Leadership Lessons from HBOS and the new social class of Loads of Money Elites

April 8, 2013

Loads of moneyThree previously much-lauded leaders from the banking group HBOS are severely criticized in a parliamentary report in the UK. There are powerful lessons to be learned. Insights from a new social class indicator are also worth noting.

This week a popularization from an academic study suggested a new model of social class in the UK. One category is being considered to be at “the top” of the seven classes, and receives the meretricious label of the elite group. Equally clear is the group occupying the least desirable social niche, the newly identified Precariat.

The abuse of labels

One of the lead researchers, Professor Mike Savage of the London School of Economics is quoted as saying

“It is striking that we have been able to discern a distinctive elite, whose sheer economic advantage sets it apart from other classes… At the opposite extreme, we have discerned the existence of a sizable group [the Precariat] – 15 per cent of the population – which is marked by the lack of any significant amount of economic, cultural, or social capital.”

Is it a simple linear scale?

My reading of the popular reporting of the study is that the seven categories are being placed along a “top to bottom” spectrum as if a simple linear scale exists through which individuals may or may not be socially mobile. But that is a different and more technical story.

My main point is that the bankers at HBOS serve to illustrate the new social concept labelled the elite ‘class’. Weber used such classifications as idealized descriptions of his sociological concepts. Here they are value laden. The elites are “top” people, because we attribute positive connotations to those with loads of money. They are seen as the worthy wealthy. Our Chancellor, George Osborne, is among those vocal in identifying the undeserving and feckless at the “bottom” of the social pile.

The HBOS Three

To return to HBOS, the three members of the elite class named and shamed in the report are Former HBOS chief executive Sir James Crosby, brilliant Harvard graduate Andy Hornby recruited by Crosby, and who replaced him as CEO in 2006, and Lord Stephenson, chairman of Halifax [the H of HBOS]

Let’s cut off their honours

The commission report recommended social sanctions on the three leaders, withdrawal of honours, and prohibition from posts involving financial dealings.

The Guardian unsurprisingly was indignant:

“Primary responsibility for these failures should lie with the former chairman of HBOS, Lord Stevenson, and its former chief executives, Sir James Crosby and Andy Hornby,” concludes the report. It is astonishing that, almost half a decade after the implosion of HBOS, a parliamentary commission with a roving brief has provided the first official account of what went wrong.

Royal Bank of Scotland will always hold top spot in British banking’s hall of shame by virtue of its sheer size and the ludicrous top-of-the-market purchase of ABN Amro, but HBOS stands alone “as a home grown failure in traditional banking”, as the report puts it. The commissioners have killed stone dead the notion that HBOS was, in some vague sense, an innocent victim of the hurricane in financial markets around the time of the collapse of Lehman Brothers in 2008.


Chess provides excellent leadership lessons in the 2013 Candidates Tournament

April 6, 2013

The qualifying battles to become world chess champion in London this year showed why chess is considered an excellent metaphor for the processes of strategic decision-making

Magnus CarlsenI have often blogged about the merits of chess as a metaphor for strategic thinking. The last three weeks [March 14th – April 1st 2013] reinforced my beliefs.

The Candidates Tourney

London hosted the qualifying competition, with the winner going to a one-on-one shootout with current world champion Vishy Anand of India. In the UK, news coverage prior to the tournament was extremely limited. In contrast, chess enthusiasts had excellent live streaming of all games on specialized sites.

Watching live

For those with time to spend, you could watch the battles live in the afternoons (starting time 2pm local time). The format was our matches each day played simultaneously, with all eight contenders in action. This made it easy for the expert commentators (mostly grand-masters) to chat happily about moves played and about to be played, working their way from match to match. The technology did not quite work, but the commentators coped with the gliches well, particularly in the last hour of the last day, when the result still depended on the remaining two games. It seems an estimated million chess players world- wide had seized up the servers.

The Chess Federation [FIDE} website captured the tension of the last round of matches:

Magnus Carlsen [image above from wikipedia: Ed] won the FIDE Candidates’ Tournament in London on Monday after a bizarre finish of what has become a historic event for chess. Both the Norwegian and the other leader, Vladimir Kramnik of Russia, unexpectedly lost their game in the final round, and so they remained tied for first place and Carlsen won on the second tie-break rule: higher number of wins. This means that in the next title match, World Champion Viswanathan Anand will face Carlsen.

Marketability

The few popular news stories concentrated on Carlsen’s extreme youth, and marketability for himself and the game of Chess. “No problem with finding a sponsor for the World Championship” one commentator chortled.

Bizarre end

When the technology was restored, the rest of the chess world learned that Carlson had lost a game in which he had played weakly his standards as the highest rated player in the World. He could still be overtaken by former World Champion Kramnik who also seemed to be losing. After a nervous wait, Kramnik resigned, and Carlsen was declared winner.

Chess lesson

I am still reflecting on the lessons for strategic leaders offered by the players and their commentators. Carlsen, utterly fatigued at the press conference immediately after he had learned of Kramnik’s loss added one new lesson [for me, anyway]. “We were all tiring in the last rounds. My sense of danger weakened.” Worth remembering by business leaders needing to deal with their dilemmas…


Goal Control wins first battle for football’s goal-line technology leadership

April 3, 2013

Goal ControlGoal Control is an unexpected winner which has emerged in the battle for Football’s goal-line technology

The German company Goal Control won the battle for installing goal line technology in football over the earlier favourite Hawkeye.
The decision was announced yesterday [April 3rd 2013] by Football’s international governing body FIFA.

According to the Guardian:

The British-based company Hawk-Eye has been frustrated in its attempt to supply goalline technology at the Confederations Cup in Brazil this summer, and most likely at next year’s World Cup, after Fifa surprisingly awarded the contract to the German company, GoalControl.

Its system, GoalControl-4D, uses 14 high-speed cameras located around the pitch and directed at both goals and was selected by world football’s governing body ahead of three other Fifa-licensed technology providers, including Hawk-Eye. While losing out on the contract represents a blow to the British firm, it still aspires to provide goalline technology to the English domestic game and is one of four companies still in talks with the Premier League and the Football Association over the potential introduction of a camera-based system as early as next season. It will compete again with GoalControl, GoalRef and CAIROS for the honour to provide a system for the 20 Premier League grounds and Wembley.

Bouncing back

Hawk-Eye has expressed its disappointment at losing out on the contract. “Sport teaches us many lessons, including accepting defeat graciously and having confidence in your ability to bounce back strongly,” it said in a statement. “Hawk-Eye wishes Fifa and the appointed goalline technology supplier every success at the Fifa Confederations Cup 2013.”

Declaring an interest

Regular subscribers to LWD will recall that we identified HawkEye as a fine example of a high technology company with an entrepreneurial leader. We also speculated on its future after being taken over by Sony. Students studying the case pointed to the football market as a promising future development for the new company.

What happens next?

The statement by Hawkeye is heartedly upbeat. Meanwhile, we will now dig more deeply to learn more of the story of the late-entry by Goal Control which claimed victory in the first battle over goal line technology. The company website is less than helpful in this respect.

Update

The Herald sun of Australia noted that

FIFA, through its rule-making panel known as IFAB, approved goal-line technology last July, when Hawk-Eye and GoalRef passed the rigorous testing process. Those systems were tested at the Club World Cup in Japan last December, before Cairos and GoalControl had even been licensed.


How firing a leader may be explained in Keynesian terms

April 1, 2013

By John Keane

The firing of leaders should be clear evidence of rational decision processes. Sometimes it seems driven by irrational expectations

My example comes from the world of football in England, but it could easily be extended to other business situations.

As Easter approached [March 2013] Premier League battles for survival were heating up. Six clubs were considered most likely to supply the three who would be relegated, with serious loss in income. If a boost to performance could be achieved in the final ten games, financial disaster could be avoided. It is considerably harder for a club to fight its way back, as the relegation to the Championship has considerable consequences on recruitment of new players, sponsorship and match attendances.

On firing a leader

The decision to fire a manager seems to be one primarily taken by a powerful owner, who may or may not be influenced by others such as the manager, and (or so the fans would like to believe) the vocal protests of supporters.

One of the most powerful and wealthy owners, Roman Abramovitch of Chelsea, has a track record of removing managers in search of others he approves of more. At present his choice has already been told he is a stop gap to be replaced at the end of the season by the best manager money can buy. This is somewhat different as Chelsea is also able to buy good enough players to win trophies. They are currently European Champions, but the achievement was not enough to save the last manager from being fired.

The candidates for the chop

Managers facing relegation this year included those at Southampton, Wigan, Aston Villa, Reading, Queens Park Rangers and Sunderland. One of these (QPR) acted earlier in the season and appointed Harry Redknapp, one of the most experienced managers capable of helping ‘the great escape’. Reading, Southampton and Aston Villa pressed the trigger later. In these cases the replacement is not obviously a better manager by track record than the departing one. This is particularly the case for Sunderland, who replaced a manager of considerable prior achievements, with a controversial one with less experience.

These sorts of decisions illustrate the Keynesian view that financial decisions are driven by irrational forces and expectations. Or, as Keynesians like to say, the leaders are left trying to ‘push on a piece of string’ [to obtain supply-side wins] to achieve better results than might otherwise have been produced.