Mr. Lymbersky is director of the Turnaround Management Society

Mr. Lymbersky, thank you for taking the time for this interview. I know you are very busy and have a flight in two hours, therefore let me get right to the point: You are quite young (28) for somebody who has accomplished so much. How do you do that?

[Christoph Lymbersky:] Well, I don’t sleep. (laugh) No, I have always had a strong desire to accomplish something, and to move things. I think it all started after I spent a year in high school in the USA, where I took a computer science class in a nearby college.  When I came back, I thought, ‘Well I can put this knowledge to good use, and found a company.’ I was lucky that I was already 18, so I gathered some information on how to establish your own business, and that is what I did.

The IT consulting company?

[Christoph Lymbersky:] Yes, that was the IT-Management Group. I founded that firm with a friend back then and what we did was simply put CD-Rom drives into computers, upgrade their memory, and teach people how to use the Internet.  Back then, that was big business (laugh). We earned our first dollars; it was not much but we had our first experiences with clients, tax, and other administrative things. Later, we approached bigger companies and offered to implement an IT network in their offices. That also turned out pretty well and our customer base and the company grew.

In 2003 you then founded a second company, COMODEX Internet. At that time, you were already studying at university. So, do I understand that right, that you were running a successful IT consulting business, went to study at university, and founded a second company?

[Christoph Lymbersky:] Yes, that is right.

Most people have trouble just doing one of these things. How did you manage to do all three things?

[Christoph Lymbersky:] Well, looking back at that time now, I must say it was a bit crazy, but what happened was I saw this opportunity in the Internet service provider market and I took it. What we did with COMODEX Internet is, we rented servers in different data centers in Germany…

I am sorry to interrupt you, but why only Germany? Isn’t that regardless of where these centers are? I mean why not in China, for example?

[Christoph Lymbersky:] Because there it works. And because Germans still have a good reputation for quality work, especially when it comes to technical things. At first, I could not take care of every single computer myself, so I needed reliable people to do that for me. I found those in data centers in Frankfurt, Munich, and Berlin. And second, we played a bit with the reputation Germans have in the world in terms of quality and reliability. And quality and reliability is what we provided. Also, if there had been a problem in Berlin that could not be handled over the phone, I would have been there three hours later to take care of things myself. That would not have been possible in China. If I did that today, I probably would have chosen Switzerland, simply because of its reputation of being a safe place. But our servers in Germany worked well and COMODEX enjoyed a great reputation.

Ok, so you founded COMODEX because you saw an opportunity in the market…

[Christoph Lymbersky:] Yes, I have always had an eye for changes in the market and a sense for opportunity. Therefore, I saw that the Internet service provider market was growing at a rapid speed and we rented those servers and rented the space and CPU power out to our clients, providing data backup solutions, mail services, and hosting solutions. Our company grew simply by reputation. I never spent a cent on advertising. Our clients recommended us to others and this way our company grew faster than we could keep up with.

So how did you manage all that at the same time?

[Christoph Lymbersky:] Well, I was pretty much working from nine in the morning until 4 am the next day. During the day, I took care of the daily business and at night I worked on strategic developments and studied for exams. Looking back at that time now – I was 21-25 – it was not always easy. Dealing with customers who don’t want to pay their bills, answering thousands of emails, and studying Investment Theory for an exam the next day. We had about 80 percent private clients. Of those, about 15 per cent did not pay their bills on time, which causes you a lot of overheads, costs you time, and works on your nerves. Don’t get me wrong, I did this for a couple years, and it was a great experience! I loved what I was doing, but I also realized that this was not what I wanted to do all my life. The companies paid my bills and put food on my table, and I wore nice suits but the daily business did not challenge me enough creatively.

What happened then? Why did you then stop everything and go to Australia?

[Christoph Lymbersky:] Well, I did not stop everything, but at one point, I had to make a decision either to keep working for my business and stop the university, or to  focus more on my university studies. Every entrepreneur will agree with me when I say that you cannot just be a “half-day entrepreneur.” At least not for years. Both my studies and my companies demanded more time from me and I could not reduce my sleep any further. Since I knew I did not want to stay in the IT business for the next ten years, I decided to focus on my studies. Even though the companies were running very well and my income kept growing, I knew that education was more important. However, I also knew that by staying in Germany, and Hamburg in particular, I would always fall back into my work… Australia seemed far enough. (laugh). I sold COMODEX and in 2005 enrolled in a Master’s of Accounting degree and an MBA at Bond University in Australia. There I could focus mainly on my studies, but I kept working as a start-up consultant for a couple of start-ups.

I am sure, you enjoyed the time in Australia; it is a beautiful country. I am wondering why you did not stay there. When you came back two years later with two great degrees, you founded your next company – a publishing house. Can you tell me a bit more about how that happened?

[Christoph Lymbersky:] Sure, when I finished my studies I wanted more. That means I wanted more knowledge, particularly in the area of international business, in which I became interested by studying and working with students and customers from all around the world. Cultural issues especially interested me and therefore I took some time after Australia to study both fields more intensively at home. The result was a university textbook I wrote during that time on market entry strategies. I also developed a market entry strategy based on financial aspects and cultural differences in order to minimize a company’s risk of failure in entering the market. The strategy is called the Wave Strategy.
When the book was finished, I didn’t want to run after publishers, but gathered information on how to found your own publishing company. Two months later, my book, published by my own publishing company, Management Laboratory Press, was among the Amazon best sellers for newcomers.

But that is not the end; you are still working for Management Laboratory Press.

[Christoph Lymbersky:] Yes, we have published about 70 books by different authors and sell those pretty much all around the world. We have a distribution network, which even some big publishing houses don’t have. It is an interesting business and far more relaxed then the IT business, which allows me to pursue my PhD and run the company.

Speaking of your PhD, how did the change to turnaround management happen?

[Christoph Lymbersky:] That was not really a change. Everything I have done and learned before is very useful for turnaround management. But to answer your question: After Australia I was also thinking of how I could use the experience I had gained in different industries and countries as well as the knowledge I have gained in my studies, and my talent (if I may call it so) to evaluate situations and seek out opportunities… how things, processes, and businesses can be improved… Well, the most interesting area for me in which I could use everything together was turnaround or crisis management. When I started studying turnaround management, there were not many companies actually offering such an expert service. Then the financial crisis happened and suddenly we found turnaround experts everywhere…

Do I hear some criticism in your voice?

[Christoph Lymbersky:] Indeed. But that is a different topic. Let me answer your original question: I asked myself, what knowledge and experience does the ideal turnaround manager have? Well, he understands the capabilities of IT; he has financial and accounting knowledge; he has legal, organizational, marketing, international business, and project management experience; he understands financial markets, tax, leadership, etc., and he has experience leading people; and he knows especially about all possible turnaround cases and strategies. Well, this is the person I wanted to become and the PhD in turnaround management adds the last point to my CV that I needed to become the best-educated turnaround manager I could imagine.

So where do we go from here? What are your future plans?

[Christoph Lymbersky:] Holidays. (laugh)

Yes it sounds like you have not taken many?

[Christoph Lymbersky:] No, I have. One thing I learned is that managing your time is very important; that also means taking holidays. Now, I will promote the International Turnaround Management Standard, which is a part of my PhD and a guided method to a more sustainable and successful turnaround. This is a standard the industry was missing before. I am also working for the Turnaround Management Society. This is a society that links restructuring professionals, private equity companies, banks, and academics to work together on this standard and other projects. We are, for example, maintaining a database of successful turnaround cases. We analyze those and enter the information into the turnaround standard. I am quite busy meeting all the members personally and networking for and with them.

On Amazon you were called a rock star among academics, and at a conference in Paris you were called a messiah of the 21^st century. What do you answer to that?

[Christoph Lymbersky:] (laugh) Who are your sources?! I take it as a compliment and simply say: Thank you.

Could you ever imagine working for a big company such as the big five consulting firms?

[Christoph Lymbersky:] Yes, of course. I am open to discuss opportunities. What is important for me is that the job is interesting. I am willing to contribute my time and passion to a company for an interesting job in return.

Christoph, thank you very much for this interview. It has been very nice meeting you and I wish you a good flight to Hamburg. d

[Christoph Lymbersky:] The pleasure has been mine. Thank you.

The interview was done by Samantha Hays from Entrepreneurial Spirits on 8^th July, 2010.

Contact Details:

Christoph Lymbersky
Master of Accounting, MBA, PhD-Candidate in Turnaround Management,
PRINCE2™ Certified Project Manager – Practitioner,
CFMP™ Certfied Financial Markets Professional – Practitioner Level
CITM™ Certified International Turnaround Manager – Level B

Turnaround Management Society
www.turnaround-society.com

Luetkensallee 41
22041 Hamburg
Germany

http://mail.google.com/a/management-laboratory.com

Mr. Becher’s current work centers on translation and translatability as well as constrastive linguistics. He has presented his work at a number of academic conferences all around the world and has just finished his very first publications, which are to appear in various international journals on general linguistics and translation studies. He expects to receive his PhD in 2011.

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COURSE DESCRIPTION
Financial institutions are a pillar of civilized society, supporting people in their productive ventures and managing the economic risks they take on. The workings of these institutions are important to comprehend if we are to predict their actions today and their evolution in the coming information age. The course strives to offer understanding of the theory of finance and its relation to the history, strengths and imperfections of such institutions as banking, insurance, securities, futures, and other derivatives markets, and the future of these institutions over the next century.

LECTURE 1: DESCRIPTION – Finance and Insurance as Powerful Forces in Our Economy and Society
Professor Shiller provides a description of the course, Financial Markets, including administrative details and the topics to be discussed in each lecture. He briefly discusses the importance of studying finance and each key topic. Lecture topics will include: behavioral finance, financial technology, financial instruments, commercial banking, investment banking, financial markets and institutions, real estate, regulation, monetary policy, and democratization of finance.

LECTURE 2 DESCRIPTION – Review of Probability and Statistics; Intro to Present Value
Statistics and mathematics underlie the theories of finance. Probability Theory and various distribution types are important to understanding finance. Risk management, for instance, depends on tools such as variance, standard deviation, correlation, and regression analysis. Financial analysis methods such as present values and valuing streams of payments are fundamental to understanding the time value of money and have been in practice for centuries.

LECTURE 3 DESCRIPTION – Technology and Invention in Finance
Technology and innovation underlie finance. In order to manage risks successfully, particularly long-term, we must pool large amounts of risk among many, diverse people and overcome barriers such as moral hazard and erroneous framing. Inventions such as insurance contracts and social security, and information technology all the way from such simple things as paper, and the postal service to modern computers have helped to manage risks and to encourage financial systems to address issues pertaining to risk. The tax and welfare system is one of the most important risk management systems.

LECTURE 4 DESCRIPTION – Portfolio Diversification and Supporting Financial Institutions (CAPM Model)
Portfolio diversification is the most fundamental concept of risk management. The allocation of financial resources in stocks, bonds, riskless, assets, oil and other assets determine the expected return and risk of a portfolio. Taking account of covariances and expected returns, investors can create a diversified portfolio that maximizes expected return for a given level of risk. An important mission of financial institutions is to provide portfolio-diversification services.

LECTURE 5 DESCRIPTION – Insurance: The Archetypal Risk Management Institution
Insurance provides significant risk management to a broad public, and is an essential tool for promoting human welfare. By pooling large numbers of independent or low-correlated risks, insurance providers can minimize overall risk. The risk management is tailored to individual circumstances and reflects centuries of insurance industry experience with real risks and with moral hazard and selection bias issues. Probability theory and statistical tools help to explain how insurance companies use risk pooling to minimize overall risk. Innovation and government regulation have played important roles in the formation and oversight of insurance institutions.

LECTURE 6 DESCRIPTION – Efficient Markets vs Excess Volatility
Several theories in finance relate to stock price analysis and prediction. The efficient markets hypothesis states that stock prices for publicly-traded companies reflect all available information. Prices adjust to new information instantaneously, so it is impossible to “beat the market.” Furthermore, the random walk theory asserts that changes in stock prices arise only from unanticipated new information, and so it is impossible to predict the direction of stock prices. Using statistical tools, we can attempt to test the hypotheses and to predict future stock prices. These tests show that efficient markets theory is a half-truth: it is difficult but not impossible for some people to beat the market.

LECTURE 7 DESCRIPTION – Behavioral Finance: The Role of Psychology
Behavioral Finance is a relatively recent revolution in finance that applies insights from all of the social sciences to finance. New decision-making models incorporate psychology and sociology, among other disciplines, to explain economic and financial phenomenon, such as erratic stock price variations. Psychological patterns such as overconfidence and perceived kinks in the value function seem to impact financial decision-making, but are not included in classical theories such as the Expected Utility Theory. Kahneman and Tversky’s Prospect Theory addresses such issues and sheds light on irrational deviations from traditional decision-making models.

LECTURE 8 DESCRIPTION – Human Foibles, Fraud, Manipulation, and Regulation
Regulation of financial and securities markets is intended to protect investors while still enabling them to make personal investment decisions. Psychological phenomena, such as magical thinking, overconfidence, and representativeness heuristic can cause deviations from rational behavior and distort financial decision-making. However, regulation and regulatory bodies, such as the SEC, FDIC, and SIPC, most of which were created just after the Great Depression, are intended to help prevent the manipulation of investors’ psychological foibles and maintain trust in the markets so that a broad spectrum of investors will continue to participate.

LECTURE 9 DESCRIPTION – Investing for the Long Run
David Swensen, Yale’s Chief Investment Officer and manager of the University’s endowment, discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases.

LECTURE 10 DESCRIPTION – Debt Markets: Term Structure
The markets for debt, both public and private far exceed the entire stock market in value and importance. The U.S. Treasury issues debt of various maturities through auctions, which are open only to authorized buyers. Corporations issue debt with investment banks as intermediaries. The interest rates are not set by the Treasury, the corporations or the investment bankers, but are determined by the market, reflecting economic forces about which there are a number of theories. The real and nominal rates and the coupons of a bond determine its price in the market. The term structure, which is the plot of yield-to-maturity against time-to-maturity indicates the value of time for points in the future. Forward rates are the future spot rates that can be calculated using today’s bond prices. Finally, indexed bonds, which are indexed to inflation, offer the safest asset of all and their price reveals a fundamental economic indicator, the real interest rate.

LECTURE 11 DESCRIPTION – Stocks
The stock market is the information center for the corporate sector. It represents individuals’ ownership in publicly-held corporations. Although corporations have a variety of stakeholders, the shareholders of a for-profit corporation are central since the company is ultimately responsible to them. Companies offer dividends, stock repurchases and stock dividends to give profits back to shareholders or to signal information. Companies can also take on debt to raise capital, creating leverage. The Modigliani-Miller theory of a company’s leverage in its simplest form implies the leverage ratio doesn’t matter, but including bankruptcy costs and tax effects give us a positive theory of the ratio.

LECTURE 12 DESCRIPTION – Real Estate Finance and Its Vulnerability to Crisis
Real Estate is the biggest asset class and of great importance for both individuals and institutional investors. An array of economic and psychological factors impact real estate investment decisions and the public has changing ideas of real estate as a profitable investment. People’s demand to buy a home by taking on long-term debt, called a mortgage, is often tied with the overall health of the economy and financial markets. In recessions, home buying tends to fall and the opposite holds in a strong economy. Commercial real estate, held indirectly by the public through partnerships and real estate investment trusts (REITs), is vulnerable to similar speculative activity. The most recent real estate boom illustrates the speculative nature of real estate, and its relation to financial and economic crises.

LECTURE 13 DESCRIPTION – Banking: Successes and Failures
Banks, which were first created in primitive form by goldsmiths hundreds of years ago, have evolved into central economic institutions that manage the allocation of resources, channel information about productive activities, and offer the public convenient investment vehicles. Although there are several types of banking institutions, including credit unions and Saving and Loan Associations, commercial banks are the largest and most important in the banking system. Banks are designed to address three significant problems in capital markets: adverse selection, moral hazard, and liquidity. Banks make money by borrowing long and lending short and use fractional reserves to lend more funds than are deposited. History has seen numerous problems in banks, including bank runs and insolvency. Government support and regulation, such as those implemented via the Basel Accord, as well as rating agencies help to ensure that investors trust the banks with which they have relations.

LECTURE 14 DESCRIPTION – The Efficiency of Markets
Andrew Redleaf, a Yale graduate and manager of Whitebox Advisors, a hedge fund, discusses his experience with financial markets. He addresses one of the fundamental questions in finance–whether or not markets are efficient–and concludes that although they don’t seem to be efficient, beating the market is very difficult. Mr. Redleaf discusses his thoughts about psychological barriers that make markets inefficient. He also comments on his beliefs regarding risk management and how people are compensated for mitigating risks, rather than for taking on risk as is often perceived. He ends by answering several questions from students.

LECTURE 15 DESCRIPTION – Guest Lecture by Carl Icahn
Carl Icahn, a prominent activist investor in corporate America, talks about his career and how he became interested in finance and involved in shareholder activism. He discusses his thoughts about today’s economy and American businesses and their inherent threats and opportunities. He believes that the biggest challenge facing corporate America is weak management and that today’s CEOs, with exceptions, might not be the most capable of leading global companies. He sees opportunities for current, intelligent college students to succeed in the corporate world if they work hard and can identify valuable business pursuits.

LECTURE 16 DESCRIPTION – The Evolution and Perfection of Monetary Policy
Central Banks, originally created as bankers’ banks, implement monetary policy using their leverage over the supply of money and credit standards. Since the Bank of England was founded in 1694, through the gold standard which lasted until the 1930s, and into modern times, central banks have pursued monetary policy to stabilize the banking system. Central banks monitor currency flows and inflation, acting when crises, such as bank runs, emerged. More recently, central banks have taken an increasingly expansive role in stabilizing economic fluctuations. In the yet to be confirmed current recession, the Federal Reserve has used open market operations and innovative financial arrangements to try to forestall the recession and bail out failing financial institutions.

LECTURE 17 DESCRIPTION – Investment Banking and Secondary Markets
First, Professor Shiller discusses today’s changing financial system and recent market stabilization reform introduced by U.S. Treasury Secretary Henry Paulson. The financial system is inherently unstable and would benefit from more surveillance, particularly for consumer protection issues, given the recent subprime mortgage crisis. Although this particular reform might not be successful, more regulators and policymakers are talking about changing the stabilization system and will likely alter the role of the Fed in the future. Second, Professor Shiller introduces the mechanics and role of investment banking. Investment banks underwrite securities and arrange for the issue of stocks and bonds by corporations. Corporations work with investment banks to navigate the Securities and Exchange Commission requirements for issuing securities. The banks then take on a “bought deal” or “best efforts deal” and help the corporation to find a market for the securities. Investment banking depends on the reputation of its bankers and, as we have seen recently, can be destroyed by rumors about the bank’s insolvency.

LECTURE 18 DESCRIPTION – Professional Money Managers and Their Influence
Most people are not very good at dealing in financial markets. Professional money managers, such as financial advisors and financial planners, assist individuals in matters of personal finance. FINRA and the SEC monitor the activities of these managers in order to protect individual investors. Mutual funds, exchange traded funds also exist to assist individual investments, and pension funds provide further services. These investment institutions help people to put money in diversified portfolios and, in some cases, reap some tax benefits for funding their retirement income.

LECTURE 19 DESCRIPTION – Brokerage, ECNs, etc
The exchanges in which stocks and other securities are traded serve an important function in finance. They bring together people interested in buying and selling securities in order to create a universal price. Brokers and dealers are also an important part of the system, their methods and standards are ultimately behind the success of the exchanges. Many information innovations have advanced the functioning of exchanges, going all the way back to the ticker machine, which was created to communicate the price of securities at a point in time to all interested parties. Electronic Communication Networks and automatic exchanges, more generally, have significantly impacted the exchange of securities and few exchanges still have physical trading floors.

LECTURE 20 DESCRIPTION – Private Equity and the Financial Crisis
In this lecture filmed on April 11, 2008, Stephen Schwarzman, Co-Founder of Blackstone Group, a private equity firm, speaks about his experience in the industry. He discusses his thoughts on global finance, particularly at such an interesting and challenging point in the history of financial institutions. Although the near future might be rough for the United States and economies around the globe, capital does tend to come back and regulators are busy figuring out how best to put safeguards on the system. He also offers career advice and mentions some of the surprises he came across upon entering the world of finance.

LECTURE 21 DESCRIPTION – Forwards and Futures
Futures markets were started in Osaka, Japan in the 1600s to create an authoritative and meaningful market price for agricultural products, using standardized contracts. Since then, futures markets have been copied around the world to allow the hedging various future risks, financial and other. In the United States, the Chicago Mercantile Exchange and the Chicago Board of Trade have been the most popular futures trading markets. Although futures markets are changing and becoming more electronic, they are still important risk management tools for farmers and present financial opportunities for all manner of hedgers and arbitrageurs.

LECTURE 22 DESCRIPTION – Stock Index, Oil and Other Futures Markets
Futures markets have expanded far beyond their initial application to farmer’s planting and harvest cycles. These markets now allow investors and traders to set prices for a broad spectrum of assets and for a whole term structure stretching into the distant future. Some of these markets are often priced according to simple fair-value formulae, others are not. Futures markets can be in backwardation, where the future price is lower than the present, spot price. They can also be in contango, where the price rises with maturity and is higher in the future than it is today. The S&P/Case-Shiller Home Price Index is a recent invention that has transferred the mechanics of futures markets to the prices of single-family homes in ten real estate markets, in an effort to create a national market for residential real estate.

LECTURE 23 DESCRIPTION – Options Markets
Options introduce an essential nonlineary into portfolio management. They are contracts between buyers and writers, who agree on exercise prices and dates at which the buyer can buy or sell the underlying (such as a stock). Options are priced based on the price and volatility of the underlying asset as well as the duration of the option contract. The Black-Scholes options pricing model is one of the most famous equations in finance and offers a useful first approximation for prices for option contracts. Options exchanges and futures exchanges both are involved in creating a liquid and transparent market for options. Options are not just for stocks; they are also important for other asset classes, such as real estate.

LECTURE 24 DESCRIPTION – The Democratization of Finance
Professor Shiller, in his final lecture, reviews some of the most important tools for individual risk management. Significant inequality in domestic and international communities has created a need for social insurance programs, such as those created in Germany in the late 1800s. The tax system, bankruptcy laws, and government insurance programs are used to manage risk of personal wealth. However, each of these inventions must take account of psychological factors, such as moral hazard, in order to be effective without eliminating incentives to participate in the workforce, or other negative side effects. With regard to careers, including those in finance, young people should frame decisions with morality and purpose in mind, and with a broad perspective of both.

LECTURE 25 DESCRIPTION – Learning from and Responding to Financial Crisis, Part I
Professor Summers, former U. S. Treasury Secretary and former President of Harvard University, in this the first of two lectures in honor of former Yale Professor and Council of Economic Advisors chairman Arthur Okun, offers thoughts on the role of monetary policy in economic fluctuations, past and present. In the “Okun period,” ending about when Okun died in 1980, the monetary authorities were very much involved in actually creating economic contractions. Inflation would repeatedly get out of control, the Fed would hit the brakes, and the economy would slow. But, that is not the story of the economic cycles of the last two decades. Recent economic cycles appear to be connected with factors endogenous to the financial system, such as bubbles or cycles of complacency among lending institutions. Summers argues that to understand the financial markets and the economy, we must consider models of multiple equilibria, such as bank run models, where a change in confidence may shift the economy drastically without any change in fundamentals.

LECTURE 26 DESCRIPTION – Learning from and Responding to Financial Crisis, Part II
In the second of his two lectures in honor of Arthur Okun, Professor Summers points out that real interest rates have been very low in the current subprime crisis. This indicates that the shock to the economy was more a financial breakdown shock than a disinflation shock. But financial breakdown shocks are not necessarily very harmful to the economy, so long as financial intermediation capital is not destroyed. In a financial crisis like the present one, financial firms are likely to take the step of decreasing their leverage, often by contracting loans, which creates its own risks for the economy. Regulators should place pressure on financial institutions to raise their capital and should intervene in near foreclosure situations, but should not attempt to support housing prices.

Expectation Defined. In 1929, most banks in the USA were solvent. Their customers believed differently. The customers expected to lose their deposits. They rushed to withdraw them. Because of the sudden rush to withdraw cash, the banks couldn’t satisfy the demand. They became insolvent. Expectation created action. Today we say, “Be careful, you might end up getting what you expect” That’s exactly what bank customers got in 1929!

Hope and Expectation. “Hope” is not expectation. “Hope” describes what you’d “like to happen”. We often confuse the two. To say that you “hope my staff will treat customers well” is a statement of preference: what you want to happen. To say that “I expect my staff to treat customers well” is a statement of intent: what you believe will happen.

Effect On Staff. When you tell staff what you expect, clearly and unequivocally, you are setting performance standards for your people. There’s a much greater chance of getting what you want from your staff when they know exactly what you expect.

Effect On You The Manager. To get what you expect from your people, you must provide the resources they need. You can tell your people that you expect them to be at work on time. But if your starting time doesn’t match public transport timetables and there’s no parking within a reasonable distance of your business, your staff will know that you don’t really expect them to be on time.

Monitoring and Measuring. Set the standards. Provide the resources. Then monitor and measure. You can have excellent standards and superb resources. Only measurement will turn these into genuine expectations. If your staff know that their performance won’t be monitored and measured against previously stated standards, they’ll also know that you’re not serious about expectations.

Staff Treatment. Managers who genuinely expect their staff to perform well consistently treat their staff as if they are successful. They do everything they can to ensure staff will be successful. To paraphrase GBS, “If you treat your staff like idiots, they’ll behave like idiots”. If you’re “on their backs” all the time, looking for errors, they’ll make errors for you to find because they know you expect them.

Conclusion. Set Standards. Tell your staff. Provide the resources. Measure the performance. Use praise and encouragement effectively. Make it clear that you really want them to be the best. Lead by example. Are you a Freddy who treated Eliza like a lady? Or are you Professor Higgins who still saw her as a flower girl? You may not quite reach the heights of success of “My Fair Lady”. But you will have a hit on your hands.

- Leon Noone

I found I was working in a management structure totally different from anything I had previously experienced. The local Managing Director was an expatriate Japanese, presiding over a group of divisional managers who were all local staff. The divisions were essentially organized around product groups, a mirror image of the structure in Japan. Each division manager had a young Japanese assistant whose role was to provide the communication connection with Japan, and to facilitate access into the Japanese systems. These assistants were essentially high-flying management cadets on their first overseas assignments, and they had no executive roles.
The local Honda organization had a permanent queue of people who wanted to join Honda, and would take any job that became available. When they proved themselves capable and motivated to take on more responsibility, they would be promoted to a supervisor role.

At this point they had to make a life changing career choice. They needed to choose between a technical career and a management career.

Those who chose a technical career would embark on a lifetime pursuit of excellence in their chosen discipline. They would move between divisions to broaden their experience of Honda technologies before they chose their specialist field. They would be encouraged to pursue academic study and research in Honda’s development and production divisions. They would enjoy a similar status to that of their management counterparts, and exercise great influence over strategic decisions. The greatest accolade for a lifetime of contribution to Honda’s engineering excellence was likely to be the endowment of a personal professorial chair in a prestigious university to ensure them a comfortable retirement and the opportunity to guide the careers of the succeeding generations.

The choice of a management career led to a series of managerial appointments that would last for around 9 years. They could expect to move between divisions, and into functional areas of which they had no knowledge or skill. They could expect to move typically from marketing to accounts, then to retail management or distribution. Their job was to manage. There would be no promotion before they had learned to manage the whole company through this management apprenticeship.

They could not be successful in their management role without the active support of their staff, and depended on the technical skills and experience of the specialists. I believe that this interdependence led to a very different management style based on mutual respect rather than the command and control attitude that was so prevalent in those times. This was management as a set of disciplines; one that required a broad understanding of the inter-relationships between business functions. After 9 years of gaining broad experience, managers had an overview of the whole business, and could manage any function. The best of them were ready for the only promotion available, a divisional manager role.

For the whole nine years, all departmental managers enjoyed equal status and pay rates. Then they were considered ready to do a really important job, with the responsibility for leadership and direction at the highest level available in their own country. They had served a long apprenticeship.

As an outsider, I observed and reflected on the culture that this management system and structure generated. It was distinctively and uniquely Honda. Everyone I met in the company was in love with the product, and took enormous pride in the quality of everything they did. There was only one place to join the company, on the shop floor, and talent was rewarded quickly, but there were only three steps to the top. I have never seen an organization with less tension between divisions, departments and functions. There was no competition between functional silos for resources, because there were no silos. The goal appeared to be optimization rather than maximization. This culture created a breadth and depth of capability that enabled Honda to achieve great things.

Two examples.

In 1988 the whole global company celebrated the achievement of Honda USA when it delivered the first ever shipload of Honda Accord cars from an overseas plant to Japan. After years of striving Honda USA had matched the Japanese quality standard.

The personal rewards for talented staff were good too.
I worked with a marketing manager who had joined Honda just three years earlier. He had worked as a cleaner in the store as a university holiday job, and took his turn on the waiting list. He had progressed from storeman to manager in three years, and was soon to move on to manage the finance division. He knew nothing about accounting, but as he explained to me, the accounting specialists were outstanding. His job would be to help them do their jobs. He fully expected to be appointed to a divisional manager role in 4 or 5 years.
The Honda system was built on trust.

Honda treated trusted suppliers as partners, and judged them to by the way they trusted Honda. The story of how we won the management development contract shows how deep this goes.

At the time my business partner and I had created from scratch a successful boutique training consultancy. We were invited to a meeting with the Honda divisional management team, to discuss a training project. They indicated that we had strong competition. The meeting concluded with an invitation to prepare a presentation to the business that would demonstrate our understanding and approach to supplying what they needed.

I said that the research would take three months and require them to open up the company to us so we could understand their business. It would cost us several thousand dollars and was beyond our ability to fund it. I argued that we would be doing essential preliminary work, and asked that they advance the funds to us. We were met with a flat refusal. I suggested that we would do the work at our risk if they agreed to pay us a fixed fee for the research and programme design as soon as we were awarded the contract. We shook hands on the deal and started work.

The presentation was a roaring success; it was a celebration of Honda product excellence with cars, bikes, pumps and generators and loud music. We showed how we had become personally committed to the Honda way. They loved it. We presented our first invoice and they handed over a cheque.
A week later we were astounded to be asked how much we would discount our first year’s fee if they pre-paid us. All our working capital problems were resolved and we had acquired an obligation to do outstanding work in partnership with Honda.
This was the real meaning of trust in business. We had to trust ourselves to do great work, then trust them to make a good decision. Then they trusted us with hundreds of thousands of prepaid fees for a major project.

It is hardly surprising that, to this day, I have a huge admiration for the late Soichiro Honda, the founder of a great global company, with a unique culture.

- Michael Taplin

Intellectual heavyweights John Ralston Saul, Naomi Klein, Margaret MacMillan and Adam Gopnik discuss “A Crisis in Leadership” at the Globe and Mail Open House Festival. The panelists reflect on what constitutes a good leader and why some leaders fail while others thrive. Journalist Carol Off is the moderator.

The financial accounting process requires being a dedicated matter. Outsourcing financial accounting proves to be a powerful business tool. There is a huge demand for financial accounting outsourcing as many businesses want to make a well-organized and better use of this strategy. Growth rate demonstrates substantial increase when a business avails the help from an outsourcing firm to handle their finances. A business that is facing or running in loss does have the opportunity of turning itself into a profitable firm with the suitable direction from the expert financial accounting outsourcing provider. Also, by availing the help of financial accounting outsourcing one can get the time to focus on other aspects of the business. Having an in-house accounting staff proves to be very costly as one have to pay a heavy expense on their salaries and other allowances. Thus, it is always a wise idea to take the help of financial accounting outsourcing firm which can cut as well as minimize costs.

One must take care of sure rules and regulations before awarding any bookkeeping project in the hands of any financial accounting firm. One should inquire about the outsourcing firm’s reputation and trustworthiness beside its performance so that it can give a clear portrait about their work philosophy. Furthermore, one should make sure about the legitimacy of the firm as one may require sharing his private and confidential documents with the service providers.

In a nutshell, the financial accounting outsourcing firm is not only liable for maintaining the financial transactions records but also executing other finance related tasks. It takes good care of back office services, general ledger, bookkeeping to tax computation and filing, data entry and spreadsheet. Financial accounting outsourcing service firm promises that one obtains the best level of professionalism, accuracy, perfect sense of timing, and the most prominently the quality work.

Most of the financial accounting outsourcing firms has expert and professionals who have years of experience in this area. Therefore, one can have sign of relief as these professionals take up your work. The financial accounting outsourcing service providers are very proficient and reliable enough to offer one a worry free environment. This is the most cost effective way and accounting solution. Outsourcing joins a range of best advantages and offers the client with an expert and cost effective way to handle financial and accounting tasks.

- James Lee

If you are a sprinter and run alone, how will you know how you compare to others who also run? The principle also applies to business and business owners.

For instance, suppose you operate a Plumbing shop or business selling bathroom fittings. You might think your operation is performing OK by reaching a gross profit percentage of 30 percent…

But what if other similar businesses in your industry are doing better and reaching a gross profit of 45 percent?

That could indicate that there is certainly room to improve and do better. In short, benchmarking gives you the targets to strive towards because they match performance with other similar businesses in your industry (your competitors).

Benchmarking is a vital constituent for business development as it lets you understand and gives you clarity to discover what it takes to be the best in your area, and what it means to be a leader in your industry.

Benchmarking means that you can: – Look for ground-breaking ideas and highly successful operating practices and then relate these to your own operation.

- Explore your own organisation without the emotion by looking at the numbers and make the required improvements to equal or better your competitors.

- Understand and Recognise the shortcomings in your own business and then to create and implement a business strategy to eliminate or improve those failings.

- Admit others in your market are performing better than you to learn how they are doing it and then apply that information to your business.

PricewaterhouseCoopers “Trendsetter Barometer Survey” noted that “fast growth companies who used benchmarking information to measure business performance against their peers achieved 69% faster growth and 45% greater productivity over those who did not.”

Planning / Analysis This factor of business management is generally not well understood. It’s largely neglected by most business owners but it can generate huge rewards.

As chartered accountants, we’ve noticed that business performance can improve quickly after using benchmarking as a tool to gain deeper business advancement.

Analysis can mean you can see a particular strategy will generate the best return for investment, and then quantify and measure the result of your decisions on profitability BEFORE investing time and money on implementation.

The best managers systematically do a review and analyse financial results, key performance indicators and benchmarks prior to making strategic / key discussions.

Good analysis means you can:

- Look at key performance Indicators (KPI’s) that help your business to prosper

- Use information to create and grow financial and business strategies that actually work that can be measured.

- Learn to communicate and measure your business financial performance clearly

- be very clear what effects the bottom line is impacted by changes that you implement.

- Communicate successfully between your business mentor, accountant and financial institution – Understand how banks measure business performance – Learn the most effective ways to increase your cash flow While analysis is very enjoyable and even rewarding it can be very intricate and is best left to specialists.

Your accountant can advise you how you can use this process in your business.

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- Paul Easton works with John Rowe – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and business accounting