News

The Competition and Markets Authority (CMA) will get to the heart of improving trust by prioritising work in markets that really matter to consumers, so they are reassured that what they are seeing is what they are getting. The CMA will build on its track record of tackling issues that jeopardise trust, including recently securing a victory for UK holidaymakers by getting some of the biggest online hotel booking sites to change their ways. The annual plan highlights how the CMA has already carried out sector-wide reviews to protect shoppers and make markets work in their favour. This includes recommending a package of reforms to government and regulators to address concerns raised by Citizens Advice that some companies are penalising millions of long-standing customers. The CMA will also prioritise cases where people may be losing out because they are vulnerable to exploitation, or getting a poor deal due to their personal circumstances. In such cases, the CMA will not hesitate to take tough action on harmful business practices and to protect those who suffer most. In the coming weeks, it will publish the outcomes of its in-depth programme of work on vulnerable consumers, which it launched in 2018. The CMA is meanwhile consulting on proposals to refer the funerals sector for an in-depth market investigation because of concerns over large price increases. The CMA is publishing its annual plan when the timing and nature of the UK’s exit from the EU remain uncertain. The plan makes clear that CMA will be ready to step up to its additional responsibilities, including a new UK state aid function, whether at the end of March or later. Whilst a ‘no deal’ exit would present challenges in the short term, the period ahead also provides opportunities for the organisation to secure better outcomes for UK consumers and to take on a bigger role on the world stage. Due to the continued uncertainty around EU exit, the CMA is publishing its priorities at a high level. It intends to continue to refine and explain its plans as clarity emerges. The CMA enters 2019/20 with a substantial volume of ongoing work and at the time of publication has 23 competition enforcement cases; 6 consumer enforcement cases; 12 merger investigations, and 2 market studies under way. Read the annual plan here. Source: Competition & Markets Authority.

Feb 15, 2019
News

New analysis from KPMG UK has revealed a challenging end to the year for businesses in 2018, as the total number of companies in England and Wales entering into administration during the fourth quarter rose modestly. A study by KPMG of notices in the London Gazette shows that a total of 368 companies went into administration between October and December 2018, compared with 322 in the previous quarter; an increase of 14%, though the number was a significant increase on the 277 administrations seen during the same period in 2017. Blair Nimmo, head of restructuring for KPMG UK, said: "The latest insolvency figures reflect an annual and quarterly increase in the number of businesses becoming insolvent, which is disappointing but by no means surprising - particularly after what was for many a lacklustre festive trading period. We continue to see retailers and casual dining chains in the headlines with various high profile insolvencies coming to the fore in recent weeks, as they fight to keep pace with changing consumer habits, reduced consumer confidence and increasing cost pressures. This in turn has also impacted supply chains, particularly those in the FMCG sector, which saw insolvencies increase by over a third in the final quarter. "Looking at other sectors, the end of 2018 also proved to be testing for a number of engineering and manufacturing companies. With a fall in new car sales in 2018, the automotive sector in particular is certainly feeling the pinch from consumers holding back on major purchases, lengthened supply chain lead times and Brexit uncertainty. "Throughout January, we noticed an uplift in general restructuring activity from companies requiring assistance in the generation of additional funding in response to a difficult trading environment. "There is undoubtedly an increased nervousness for the business community, which has only been amplified by the current political environment. Whilst it remains difficult to predict what impact the final Brexit outcome will have on businesses, we are encouraging clients to develop contingency plans, specifically in areas such as funding, working capital, supply chain, contracts and people. That being said, it will be interesting to see how the stats move throughout 2019 as we begin to see the real impact of Brexit take hold." Blair Nimmo concluded: "Overall, the latest figures reflect a challenging, but not alarming picture for businesses across the country. While political and economic uncertainty means most businesses are adopting an extremely cautious approach to any form of investment, with the right approach, businesses with sound plans, balance sheets, funding and leadership, are in a position to take advantage of the current climate." Source: KPMG.

Feb 15, 2019
News

The International Auditing and Assurance Standards Board (IAASB) seeks public comment by 1 July 2019 on three interrelated standards that address quality management. The proposals bring important changes to the way professional accountancy firms are expected to manage quality - for audits, reviews, and other assurance and related services engagements. The proposed standards include a new proactive risk-based approach to effective quality management systems within firms that establish the foundation for consistent engagement quality. The new approach improves the scalability of the standards because it promotes a system tailored to the nature and circumstances of the firm and its engagements. The IAASB proposals are intended to improve engagement quality through:   Modernising the standards for an evolving and increasingly complex environment, including addressing the impact of technology, networks, and use of external service providers; Increasing firm leadership responsibilities and accountability, and improving firm governance; More rigorous monitoring of quality management systems and remediating deficiencies; Enhancing the engagement partner’s responsibility for audit engagement leadership and audit quality; and Addressing the robustness of engagement quality reviews, including engagement selection, documentation, and performance. Given the significance of the changes and the need for firms to adjust how they manage quality, the IAASB has also developed draft guidance and tools, such as examples and frequently asked questions. These materials will help firms understand the proposals, including how to apply them in different circumstances. Exposure drafts Overall Explanatory Memorandum, The IAASB’s Exposure Drafts for Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews  Proposed International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements (previously ISQC 1)  Proposed International Standard on Quality Management 2, Engagement Quality Reviews  Proposed International Standard on Auditing 220 (Revised), Quality Management for an Audit of Financial Statements  Comments on the exposure drafts are requested by 1 July 2019. Source: The International Auditing and Assurance Standards Board.

Feb 15, 2019
News

The Central Bank of Ireland recently published a paper "Business Model Strategy: Guidance for Credit Unions". The paper highlights the challenges facing credit unions as they seek to adapt their business models in order to meet the evolving needs of their members, while addressing ever increasing competition. The purpose of the guidance is to support credit unions in adopting a structured, risk-focused approach to business model strategy, while setting out the Central Bank’s key risk considerations and related supervisory expectations. The guidance highlights that credit unions are legally obliged to develop strategic plans. Strategic plans need to be tailored to the credit union's individual financial circumstances and capabilities, as well as common bond dynamics, while addressing operational and commercial challenges. The guidance notes that it is incumbent on credit unions to demonstrate sound and prudent risk-focused strategy formulation, business planning and implementation, aimed at the delivery of member products and service needs sustainably. Ownership of strategy and implementation by credit union boards is emphasised. The guidance advocates that when credit unions decide to offer a broader range of products and services to members, they should consider the full range of risks involved. Credit unions are expected to have the necessary resources and the competence and capability to deliver any new strategy and to manage the associated risks involved, in order to protect members. The guidance notes an increased reliance by credit unions on outsourced shared service provision, including collaborative efforts between credit unions to support scale and cost efficiencies, and sets out related-risk considerations for boards to consider. Commenting on the guidance, Patrick Casey, Registrar of Credit Unions said: "When developing business model strategies to address underlying member demand on a sustainable basis, it is essential that credit unions adopt a structured risk-based approach appropriate to their individual financial circumstances and capabilities, as well as common bond dynamics. This guidance forms part of a range of prudential supports provided by the Central Bank to credit unions. These supports are provided at a time when credit unions are seeking to adapt their business models in order to meet the evolving needs of their members while addressing increasing competition. Ultimately, it is a matter for each credit union board to determine the appropriate business model for their credit union. The structured risk-based approach set out in the guidance paper, should be a useful input for boards seeking to undertake the business model change process." Source: Central Bank of Ireland.

Feb 15, 2019
Spotlight

Many leaders struggle to adjust and align in knotty situations, but it is possible to lead with clarity in a VUCA world.   We are in a VUCA world: volatile, uncertain, complex and ambiguous. Technologically, economically, politically, environmentally and socially, the sands are shifting beneath our feet. Change is now no longer confined to organisations: it is system wide, interconnected and discontinuous. Wherever we look, leaders are challenged as they struggle to adjust and align to situations of increasing complexity. Navigating in a context such as this requires different skills, attributes and abilities. Through my work as an academic and advisor, I have been fortunate to closely observe and assist organisations facing and managing change in the most extreme environments. From that work, a number of key lessons surface: areas of reflection that will help you and your organisation develop your vision and align to an environment in flux. Mental space The first involves thinking about how you frame your leadership. Leaders are ‘pathfinders’ within organisations. At their best, they articulate a shared vision, understand strategy as a dynamic process, and ‘sense make’ from confusing environments and mixed messages from stakeholders. Having external sounding boards can help leaders untangle conflicting information and allow them perspective amidst frantic activity. An analogy that may be helpful comes from studies of emergency medicine. When a patient is in difficulty, they often have a number of skilled physicians working on them at the same time. But the consultant – the leader – is standing back, often behind and watching. They can’t just look at blood pressure, or respiration, or bleeding – they need to see it all and how it connects. When I work with leaders dealing with extreme volatility, they identify the cultivation of this mental ‘space’ as a way to manage complexity and confusion. Alignment The second is the need to reflect on your organisation and what you think it is currently established to do. This may seem like a strange question but think of it in this context – Harvard academics Heifetz and Linsky have observed that “there is no such thing as a dysfunctional organisation, because every organisation is perfectly aligned to get the results it currently gets”. So, asking what your organisation is actually aligned to do is useful, even if it is sometimes uncomfortable for leaders to identify hidden areas of dysfunction.  Enacted leadership The third is your own conceptualisation of what leadership actually is. We have traditionally tended to see leaders as having some significant attributes that were usually positional (at the top), gender-based (male) and heroic (superhuman). Thankfully, we now recognise that leadership appears at all organisational levels and often looks very different from the stereotype. Recognising enacted leadership when we see it is crucial. Rewarding and protecting those leadership behaviours you want within your organisation is just as vital. Retired US General, Stanley McCrystal, reflects on this in his recent book on iconic leadership. He comments that leaders are just humans surrounded by those who enable and find meaning in their activities. Leadership is all about context and is an organisational process, as well as an individual one. Timing and trust Sometimes timing is everything. One of the things that my research has illustrated is that common guidance on managing change doesn’t work in all contexts. Indeed, when an organisation is under stress, introducing what is often called ‘a sense of urgency’ can be actively unhelpful. Instead, a paced and inductive approach is more useful. I saw this most critically in the newly established Police Service of Northern Ireland, which embarked on radical, rapid change in a highly volatile environment. Ensuring that the organisation had a period to prepare was important, even though it drew criticism at the time. Thinking about how you time and pace big decisions and their implementation allows you to be in a better position for psychological and structural transition to be successful. Leaders often talk about trust and empowerment, but it takes real courage to turn talk into active practice. One leader I spoke to was keen to redistribute authority quite radically down his organisation but admitted that when staff started acting on this and taking decisions, he was momentarily horrified. He realised that he had a choice to make: to roll back into his comfort zone or move ahead and, in doing so, really trust (and back up) staff who were nervous themselves. He chose the latter and reaped the rewards. The ratcheting of risk Resilience is a real buzz word at the moment. We tend to think about it in terms of our own personal ability to recover from setbacks. However, resilience is also an organisational attribute and all leaders need to consider how equipped their organisation and people are to cope with a shock to the system. In my work with leadership teams, I often ask them one question: what three things would need to happen in close succession for your organisation to be in real trouble? When potential threat is conceptualised in this way, it’s much easier (and also scarier) for leaders to see environmental factors that could force them off track or worse, lead to catastrophe. Having identified not just single factors, but the ratcheting of risk, they can then prepare more appropriately. The duty of hope One of the most significant personal challenges for any leader is managing through periods of stress and instability. Continuing to demonstrate positive behaviours in negative environments is difficult to sustain but vital to those who are looking for direction. During the Northern Ireland peace process, senior officials in the Irish Department of Foreign Affairs coined a phrase for periods of difficulty – they saw it as having a ‘duty of hope’. Essentially, this spoke to two aspects of the challenge that faced them: their professional duty and their personal emotional response. As such, it was a powerful and accessible idea to hold on to in the darkest of times. Past and present Shakespeare famously wrote that “the past is prologue” and this is never truer than in an organisation under pressure. Understanding the history and legacy of your organisation will tell you a great deal about why it behaves the way it does. It is possible to identify where the past impacts upon the present just by paying close attention to organisational myths. Think about the stories that your organisation members tell, especially to new people. Who are the heroes in these stories and who are the villains? This will tell you a lot about your culture and assist in managing diverse internal interests and perspectives.  Conclusion Leading in complexity is tough; having time to reflect even when (or especially when) volatility is at its most disruptive is critical. Barack Obama and John McCain were both running for the presidency of the United States of America when the financial crisis hit. McCain suspended his campaign and suggested that the first presidential debate be postponed. Obama refused, commenting that “a president needs to be able to focus on more than one thing, at one time”. It was an inflection point in the campaign and McCain never regained momentum. Obama had hit upon a fundamental truth of managing in extreme turbulence: the need to at least attempt the management of environmental complexity. These lessons – the cultivation of mental space, an awareness of aspects of dysfunction, leadership as a whole organisation process, the timing and sequencing of change implementation, empowerment as an enacted reality, what the past tells you about the present, and personal and organisational resilience – should act as a guide for implementing your vision in challenging times. We are in a VUCA world. Dr Joanne Murphy is a Senior Lecturer and Interim Director at the William J. Clinton Leadership Institute, Queen’s University Management School.

Feb 11, 2019
Spotlight

The apparent ineffectiveness of leadership development programmes is a key concern for organisations worldwide.   $50 billion is spent globally each year on leadership development according to a recent UK Corporate Research Forum (CRF) report entitled Leadership Development – Is It Fit for Purpose? This accounts for almost 40% of the $130 billion which Deloitte estimates is spent annually on global learning and development. US companies alone reportedly spend almost $14 billion annually on leadership development but despite this substantial investment in leadership development, the CRF’s and Deloitte’s latest Global Human Capital Trends reports highlight a growing gap in CEOs’ confidence in the ability of their organisational leadership to build organisations for the future. Executive leadership programmes are therefore being challenged and re-evaluated, particularly in light of more cost-effective and transformative learning technologies now available to organisations. From a business perspective, the obvious questions are: why continue to invest in leadership development? And if we do, is it possible to ensure a return on this investment? At this juncture, it is important to note the difference between leader development, which is directed at an individual level, and leadership development, which is defined as “the expansion of the organisation’s capacity to enact the basic leadership tasks needed for collective work: setting direction, creating alignment, and maintaining commitment”. The philosophy of leadership at UCD Smurfit Executive Development is firmly on the latter, leadership development, based on the view that leadership is a contact sport and requires a more holistic focus. However, the continued level of spend indicates that leadership development programmes remain a priority within organisations. Furthermore, participants’ satisfaction levels with their programmes demonstrate evidence of their positive impact, at least at the individual executive level. The 2017 Financial Times Corporate Learning Pulse Survey reported that 94% of senior executives indicated that undertaking such programmes had improved their business knowledge, competencies and confidence, while 85% acknowledged that the programmes had enhanced their ability to perform more effectively in their roles. So if executives report a positive impact from undertaking leadership programmes, why is this not being leveraged within organisations? If we are to ensure that investment in leadership development yields tangible results, a number of important factors must be addressed at the outset. The re-entry phase is a significant determinant of enhanced performance  The re-entry phase relates to the first 12 months after completing a programme. It is the period when the executive is most likely to demonstrate enhanced performance in terms of actions performed in the executive’s role that result in achieving the organisation’s goals. While enhanced performance is not limited to this period, this re-entry phase is critical because it corresponds with the executive’s return to the organisation as a re-energised, more confident, self-assured individual seeking to make a meaningful contribution beyond her or his role. The likelihood of the executive achieving enhanced performance increases where there is alignment of vision, values and purpose between the executive, those in interconnecting roles, the wider organisation and the environment in which the organisation operates. Successful re-entry is only partly determined by the executive  This is a common misgiving within organisations; particularly where the “fix it” mentality exists and very little regard is given to how the executive will be enabled on her or his return to apply their learnings. It is only common sense that the executive must be enabled to apply her or his learnings on return to the role they occupy. However, it is often the case that significant focus is placed at the outset on the decision to invest in a particular programme, but very little attention is given to how the organisation can support the executive’s return on completion of the programme. Equally, the environment in which the organisation operates plays a key role – particularly in the public sector and civil service – impacting emerging opportunities and, in ideal circumstances, supporting new directions being taken. Alignment of motivations and expectations is crucial  Hidden motivations play a pivotal role in managing the expectations of executives when they complete the programme. This becomes challenging, for example, when the motivations for the programme were unclear at organisation level. Conflicting expectations also occur where little guidance is given to the executive before her or his completion of a programme.  Some organisations, for example, have poor nomination and selection processes, creating resentment for those who are not selected and a sense of confusion for the selected executive who is unsure as to the basis for their selection. At times, organisations fail to communicate adequately during the onboarding phase of the programme – that is, the time in the lead-up to the commencement of the programme. A typical example of this is where an executive may be selected to undertake a leadership development programme as a high-potential employee. If the organisation has not thought clearly about the potential to promote this executive on her or his return, it can lead to immense frustration on the part of the executive and unfortunately, in some cases, a decision to exit the organisation. Pre- and post-programme phases are inextricably linked Successful return to the organisation cannot be disconnected from the pre-entry stage. Therefore, responsibility for this pre-entry stage rests largely with the organisation. The ways in which the programme is conceived, designed, developed and communicated, and the executive selection/nomination process are all key determinants of a successful re-entry phase. Lack of organisational communication in the pre-programme phase with other people working closely with the executive can cause tension on the executive’s return. Where there was a lack of clarity on the executive selection process, feelings of neglect, being forgotten or excluded can emerge at peer level, making it difficult for the executive to be open about their experience. Therefore, the importance of fair process is essential and impacts the level at which the executive can share her or his learnings and insights with peers in particular. Shared understanding of the organisation’s goals is key It may appear obvious that developing leaders requires a change in the habitual way of doing things and putting new thinking into practice within organisations. However, the importance of the role of the organisation in this respect is sometimes underestimated. Where the organisation is culturally open to change and collectively embraces the value of learning, the executive is afforded opportunities beyond her or his role to play a transformative role within the wider organisation. Key to this is that the senior leadership team is invested in the learning opportunity provided by the leadership development programme. Those who work closely with the transformed executive are drawn positively to become part of what he or she aspires to achieve within the organisation’s mission. Positive transformation naturally leads to the search for new purpose  Leadership development programmes play an important role in the transformation process. The transformed executive emerges with an enthusiasm to share her or his learnings in seeking new purpose and meaning beyond themselves. The point at which this opportunity is not provided coincides with frustration on the part of the executive, whose natural inclination is to feel trapped with the desire to become unstuck. This inevitably results in the executive questioning her or his future, which is detrimental to retention of talent. Conclusion Organisations must be mindful of several factors before embarking on a leadership development process. The programme’s starting and end points should not coincide with the actual programme schedule itself; rather, from the design phase right through to facilitating the executive’s return to the organisation and enabling the application of her or his learnings within their teams and the wider structure. Organisations need to understand that the returning executive will have new expectations of what he or she can achieve at a wider organisation level. These expectations have the capacity to play a transformative role within the organisation if the decision-makers are open and have considered this in advance as part of the programme planning. Helen Brophy is a Director at UCD Smurfit Executive Development.

Feb 11, 2019