish to amend policies to deal with any notification or evidential requirements.
- Any changes to contracts of employment? Employers may wish to consider a range of new contractual provisions, such as including a right to lay off employees if work diminishes, or rights to alter working hours, the place of work, or to redeploy employees (e.g. to cover work if other employees are sick). If an employee’s place of work is changing permanently, the employer may want to renegotiate the contract.
Employers should take advice on their specific situation before attempting to make changes to contracts and policies. This can be a troublesome area and, if not handled correctly, could lead to employees claiming constructive dismissal on the basis that the employer has committed a fundamental breach of the employment contract. And remember that, even where employees agree to changes, the employer is still constrained not to exercise its contractual rights unreasonably by the term of mutual trust and confidence that is implied into every contract of employment.
Employers should also bear in mind that if their contracts and policies are regarded too unfavourably, employees may simply vote with their feet and choose to work elsewhere. On the other hand, judicious changes to employment contracts of employment could give employers valuable flexibility to operate in the emerging, post-Covid world of work.
Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector
‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools
A third (33%) of Banking & Finance decision-makers believe decisions made in silos, despite majority (63%) of decisions being implemented worldwide
More than half (57%) of Banking & Finance decision-makers rely on spreadsheets for decision-making despite modern planning tools now available
The #1 decision-making platform, has today released ‘The State Of Decision-Making’ report focussing on how UK organisations make their important business decisions.
Based on a survey of 500 senior decision-makers, across industries including, Banking & Financial Services, Consumer Goods, Manufacturing, Pharmaceutical, Professional Services, Retail, and Transport & Logistics, ‘The State Of Decision-Making’ report from Board shows that today’s business decision-making process is increasingly complex, with multiple departments and seniority levels all responsible for some form of decision-making, leading to a lack of cohesion between units and a waste of business resources.
‘The State Of Decision-Making’ research found that while a clear majority of respondents (63%) working within the banking and finance sector say the important decisions they are responsible for get implemented globally, the decision-making process itself is not joined-up across the business, with one third (33%) also saying that crucial business decisions are made in departmental silos.
The research, conducted on behalf of Board International by independent research organisation 3GEM, also asked respondents the tools they use to make decisions and, while almost every action within an organisation today will lead to the creation of new data, it seems many businesses are not using the crucial insights which data can provide to make important decisions.
More than half (55%) of respondents in the banking and finance industry said they were making business decisions based on data and insights, but ‘gut feeling’ decisions are still made by up to 44% of companies. What’s more over half (57%) of the sector’s companies still rely on spreadsheets to aid their decision-making, despite more modern and reliable tools now available.
“In today’s fast-paced, data rich and evolving business environment, making quick and effective decisions is critical to both compete and survive,” explains Gavin Fallon, Managing Director for UK, Nordics & South Africa at Board International. “Important decisions are being made at any one time across multiple business functions, but all too often, important decision-making is disconnected, modular or fragmented.”
The research also asked respondents about the challenges banking and finance decision-makers face at their organisation, with nearly a third (29%) citing a lack of available data and insights and one quarter (25%) citing the fact there are too many people in the decision-making process as their biggest frustrations. However, industry decision-makers believe that the process can be improved with the introduction of new technology, with the majority (57%) of respondents saying this would make their decision-making better, while 41% also felt increased use of data and insights would help.
“Businesses have to plan every day for a far more uncertain future and set themselves up to prepare for change and keep changing against the backdrop of a more volatile and uncertain marketplace than ever,” continues Fallon. “A bad decision can have wide-ranging impact across the whole organisation and no business can afford to waste time and resources on bets that may or may not come off. As the business environment increases in complexity, the ability to not just react, but predict, in real-time, becomes more important than ever.”
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