Board Governance and Sales Incentives scheme

Wells Fargo and the Slippery Slope of Sales Incentives

even a strong compliance function can’t counteract a compromised culture.

Get on Board the proper people, culture and behaviour….this is the primary interest to serve the shareholders as well, MALTAway is ready to serve you BOARD GOVERNANCE AND NON EXECUTIVE DIRECTOR (NED)

board-compensation-committee

In early September Wells Fargo agreed to pay a $185 million fine and return $5 million in fees wrongly charged to customers. The settlement stems from the bank’s employees allegedly opening more than 2 million bank and credit card accounts without customers’ permission. The CEO of Wells Fargo, John Stumpf, apologized in front of a congressional panel Tuesday, saying in a statement, “I accept full responsibility for all unethical sales practices.”

That speaks to why they did this in the first place: To meet sales quotas and earn incentives.

This is certainly not the first time that a high-profile sales scandal like this has hit the press. In the early 1990s Sears sought to restore its reputation with $46 million in coupons because some employees of its automotive repair division (who were paid a commission on sales of parts and services) had allegedly enticed customers into authorizing and paying for needless repairs. In 2005 the world’s largest insurance broker, Marsh Inc., paid $850 million in fines in the aftermath of accusations that it had received kickbacks from insurance companies for steering business their way — a scheme at odds with Marsh’s commitment to finding the best deal for customers.

Beyond the fines, Wells Fargo has fired at least 5,300 employees for “inappropriate sales conduct,” and the bank is making changes to its quota system. Stumpf said in an earlier statement: “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers.” Politicians, predictably, have railed against the leadership at Wells Fargo and have called for Stumpf’s resignation. One of the intriguing facts to come to light is that the fraudulent account openings continued even after the bank was aware of it and had fired employees for it starting in 2011.

That suggests that firing employees was not enough to curb the actions. Will eliminating sales goals do it? Before answering this question, it is useful to understand why and how such sales practices begin and spread within an organization.

In these and many other similar (but often less high-profile) cases, much of the blame gets placed on the sales goals and incentives. Salespeople are offered a large monetary reward linked to the achievement of sales goals — goals that employees perceive as excessively high. Sales managers, too, are rewarded for goal achievement, so they put pressure on salespeople to deliver. Salespeople are enticed by the promise of the large reward, or perhaps they are fearful of losing their jobs. Either way, they do whatever it takes to make sales goals.

But large rewards tied to challenging sales goals do not have to be a deadly combination. Many companies have great success using incentives and stretch goals to motivate the sales force and drive revenue. The culture in such sales forces may be sales-oriented and even competitive, yet salespeople still behave ethically and remain focused on meeting customers’ needs.

What differentiates sales teams that play by the rules from those that break them?

Large-scale unethical sales practices often begin with minor ethical compromises. Things escalate and spread from there. Consider the following sequence:

A bank account manager, under pressure to make a sales goal, pushes a customer to add a credit card, even though the account manager knows it’s not in the customer’s interest
Still short of the goal, the account manager asks his friends and family to open accounts. (The accounts are to be closed shortly thereafter.)
With the goal still not achieved, the account manager opens accounts without asking customers and transfers a small amount of money. (The accounts are closed shortly thereafter and the money is transferred back.)
As soon as the account manager gets away with the first unethical act, it’s not a big step to the fraudulent ones. The justification moves from “it’s legal” to “no one is harmed” to “no one will notice.” When such practices are tolerated, they escalate in severity and spread throughout the organization.

To prevent that, the sales culture has to stop the first level of compromise, because the slippery slope begins there. As Wells Fargo has discovered in the last five years, even a strong compliance function — one that began firing people in 2011 — can’t counteract a compromised culture.

When things escalate to such a scale, the problems won’t stop with salespeople. Managers and leaders may be looking the other way, or aiding and abetting the behaviors.
What’s most insidious is that managers and leaders may be engaging in similar behaviors in their spheres and domains — in how they deal with other people inside the company, with partners, and with suppliers. Often, bringing about change requires going right to the top of the sales organization and bringing in a new leader who isn’t connected to the history of what’s happened. This individual can build a new culture based on appropriate values and the right workstyle.

Though not a question for customers and regulators, companies such as Wells Fargo have to ask how they can succeed in a sales world without heavy reliance on goals and incentives.

In 2011, about the same time that Wells Fargo began firing employees for questionable sales practices, we wrote a piece for HBR.org addressing that very issue. We called it “Is Your Sales Force Addicted to Incentives?” As we wrote back then, the key to success will be a new culture built around a more balanced approach to managing sales. This new approach will require using tools other than incentives — for example, interesting work, enhanced processes for selecting salespeople and managers, training and coaching, information sharing, empowerment, teamwork, manager assistance and supervision, and improved performance management systems — to motivate salespeople and guide and control sales behaviors.

If the bank is successful in transforming to this balanced sales culture, then perhaps the money it once used for employee incentives can instead go to customer incentives — for example, a no-fee credit card or a better interest rate for opening a new high-balance account. Other companies would be wise to take the time to examine their own sales culture and ask whether incentives might be clouding otherwise good judgment.

https://hbr.org/2016/09/wells-fargo-and-the-slippery-slope-of-sales-incentives

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For Corporate Ethics you Can’t fill Boards’ meeting just with Compliance

For Corporate Ethics you Can’t fill Boards’ meeting just with Compliance

maltaway alberto balatti corporate board ethics

As Aristotle famously said, “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.” Virtues in turn permeate the broader organizational culture and define “the way things are done around here.” That’s a force that’s a lot stronger than a narrow focus on following the rules.

MALTAway is your way for a better Corporate and Assets Governance

At companies across the globe, the layers of compliance mechanisms are growing. At first blush this seems to make sense: Perhaps the most obviously straightforward method of preventing unethical or damaging behavior is increasing the number of rules designed to curtail it. However, one of the more unsettling and unintended consequences of a singular focus on ethics-as-compliance is a checkbox mentality that gives the illusion of reducing risk without really doing so. Moreover, unless an organization is careful, a compliance-focused approach to eliminating unethical behavior can stunt a company’s efforts to innovate and to take intelligent risks.

So what can a company do to excel ethically? Instead of focusing on the poor choices you want employees to avoid, focus on the positive virtues you want them to exhibit.

Plato emphasized a virtue-based system of ethics 2,400 years ago in his Academy. The philosopher believed that virtues were best encouraged through questions and discussions rather than through statements and proclamations. In other words, we learn ethics in conversation with others.

So rather than getting together with senior managers to craft a “values statement,” corporate leaders should instead foster a series of structured conversations between leaders at all levels and their teams. The goal of these conversations should be to develop a common language to help frame examples of how people live out the organization’s values or classical virtues. This is inherently a social process — virtue is learned, not inherited. Leaders are already teachers of their culture, whether they are aware of it or not, so they should ask themselves how they can teach it better.

Here are questions for each of the seven classical virtues that companies can use to shape these conversations and shift their focus from complying with the rules to excelling ethically.

Trust: confidence in one another.

  • When has trust made us faster and more agile?
  • How can we restore trust?
  • At our best, how do we earn and deepen trust?

Compassion: an understanding of another’s challenges.

  • How does compassion support our business goals?
  • How does compassion increase engagement?
  • When have acts of compassion improved our business results?

Courage: strength in the face of adversity.

  • When have you witnessed courage in our company?
  • Who is effective at encouraging people to be courageous?
  • How can we help people to be more courageous?

Justice: a concern for fairness.

  • As a company, when did we go out of your way to help a coworker?
  • How can we further empower our people so they are more engaged in setting their own performance criteria?
  • When have we been our best in serving the needs of each of our stakeholders?

Wisdom: having good, sound judgment.

  • What have been our wisest decisions?
  • When faced with our most difficult decisions, when did we choose the best course and have strength to endure?
  • How can we be more intentional about integrating wisdom into decision making?

Temperance: having self-restraint.

  • How can we balance two competing rights, such as concern for the company and concern for the individual, or compassion and justice?
  • How can we help people practice self-control?
  • When have we been our best at encouraging life-work balance?

Hope: a positive, optimistic expectation of future events.

  • What are the parts of working for our company for which you are grateful?
  • What do we do well, and how could we do more of it?
  • When was our culture at its best?

Leaders can assess how well they’re modeling virtue-based ethics by asking employees five questions about how the company is exercising its moral muscle:

  • How well are we teaching character in our company?
  • How might character development benefit our company?
  • What is being done to encourage or discourage character development in our company?
  • How does character development reduce risk?
  • How does character development promote growth?

The goal isn’t perfection; organizations are neither completely virtuous nor completely free of virtue. The goal is for companies to be better than they have been and for leaders to teach virtuous behavior by example.

We suggest that it is strategically smart for an organization to make sure that stories about the practice of virtue are actively and intentionally shared throughout the organization. Character is the result of daily actions — planning meetings, quarterly reports, RFPs, customer interactions, and so on.

As Aristotle famously said, “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.” Virtues in turn permeate the broader organizational culture and define “the way things are done around here.” That’s a force that’s a lot stronger than a narrow focus on following the rules.

https://hbr.org/2016/04/corporate-ethics-cant-be-reduced-to-compliance

MALTAWAY BOARD GOVERNANCE AND NON EXECUTIVE DIRECTOR (NED)

Even here in Malta this issue arises with relevant importance and validity , partly because the high number of foreign companies present in Malta, in order to be compliant with international standards for tax purposes (see the case of dummy company and tax inversion) , must have a board of directors with directors and NON EXECUTIVE DIRECTOR , residents in Malta, supporting and providing clear and convincing evidence that the foreign company is effectively managed from Malta.

Furthermore having a NED with international experience in the BOARD, reinforce widely the diversity, independence and compliance requirements for a better Corporate Governance, Leadership and Business results

30+ years Board, Governance, Investment’s  experience and practice for YOUR BOARD needs and solutions

BOARD MEMBER SEARCH

  • President
  • Board Member
  • CeO
  • Executive Director
  • NON-Executive Director
  • Independent NON-Executive Director
  • Committee’s Chair

BOARD ADVISORY

  • Analysis
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  • Benchmark
  • Assessment
  • Coaching
  • Compliance

For Corporate Ethics you Can’t fill Boards’ meeting just with Compliance

At companies across the globe, the layers of compliance mechanisms are growing. At first blush this seems to make sense: Perhaps the most obviously straightforward method of preventing unethical or damaging behaviour is increasing the number of rules designed to curtail it. However, one of the more unsettling and unintended consequences of a singular focus on ethics-as-compliance is a checkbox mentality that gives the illusion of reducing risk without really doing so. Moreover, unless an organization is careful, a compliance-focused approach to eliminating unethical behaviour can stunt a company’s efforts to innovate and to take intelligent risks.
So what can a company do to excel ethically? Instead of focusing on the poor choices you want employees to avoid, focus on the positive virtues you want them to exhibit.

Share how MALTAway think different on https://albertobalatti.wordpress.com/ as well

Hire an INDEPENDENT NON Executive Director (NED)

Is your board of directors ineffective? More strategy less compliance please

Toward a value-creating board, more strategy less compliance please

MALTAway is your board governance partner, furthermore having a NED with international experience in the BOARD, reinforce widely the diversity, independence and compliance requirements for a better Corporate Governance, Leadership and Business results

The amount of time board directors spend on their work and commit to strategy is rising

Directors say they dedicate more time now to their board duties than ever before and that, since 2011, they’ve cut in half the gap between the actual and ideal amount of time they spend on board work. In the newest McKinsey Global Survey on corporate boards,1the results confirm that strategy is, on average, the main focus of many boards. Yet directors still want more time for strategy—more than any other area of their board work—when they consider its relative value to their companies.

We asked directors about the effect their boards have on company value and found that, in general, respondents believe their impact is high or very high—which was also true in our previous survey on the topic.2 To gain a deeper understanding of how boards create value, we took a close look at larger commercial companies and identified patterns between directors’ assessments of the board’s overall impact, effectiveness at executing specific tasks, and the way the board works. From our analysis emerged three types, or profiles, of boards, which we call ineffective, complacent, and striving. Interestingly, some directors’ initial views on their overall impact diverge from how effective they say their boards are at individual tasks. To be successful, then, the results from our three profiles suggest that boards must be effective at individual tasks, maintain a trust-based but challenging board culture that embraces feedback, and aim to improve continuously.

Time spent—and commitment to strategy—are on the rise

On average, the amount of time directors spend on board work has increased notably in recent years. Compared with 2011, respondents now say they spend five more days per year on board work, cutting in half the ten-day gap between the actual days spent and the number of days directors want to spend to get it right

 

As the number of days has grown, so has the amount of time spent on strategy, where board members tend to say they make their biggest contributions (Exhibit 2). Indeed, directors are almost twice as likely to say their boards are more effective at strategy than any other area of their work; they report the least effectiveness at organizational health and talent management.3 Strategy is also where directors spend nine days per year, the greatest amount of time across the seven areas of board work we tested.

But for all of their focus on strategy, most directors would like to dedicate even more time to strategic issues. Fifty-two percent of directors say they want to increase the time they spend on strategy in the next few years, based on its relative value to their companies (Exhibit 3). An equal share say the same for organizational health and talent management, an area where boards spend only three days per year.

A board’s actions, dynamics, and self-perception all matter

To gain a more comprehensive understanding of how boards can be successful, beyond the time directors spend on their work, we looked closely at three factors of board performance: directors’ assessments of what impact their boards have overall, how their boards perform specific board tasks, and how their boards operate.4 After considering responses at both the global and the task level (where some interesting differences emerged), our analysis resulted in three types of boards: those that are ineffective, those that are complacent, and those that are striving.5

The ineffective boards

Compared with their peers, the directors on ineffective boards report the lowest overall impact on long-term value creation and the least effectiveness at the 37 tasks we asked about. Notable shares say their boards don’t execute some of these tasks at all: 70 percent, for example, say their boards don’t align with the executive team on how to manage company risk. Of the tasks they do perform, only minorities of these directors say their boards are effective at any one. Ineffective boards do best at securing and assessing their management teams: 44 percent say their boards are effective at discussing top-team performance with the management team, and 42 percent say they’re effective at regularly reviewing the top-talent pipeline. When it comes to how boards operate, less than half of ineffective-board directors report a culture of trust and respect in the boardroom or that directors seek out information on their own. Only 1 percent say their directors received sufficient induction training.

The complacent boards

By contrast, directors on the complacent boards have a much more favorable view of their overall contributions. Close to half say their boards have a very high impact on long-term value creation—the largest share among the three types of boards. But when asked to consider their boards’ execution of 37 specific tasks, there are only 3 for which a majority of respondents report effectiveness: ensuring that management reviews financial performance, setting the company’s overall strategic framework, and formally approving the management team’s strategy.

Organizational health and talent management is a particular weakness: just 9 percent of directors on complacent boards, for example, rate their boards as effective at ensuring the company has a viable CEO successor who can step in at any time (Exhibit 4). Compared with ineffective boards, though, these boards have a stronger sense of trust and teamwork. Two-thirds of complacent-board directors report a culture of trust and respect, and about half say their boards spend enough time on team building. At the same time, they struggle to embrace feedback. Less than one in five say their boards regularly engage in formal evaluations, either individually or as a board, or that their chairs ask other directors for input after meetings.

The striving boards

The striving boards, then, are the most well-rounded of the bunch. Just 26 percent of these directors rate their boards’ overall impact as very high, compared with 44 percent at the complacent boards. But on specific tasks, they report much greater effectiveness than their peers on every single one—and at least half of striving-board respondents say they’re effective at 30 of the 37 tasks. These directors rate their boards as particularly good at strategy and performance management (Exhibit 5). For example, 69 percent of respondents on striving boards say they effectively adjust strategy on a continuous basis; only 35 percent on complacent boards and 2 percent on ineffective boards say the same.

Striving boards stand out, too, in the ways they operate (Exhibit 6). These directors report an exceptionally strong culture of trust and respect, that board members and the management team constructively challenge each other (76 percent say so, compared with 53 percent of complacent-board directors), and that chairs run meetings well. Feedback is another area that distinguishes these boards. Striving-board directors are more than twice as likely as complacent-board directors to say their boards conduct regular evaluations, and more than three times likelier to say their chairs ask for input after each meeting. That said, there’s significant potential for even the striving boards to improve: only one-third of these directors say their boards regularly evaluate themselves.

Finally, directors on striving boards commit much more time to their work than others do: on average, they spend 41 days per year on board duties. The complacent-board members spend only 28 days per year—even less time than directors on ineffective boards, who report spending 32 days on board work.

Looking ahead

  • Spend even more time. This year’s results indicate across-the-board increases in the time that directors spend on board work, compared with previous surveys. While directors at striving boards already spend 41 days per year and have no ambitions to spend more time, the average board member spends 33 days and says he or she would, ideally, spend 5 days more. In our experience, though, many board members are spending 50 days or more per year on board work, either due to regulatory pressure or simply owing to the fact that the time required to do a good job is usually more than directors initially expect.
  • Balance trust with challenging discourse. According to the results, the boards that are most effective and well-rounded also have the strongest board dynamics. In a healthy boardroom, a culture of trust and respect is vital. But so is an environment where directors and company leaders challenge each other. It’s no coincidence, then, that directors at striving boards report these characteristics most often. But all boards could be better at other elements of how their boards work: improving induction training, for example, and conducting regular evaluations, which only a minority of respondents report—even at the striving boards.
  • Appoint an ambitious chair. Another important ingredient of improved board dynamics—and an improved board—is an effective chairperson, who runs meetings well, establishes a culture of trust and constructive discourse, and invests in training, development, and feedback. Good leadership sets the tone for the board as a whole and can set the stage for a more effective, value-enhancing board.

http://www.mckinsey.com/Insights/Strategy/Toward_a_value_creating_board?cid=other-eml-alt-mip-mck-oth-1602

 

 

Board members, a guide to get on board your CeO

Board members, a guide to get on board your CeO

a great post from pulse…..

MALTAway is for your governance and board  members

alberto balatti_murakami

When we work with boards of directors to help them prepare to interview CEO candidates, we develop an interview guide that will organize the conversation, which typically runs for 90 minutes.  While interviews are only one step in a CEO hiring process, along with in-depth referencing and executive assessments, it is not an over-statement to say that they are the lynch-pin in the process.

Boards and search committees will always put credence in analyzing track records and relevant experience, reviewing written reports, and talking to referees.  But it is in the interview where chemistry is established and essential intangibles like passion, energy, and fit are determined.  As a result, at the CEO level, as well as at every step in your career, being a strong interviewer is a major advantage.

In conducting CEO candidate interviews, many questions posed by a search committee are, of course, customized to the company’s particular situation.  But many of the questions are based on the essential areas in which a CEO needs to demonstrate capability: strategy and vision; growth, financial, andoperational management; leadership and team building; and Culture.

Here is the interview guide that we recently created for a board as part of a public company CEO search.

If you are an active or aspiring CEO candidate, it will serve you well to be prepared to answer these types of questions.  Even if you’re not yet at the CEO level, reflecting on these questions will give you an edge when you prepare for your next big job interview.

INTRODUCTION

The typical CEO interview begins with the chair welcoming the candidate, thanking them for coming and inviting the members of the search committee to introduce themselves.  He or she will then tell begin with what I believe is the best opening question:

“You have had a chance to begin to get to know our company.  Why do you think this could be the right opportunity for you at this point in your career and why do you think you might be the right leader for us?”

The best candidates will answer this with a crisp 4 to 6 minute narrative about their career, their relevant experience, their professional interests and aspirations, and a top-line assessment of the opportunity.  Often times this is the most important question of an interview, because as we all know, first impressions are lasting impressions.  It is in this questions, along with the hellos, handshakes, and introductions, where those all-important first impressions are made.

INTERVIEW GUIDE

From that point, each area of CEO capability are probed, with selections from the following questions (all of these questions would require several hours of discussion):

Growth, Financial, and Operational Management

  • Describe an instance where you have driven a company or business to accelerate growth, expand EBITDA and profitability, increase efficiency and enhance shareholder return. What was the vision and what needed to change?  How did you get the organization to respond?  What was the outcome?
  • Describe your experience managing significant budgets and P&Ls. How did you prioritize your investments?  What process did you use to gain support?  What have been your experiences with tough decisions regarding budget cuts, restructuring or reallocating resources?
  • With an example or two, tell us about how you have grown or changed a business or an organization through strategic partnership, joint venture or acquisition. What was the long-term effect on your business?
  • Have you ever created and/or launched a new product or business that resulted in a new revenue stream? 

Strategy and Vision

  • What do you think are the most-important strategic priorities for our company over the next three years? What would you do as CEO to achieve success against these priorities?
  • How have you developed strategy when your business faced new market entrants and competitive threats? What were the short- and long-term goals that you put in place?  How did you involve others in designing and implementing change? What was the result?
  • Describe your experience managing an organization as it creates new business models, products, content or initiatives that are essential to the company’s growth. How did you develop a vision and a strategy to support it?  How did you communicate and gain buy-in from key constituents as the organization evolved?  What were the results?

Leadership and Team Building

  • How would you describe your management style? How would your staff and peers describe you?  What would they say are your major strengths and/or weaknesses as a leader or manager?  Where do you think you might improve?
  • Explain some of the different environments that you have worked in. Where have you been at your very best?  Describe the environments in which your leadership style is most effective.  Where have you been frustrated and less successful?
  • With an example or two, tell us something about your communications style in the workplace with your direct reports, your superiors and your staff more broadly? Also with the external community – clients, and investors?
  • Tell us about a time when you took over a team that had been under the leadership of another person for a long period of time. What did you do to build support, rapport, trust and followership quickly?

Technology

  • Like many companies we are experiencing changes in our operating environment due to continued digital transformation, the shifting patterns of content consumption and aggressive competitors. What have you done to implement technology improvements, e.g., platform integrations, new enterprise management systems?
  • Can you share a time when you have had to expand a core product set through innovation, and particularly in a mobile environment?
  • How would you bring greater innovation to our company? What innovations have you led at other businesses that are most germane?
  • What business that has adopted new technology and evolved their business model do you admire most? Why?   

Culture

  • What is most important and valuable to you? What serves as a guiding principal in your life?
  • Think back and share a story about a personal life experience that defines who you are today. What was the value/lesson?
  • How have you changed cultures to facilitate innovation?

Other Questions (if not previously addressed)

  • What is your assessment of where our company stands today? From your vantage point, what is the company doing right and what needs to change?
  • What do you believe would be your biggest obstacles to succeed as the next CEO? What development needs and gaps in skill/experience will you need to pay attention to, and how will you address them?
  • Can you give us an example of where a gap in skill/experience led you to be less effective than desired? What have you done to ensure you do not fall into the same trap again?
  • Describe one or two specific accomplishments that you are especially proud of over your career and why.
  • How would you approach your first 100 days in the job? How would you learn the business, build trust, generate buy-in, and develop a plan?

And finally, the all-important concluding question:

“What questions do you have for us?”

 * * *

Be prepared to answer these types of questions and you will maximize your chances of acing the interview and getting a step closer to your next big job.

https://www.linkedin.com/pulse/how-boards-interview-ceo-candidates-james-citrin?trk=hp-feed-article-title-share

https://albertobalatti.wordpress.com/

FORBES, MALTA making Waves in Financial Services

FORBES, MALTA making Waves in Financial Services

MALTAway for your Board Members, Advisory and Governance 

The beautiful Mediterranean island of Malta covers 316 square kilometers and has a population of fewer than 450,000. Historically, its location between Europe and North Africa has given it great importance as a trading post and a naval base, but gone are the days when the island relied solely on tourism to support its economy, nowadays Malta is making waves for completely different reasons.

The Island making Waves in Financial Services – Forbes 2016

maltaway_windsurf

http://www.financemalta.org/publications/articles-interviews/articles-and-interviews-detail/the-island-making-waves-in-financial-services

Treat Employees Like Business Owners, do it basic, simple and straightforward.

Treat Employees Like Business Owners, do it basic, simple and straightforward.

The rest is boredom and noise, keep it far away

Employee loyalty and engagement are hot topics, and for good reason. Companies want to attract and retain talented people who really dig into their work. But most employers ignore two of the most powerful tools for making that happen.

MALTAWAY Board Governance and Business Advisory, a different WAY from Malta

Tool #1 is enabling employees to build real ownership in the business.

Of course, many public corporations offer stock-purchase plans or the like as part of their retirement benefit. And everyone knows about the options collected by a select few in Silicon Valley and other tech centers. But meaningful ownership — sizable grants of stock to rank-and-file employees year after year, to help them acquire a significant stake in the company — is all too rare.

It doesn’t have to be. Many large corporations manage to find big bundles of shares (and huge amounts of cash) for executive compensation, even though there’s little relationship between senior-management pay and financial results. A portion of those assets can be redirected to regular stock grants for employees. And companies — except for the very smallest — can implement an employee stock ownership plan (ESOP), often funded through borrowing. So long as it’s sufficiently generous, either approach gives employees the kind of stake that makes them feel like true owners.

Just look at the supermarket industry to see such ownership in action. H-E-B, the big Texas-based chain, recently announced that it would give up to 15% of company shares over time to 55,000 of its employees, distributed according to a formula based on salary and seniority. That’s a chunk of stock estimated at more than $1 billion. Publix, a large chain headquartered in Florida, is majority owned by its employees and regularly makes the annual “best companies to work for” lists. And there’s WinCo, a grocery retailer based in Boise, Idaho, with 14,000 employees and 86 stores spread across eight western states. Every WinCo employee is an owner. Cathy Burch, who has worked there for 20-some years as an hourly employee, now has close to $1 million in her retirement account.

You don’t think that kind of generosity builds commitment and passion? “We work our tails off,” an employee with 28 years at WinCo told Forbes. “We’re more of a team than just working for a typical company. There’s a carrot out there you’re working for, for the rest of your life.”

Tool #2 goes by different names: open-book management, economic transparency, ownership culture. Whatever you call it, it means encouraging employees to think and act like businesspeople rather than like hired hands.

If you work for a conventional organization, your job is to show up at the appointed time and perform certain tasks. At open-book companies, it’s part of everyone’s job to contribute to the success of the business. Managers help employees understand, track, and forecast key numbers. They welcome ideas for improvement. They reinforce the ownership mindset by sharing profit increases with everyone, usually through bonuses funded by the increase itself. Many of these businesses also have a stock plan in place.

The approach is easiest to understand in a small company. The Paris Creperie, a Boston-area restaurant that’s about the size of a McDonald’s outlet, recently adopted open-book management. Creperie employees learned the basics of the restaurant business, including determinants of profit such as cost of goods sold (COGS). Then, last summer, they launched an initiative to reduce COGS, cutting food waste, reconfiguring some dishes, and coming up with ways to operate more efficiently. COGS dropped from roughly 30% of revenue to 26.5% over a four-week period, and continued to hold in the mid-20s. Operating profit rose by more than 10 percentage points in just four months and has stayed in the 18% to 20% range, compared with a restaurant-industry average of less than 4%.

This year, employees there are on track to get bonuses averaging $6,000. “Any other restaurant, I would just be scraping by,” shift supervisor Amanda Norton told theBoston Globe. “Seeing those bonuses really helps me breathe easier, knowing that it’s not the end of the world when I have to pay bills.”

You can imagine what all this does for employee loyalty and commitment. “Actually,” says Harvard Business School professor Leonard A. Schlesinger, “when employees know more about the business and have an economic stake in the outcome, there’s a high probability that turnover rates would go down exponentially.”

These tools also address two fundamental challenges of today’s free-enterprise system. An ownership nest egg helps mitigate inequality by putting more money in the hands of rank-and-file employees. And open-book management teaches people the basics of business, so they can thrive when they have to change jobs, as most inevitably will in our fast-changing economy. “People are learning what it means to run a business,” says Joe Grafton, a consultant who works with the Creperie. “That’s something they can take with them as they move forward with their careers.”

Both measures give people a stake in the system and the wherewithal to live a more secure life. A company that puts these tools to work helps its community while helping itself.

https://hbr.org/2015/12/treat-employees-like-business-owners

MALTA skilled workers, what’s next

Visa programmes to attract skilled workers?

MALTAway for your Board Members and Governance

To compete in a global market Malta has to compete on the skilled workers as well, rewarding them to move here, taxation is just a way

The KPMG’s biennial financial services conference questions ‘what’s next?’ for Malta’s financial services industry

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The financial services industry is finding it hard to recruit skilled workers because Malta’s education is preparing “robots” and not independent thinkers, speakers taking part in a financial services conference said today.

In a day-conference at the Hilton organised by audit firm KPMG Malta, senior partner Tonio Zarb said Malta had to work harder to reach the level of sophistication of other countries in the financial services sector.

“One way of doing this is to import expertise. Innovation is closely tight to education and we need to encourage a change in our education system to produce independent thinkers, and not robots,” Zarb said.

Malta Financial Services Authority chairman Joe Bannister drew attention to the fact that, despite the complaints of the industry, very few came forward to help with training prospective workers.

He explained how last year, only 90 placements were granted down from a 120 the previous year. Bannister went on to state that students were attracted to the financial services industry because of the high salaries. He went on to warn of risks of creating a wage inflation.

One way of bridging the gap resulting from skills shortage was through the setting up of visas programmes, such as those employed by the United Kingdom, FinanceMalta chairman Kenneth Farrugia said.

The UK brought in a 20,700-a-year cap on skilled workers from outside the EU in 2011.

KPMG partner Juanita Bencini went on to suggest that the solution could be closer to home: increase female participation. 60% of University graduates are women but less than half of the full-time working population are women.

“We have to tackle the defeminisation of the workforce and we [financial services sector] should be at the centre of increasing female participation.

It’s also translated into how employers look at it,” Bencini said.

“There is a huge mismatch between what the industry wants and what comes out of university. We have not shown enough courage to ensure that this talent doesn’t drop off and we cannot afford to have them disappear of the face of the earth.”

Bencini added that what the government did with the universal provision of free childcare centres had helped a lot but the private sector needed to do something different too.

“Can we see our males working four days a week? We really need to start thinking to ensure female participation is there and this will make the industry grow,” she said.

Labour MP Charles Mangion also highlighted the country’s stability as a key attraction to investors. He noted, that the cross-party consensus that existed for years allowed the sector to flourish.

The financial services sector contributes some 12% to the country’s GDP.

http://www.maltatoday.com.mt/business/business_news/59845/financemalta_chair_suggests_visa_programmes_to_attract_skilled_workers#.Vl7N8nYvfIW