Management and 5 year plans

I just saw some of the videos on MSNBC regarding the US economy, including the much-respected Alan Greenspan admitting to a mistake in a model that he had where banks can be trusted to look after themselves and how companies are now facing not just a credit crunch (lack of cash) but insolvency (debts more than assets). Actually, the hard truth is that bankers look after themselves.

Most businesses work out rather detailed 5 year plans. Well, at least most executives have to do a detailed 5 year projection every year. The economy in Sep 2007 last year was starting to realise the effect of the subprime mortgage problem.

With the current economy, it just destroyed all the hardwork all these executives have put in while working out the 5 year projections. All destroyed because the economy is different from what we thought it would be.

My point - most detailed 5 year plans are quite a waste of time and energy. Yes, they may show some indication of the direction when introducing a new product or service, but it is with too many assumptions on your product, technology, economic, consumer demand, etc.

Assuming that the plan is realistic, the only way to make it useful for more than 3 months is to have:
a. regular (at a frequency that the assumptions can change) reviews to check, verify and adjust the assumptions.
b. management that are realistic enough to adjust the projected results accordingly.
c. shareholders who can accept that as the assumptions change, the results of the company is expected to change. For better or for worst.

Unless a, b and c are made true, 5 year plans are just an feel-good exercise in the name of management responsiblity.

1. Should we maintain the act of doing 5 year plans when it is relatively useless if not reviewed? Or should we use it properly and do the reviews?
2a. For those few that are already doing the reviews, are we realistic in adjusting the assumptions we make about the market, product, demand, technology, etc?
2b. For those that dont believe in 5 year plans, what are the alternative models can the board use to evaluate and review?
3. Do you have a top management team or board that can accept a reduction revenues and profits? Or will they tell you to work harder to achieve what is not-too-realistic?
4. Do you think that in some (other people's) cases, the messenger will be shot?

Open your mind - food

For some reason, we humans can be rather closed minded in many ways. Of course there are also other human traits (such as determination) that can be mistaken for close-mindedness. However, I am refering to the simpler things such as food.

I like to eat and enjoy the food. And in my mind, each dish can be done in many different ways. And the variety that I am happy for the varieties I can get from a single dish. I am Asian Chinese, living in Asia, where I enjoy a huge variety of totally different styles of cooking. So a plate of fried noodles can be so different from one location to another, and even from one stall to another.

That being the case, some of my more food-oriented friends, have found for themselves the "best" of many dishes. And this is good. At least until they start to measure every other dish by the same name against the "ruler" based on the "best".

What puzzles me is this: if we acknowledge that each serving of fried rice from a different stall or restuarant is different (different ingredients, frying method, etc), how do we can we then judge other similar but not-the-same fried rice based on the previous "best"?

So when they eat at a new place, the dish they eat is then compared to the current "best" and naturally, found lacking. Not because the current dish is bland, but because the "best" was measured using a different ruler. But what if there is no "best", then how wil this dish fair? Is it nice?

Some fried rice include big prawns, some have extra roasted meats, others have very little ingredients but taste and smell absolutely delicious. Some are served with freshly cut chilli, others are served with sambal, and yet others with all kinds of condiments. The friend rice can be yellowish, light brown and even dark brown. With all the varieties, how then should we judge?

To me, each of the variation is a dish by itself and not to be compared to another offering although they share the same name. (Of course they could use different names but then it would be totally confusing for the consumer - imagine having to know 20 different names for fried rice alone.) And if each is unique, how then should we judge what is good or not good?

Before we go into the criteria for judging, I'll like to point out some other oddities of my friends. There is those who would highly recommend a particular dish at a particular stall, and when asked to elaborate on the exact reason (especially after we have tried the dish at that stall and found it unimpressive), the answers will be along the lines that the chilli-sauce is fantastic. Others would have great bias for big size or large quantities of ingredients such as prawns, crab meat, etc.

I think that we should have a slightly more definitive way to judge and recommend food. While each of the "measures" may be subjective, the structure of the measurements should not be. And for food, I think, the measurements should cover taste, colour, fragrance, texture, and ingredients (and some will include presentation, which I intentionally left out so that we will remain unbias against the hawker stalls).

If we open our minds, we may find many more acceptable varieties. This in turn will allow us to enjoy more of the varieties available and also learn to appreciate the differences of each. The challenge is whether you can open your mind and experience the new. I believe that this may prove more rewarding by far than seeking only the "best".

1. Do we people have to judge everything according to a single measurement such as the "best"? Think of cases that you use the "best" as your ruler or weighing machine. Are we guilty of measuring everything with a ruler because our minds are closed to other forms of measurements, such as weight or volume?

2. Can we open our mind and explore each taste as its own and not try to compare it with others (even though they share the same name)?

3. Can we appreciate each for its own goodness? in it's similarities as well as differences?

4. Do we treat the people around us like the way we treat food? That we dislike someone because he isnt like someoneelse or because he is like someone we already dont like?

5. Do we stereotype people around us without even learning whether they fit into our stereotype? Do we think "he is xxx and all xxx are yyyy, so he is yyyy"?

6. Do we wish to be judged using the single measurement of the "best"? No? because we are complex? Do we judge other people this way?

Our fundamentals are strong?

Chinese saying: - Lips perish, teeth cold. Meaning - if your lips are destroyed, there are no longer any protection for the teeth.

We live too close to each other. No, not just my neighbouring unit, but the neighbouring countries, and their neighbours, and the neighbours of those neighbours. (What is shortest number of borders one has to pass to go where you are to the furthest country? 3? 4? Other than the landlock ones, most places are just 1 border away by ship) So close in fact, that what they do, affects me, especially when the subject in question is shared, such as food, oil and money.

And so because some people in some far distant neighbourhood got caught playing with money they didnt have (domino numero uno), other neighbourhoods found that they too may be guilty of such, at the very least, in the form of lending to those playing. Now the second (and third and so on) giant domino connected. And the rest is not far away. Well, not all the neighbours are like that. Some are not.

Here, we dont do that kind of playing or lending. And so some people says that we should not be affected. But when some neighbours start losing confidence, retirement benefits, real purchasing power and jobs, they often stop buying new things. When they stop buying things, we have a hard time selling the stuff we produce. If we can sell the stuff we make, we need more warehouses. So the warehouse construction industry is going to save us. No?

We can improve productivity (learn from toyota), ensure high quality, manage the supply chain, cut costs, etc. And see, the bottom line improves because we are now producing more high quality goods at lower costs. After all, our finished goods inventory and other assets are valuable. No? We have to sell it before it becomes real value? Ok, so sell it.

We cant sell? What do you mean we cant sell? They used to buy everything we could make. No one is buying? Why? How can they stop buying? That cant be real! Our fundamentals are strong, our economy is good, we are still growing... They used to buy so many every month. Tell them to continue buying like previously. What do you mean they cant buy?

What do you mean the factory is closing? We are producing very efficiently, high productivity, low costs. What do you mean the employees are retrenched (VSSed or fired, or whatever)? They are working well, just last month the production was record high. We should pay them bonuses for the productivity. What do you mean we have no money? After you sell the products, there will be money. What do you mean there are no buyers?

What do you mean our suppliers are at our doors? Explain to them, this is a temporary situation, come back next week. Did already? Two weeks ago? Go and sell some of the stuff in the warehouse and pay them. What do you mean no one is buying?

What do you mean the banks want to foreclose? We have strong fundamentals, see the factory is so big, so efficient. See the goods in the warehouse? when we sell all of those we can pay the loans plus interest. What do you mean we cant sell?

Perhaps we should rethink what we mean when we say that "our fundamentals are strong". Fundamentals should reflect what is happening at the ground. Taking the manufacturer as an example, let's ask a few naive questions.

1. What does Price and Costs really mean to the bottom line if nothing is sold?

2. Reserves or Cash on hand can only last for so long if you have overheads and expenses. What happens if the prices go up? what is the common way to reduce overheads and expenses? By retrenching, do we improve or reduce our chances for survival?

3. If many are retrenched, how will they buy things? If they dont buy, how do we sell?

4. This one is off-topic - If finished goods consumes raw materials and manpower to produce, shouldnt Finished goods be treated as expenses until someone buys it. If you have finished goods that you think will not be sold and it remains in your balance sheet, is that honest? I know that is what is being practiced. But is it Honest?

I have to say this for the record so that I may be proven right or wrong in the next few months. The whole thing is not going to explode. It has exploded. We are over-reacting in the way typical of the west, by thinking that the explosion is still going on and going to get worse and worse.

Just like the price of oil has no limits from Jan-June 2008, and now (Oct 2008) it is at half the price from July 2008. What I mean is that the worst has happened, it is the aftershocks that we must prepare for. But it aftershocks, not a continuous series explosions.

So we will be down a little, maybe many countries will have recessions. Nevertheless, the world will be all right, perhaps even better because of the cooling down of the overheated economies (especially those driven by trades in non-existent commodities or services).

Cannot and Don't Want

Life is full of choices. In fact, it is so important to us that we fight or work hard to have those choices. Even the choice of whether we want to work to have those choices is a decision one must make.

But we are frustrated because of choices too. Families in the big towns will choose from national schools, private schools, popular schools, neighbourhood schools, etc. And many are frustrated because they cant get a place for their child in a particular school. I know of a small town where there is only 1 school. Every parent is happy that the child is going to school. No choice.

Back to the idea of Cannot and DontWant. Because we have choices, many times our choices are guided or limited by Cannot and Dontwant. What's the difference?
Cannot refers to something that I dont really have a choice about because someone, some book, some principle or something states that I cannot do. With a height of 1.60 metres, you cannot play basketball professionally. With serious colour blindness, you cannot become a graphic design artist for magazines. I am married, so I cannot have sex with other people. I am a respected member of an organisation so I cannot take part in "wrongful" activities.

Dontwant refers to something you can choose and you choose not to. I can eat hamburgers or sleep at 10pm or have extramarital sex, steal a stack of paper from the office but I dontwant. You get the idea.

So what's so interesting about the Cannot and DontWant? Well, Cannot is often bent when it is convenient. Convenient may mean nobody is watching, it is too small to matter, or the alternative is too troublesome. Because Cannot is imposed, and not "natural" to the individual.

DontWant normally stands most of the time. Because it is a true choice of the individual.

Where am I going with this? Because society makes us behave with more Cannots than DontWants, we practice our lives in a make-belief world of restrictions. These restrictions are often thrown aside once we are out of reach of the "whatever" that is imposing the restrictions.

I have asked many female friends of mine whether they will sunbathe topless on a beach, and the answer is always "No!". But when the location is extended to a beach in a foriegn country that allows toplessness, and that there are people around but none that knows them, the answer almost always comes back as "Yes". (I didnt ask the conservative ones, since something like this should not be even discussed with them.)

So I dont know what is the ratio of topless sunbathers to covered sunbathers, but I know the ratio increases drastically once they are in a foriegn land. So Cannot locally, Can elsewhere. Of course the conservative ones who will say no even if they have a private backyard with 20 feet walls. But those are not Cannot, they are DontWant. See what I mean?

So we become different when we are in a place that no one recognises us. (Just like how someone described that you are your true self only when no one is watching.) In Malaysia, almost all drivers ignore many traffic signs especially "NO U-TURN". These same drivers obey the same sign when in Singapore. Cannot is at work again. (For readers who may not be aware, in Singapore, cannot means cannot, while in Malaysia, cannot means can if there are no cops around)

Given that we are mostly governed by Cannot, what are we like when the restrictions are removed? Do we start physical relationships with everyone we like? Do we park our cars anywhere that is convenient for us without considering other drivers? (perhaps we already do?)

If Cannot is truly strong, then there will be little vice, affairs or crimes. Of course, Cannot is weak and limited, and therefore we have the choice again.
So, dont believe people when they tell you they are XXX and therefore they do not YYY. Check if it is a case of Cannot or DontWant. If it is a case of Cannot, it can be easily changed. And seldom do you meet a real DontWant.

What about you? Are you guided (or limited) by Cannots that are externally imposed? How many truly DontWants do you have?