A few years ago, I moved away from teaching and coaching the “soft” skills of management and have been concentrating much more on the “hard” skills.
One of the hard skills of management, which everyone running a department or process should know, is one which appears to be missing in MOST businesses. It is the art of Business Control.
It is very straightforward: POPS.
POPS is a very simple but effective method of structured management thinking.
If the POLICY, ORGANISATION, PROCEDURES, SUPERVISION Business Controls had been applied to the Banking Industry, we would never have had a financial crisis.
“POLICY” is the high-level control and is the responsibility of the Board and Senior Management. They not-only put together the Policy but their duty is to ensure that everything which happens within the organisation is in keeping with Company Policy.
For instance, if traders fiddle with interest rates and interest rates have been fiddled-with for years without anyone being brought to book – they may be forgiven for assuming that fiddling with interest rates is part of the bank’s Policy and culture.
“ORGANISATION” is about the people. Are the right people doing a particular job? Have they been trained? Have they been communicated with? Do they know what they can and cannot do? Is there a good Management Structure which can report up to Board level?
“PROCEDURES” : For instance, is a trade or block of trades recorded and checked? Are there “snap” checks and audits designed to check that company Procedures are being adhered to.
SUPERVISION is a day-to-day control (so is the Procedures Control). This control is the responsibility of the “one-up” manager. The one who is there – not the one at meetings. Very often , things happen without day-to-day supervision. For instance, if a trader makes a few dodgy deals, a good manager’s responsibility is to (at least) make the trader know that he could be caught.
Here’s an example of how a thorough Management Audit which looks at specific Business Controls can unearth the REAL cause of an issue. It is also surprising how many breakdowns and corporate crises are the result of a bad or non-existent high-level POLICY control.
In 1987, the car-ferry, The Herald of Free Enterprise sank in Zeebrugge Harbour and 193 people died. There appeared to be a very simple explanation for the “accident”. The loading doors at the front of the boat (through which cars entered the boat) had been left open.
However, a proper structured investigation designed to identify the Root Cause of the disaster was needed.
The doors were left open because one man was asleep when he should have pressed the button to close the doors. Therefore, the PROCEDURES control had broken down. The procedure was that when the boat was about to move, a button would be pressed on the bridge. That would trigger the man to press the button to close the doors.
The direct SUPERVISION control was was non-existent because the man who should have pressed the button was managed by a senior man who was only in charge of ferry car-parking and not door-closing.
In addition, there was no PROCEDURE for anyone to confirm to the bridge whether the doors were closed or not. It was assumed that once the “close the doors” button had been pressed, that the doors were closed.
The ORGANISATION control is about the people involved in the process. In this case, the organisation consisted of just ONE lowly manual worker who, on this occasion, was asleep. The First Officer who pressed his button, immediately assumed that once he had pressed it, his job was over.
The last Control is the highest-level – POLICY. This control is administered right at the top of an organisation – by the Senior Management and the Board of Directors.
One may be forgiven for thinking that there is absolutely no way that such a high-level control could possibly have anything at all to do with someone forgetting to close the loading-doors on a ferry.
However, the Root Cause of the Herald Of Free Enterprise disaster WAS a breakdown in the POLICY control.
The Company’s POLICY was to turn the ferry around in 15 minutes.
Consequently, the man who should have pushed the button was tired because he had not slept properly for two days and was already asleep when the boat had docked.
As is often the case, the ultimate responsibility for the sinking belonged to the management.
Today, Barclays banks has a very similar situation in respect of its traders who are alleged to have manipulated LIBOR for purposes of profit!
Was there proper SUPERVISION? Were PROCEDURES in place to guard against improper behaviour? Was the ORGANISATION right? Were the traders only (as far as they understood) acting within Barclays’ POLICY? Did Barclays have a “SELL, SELL, SELL!!!” Policy which encouraged short-cuts and cheating?
A measured, thought-through approach is needed.
The reaction by the media and politicians already suggests that instead, there will be a free-for-all, accusatory, disorganised non-process, preceded by the customary witch-hunt and a Lawyer Benefit in the shape of an inquiry.
What is REALLY NEEDED is a Management Audit delivered by a team of sceptics NOT PAID FOR by Barclays.
That is to say –NOT Pricewaterhouse Coopers and certainly NOT those Muppets at the Financial Services Authority.