The job of a bank, apart from looking after your money, is to finance business. The banks are not doing this. They were caught with their systems down, created a lot of toxic debt, got bailed out and have now clammed up. One major bank this week dismissed an investment on the grounds that it is a “start-up” and therefore ‘outside their lending scope at present’ – no suggestion that it was not a good investment. About 65% of the reasons for businesses needing money is start-ups. ‘No new start-ups’ equals stagnation.

It pays to take a quick look at the dedicated approach of Silicon Valley Bank offering various types of finance for different stages of development. Every country aspiring to support entrepreneurs should have its own version of this.

If we are not careful we shall end up with the worst of all worlds as a result of the recession still plaguing us. Printed money must be paid for; borrowed money must be paid back. If we do not have a system for dealing properly with these two phenomena we shall have serious inflation. If it becomes bad enough it could devalue all our currencies including the world’s most important currency, the US dollar. Short term fluctuations are to be expected but long-term the world needs a steady reserve currency. It does not have to be the US$ but if it changes too quickly the fallout will be frightening.
What are the signs so far?

There is uncertainty about where the world economy is heading. The experts disagree.

The superficial signs are that there is a trend towards recovery and certainly money has been made on the stock markets as they bumble their way up and down for temporary reasons. The underlying data suggest a different picture. Job losses are continuing and we cannot even assess the ‘hidden’ job loss equivalents of reduced wages and unpaid staff. A significant number of company directors coming to me for guidance are taking no pay in order to avoid losing their senior employees to competitors; but directors need to be paid too. The title itself infers only responsibility.

Credit taken by customers is extending way beyond prudent business into virtual theft. This is particularly true of the larger companies in their dealings with Small & Medium Enterprises (SMEs). It has even extended to some governments around the world delaying payments to their suppliers. The dangers of bankrupting smaller companies who provide a high proportion of total employment are self-evident.

Banks have downsized without rescheduling the workload; the smaller staffs are quite unable to cope. A major European bank told me this week that it was not their practice to inform a client when his relationship manager left the bank. Can you believe it?

When you don’t know where you are heading it is difficult to know what to do. However, we can learn the lessons of actions taken so far. Top of these is the folly of simply bailing out the banks.
Sure, they can then resume their inflated bonus payments, but for what? Not for lending, apparently.

When the pump runs dry you need to prime it. You do that by pouring water into the stem, not by handing a pail of it to administrators. Direct support for existing businesses and good loans to start-ups make more sense than putting the cash through banks or a long chain of inspectors.

Liquidity is the problem and serious efforts have to be made to increase it. Statutory control of payment terms is a pre-requisite to making the money move around faster. It is legitimate that those who have obtained goods or services should pay promptly for them. Without it many more companies are going under.
We need capital for new businesses. When the pump runs dry you prime it by pouring water into the stem. Direct support for existing businesses and decent loans to start-ups make more sense than putting the cash through banks or a long chain of intermediaries.

The conventional sources of finance are barely operating. We must look to research funds, specialised development funds and real risk-taking funds to supply the priming capital new businesses now need. And, above all, to individuals who have made their money and now want to give a start to the next generation of entrepreneurs.

It is one of the first rules of life that when you don’t know what to do you get help and work out what to do. If you don’t, you risk being one of the casualties, too.

There is one group of people coming out of the disaster with a big smile on its face – the bankers. The make Houdini look like an amateur. Not only have they got away with privatising the profits and socialising the losses, they are right now increasing their charges, reducing their service and continuing to pay themselves outrageous bonus monies. Four of them, under the watchful eye of the political equivalent of a Kalashnikov rifle, apologised – and immediately set about stealing more of their customers’ savings. And what did we do? Some hotheads broke a few bank windows and got arrested. Otherwise we sat back and took the fiscal rape with barely a murmur.

Apart from locking them all up for a very long time and throwing away the key, there are eight things we must now do to put the situation right and prevent a recurrence of the worst of the causes of global financial bankruptcy.

First, we must make 30-day payment of bills universally statutory with an excessively high monthly interest penalty on payments delayed beyond that deadline. I know it will not be easy to enforce but if a determined effort is made it will change the culture quite quickly, improve liquidity – at the root of our problems – and keep millions of small business going which otherwise will go bankrupt. It is unforgivable that one of the largest international food and soap companies in the world should be paying its small suppliers at 90 and 180 days. That is not business, it is theft.

Second, we must make it law that all bonus-type payments to “heavy earners” should be made in the form of “Attached Shares” in their businesses. These are not stock options. They are shares issued at the current (at time of issue) market price to the value of 85% of the payees’ income above US$250,000. The remaining 15% can still be paid as normal income. These shares will not be assessed for income tax when issued but when realised. They may not be sold for seven years except in the case of death of the shareholder or his confirmed diagnosis with a terminal dread disease. Dismissal and resignation will not entitle the holder to sell his shares. Heavy earners will thus be encouraged to consider carefully the future of their businesses. Their future bonus depends on it.

Third, the law of limited liability must be changed. Designed to encourage entrepreneurs to invest in money-making ventures, it has become used as a shield for reckless financial advisers to gamble with their clients’ money on a ‘heads-I-win-tails-you-lose’ basis. It was not intended for that; we should remove this improper use of it.

Fourth, we must publish the terms and conditions of everyone employed. Current talk about transparency is poppycock. Nobody has the slightest intention of being transparent if they can possibly avoid it. People will not immediately warm to the idea of true transparency. Within a year of it being introduced 95% of the population will welcome it. The other 5% will either earn their wages or quit.

Fifth, we must reduce (yes, reduce) the regulations governing financial dealing. They have been shown to be worse than useless, and they always will be. We must substitute the law of Criminal Breach of Trust (CBT) for the current nit-picking regulations that inhibit the lawful from dealing smoothly with their finances but still allow the thief to get away with it. Criminal Breach of Trust will say that there is a line of honest, transparent dealing that we all know but that is not defined in detail. Cross it and you go to prison. Where is it? You find out – and stay behind it. The courts will decide if you have crossed it. They are perfectly capable of doing so. The line is, in any case, always shifting as investors get more educated. Defining it would only mean that it gets out of date very quickly. If you don’t think this will work, have a word with me. It already works extremely effectively in a different sphere.

Sixth, we will not take back bonus and other payments from those who have earned them. We connived at the scam, we must contribute towards its solution. We won’t take the money back – provided all those I described earlier as ‘heavy earners’ make a full and complete disclosure of their take for the last ten years, for publication. Anyone found falling short of total honesty will have ten years in a cell in which to contemplate the virtues of transparency. A quality thesis written on the subject while inside could contribute to a small remission of some of the sentence.

Seventh, each public company will be required to support a Shareholders Union which will represent not only the institutional investors but the small private investor as well. Labour unions transformed the lot of the working man over approximately fifty years; Shareholder unions can transform the lot of the investor in less than five.

Eighth, we will ask all those whose assets exceed a certain amount to contribute 10% of them to the Raising Fund (to distinguish it from a Sinking Fund). The amount will vary with certain criteria such as age and responsibilities. Their names and contributions will be published and they will be awarded a special medal. The Raising Fund will be administered by a Trust and used to support businesses legitimately hard hit by the recession and where the demise of the business would cause unsupportable hardship.

Tough? True love always is. So how can these eight ideas be made politically acceptable?

I’d welcome your suggestions.

I have noticed that many CEO’s are coming round to this point of view. These are tough, entrepreneurial business men and women, not given to soft management or to accepting less than top class work. But they are confident as well. They do not have to show the rough side of managing to prove their power; they know that real power is self-evident and is the prerogative of the gentle, not the brutal.

What are the characteristics that make employees care about the organisation in which they work? What makes an employee committed to super effort and very high standards?

I recently had a run-in with a restaurant I often visit, part of a big group. The food is excellent and the service, good. One evening the food was still fine but the service went to pot. So badly, in fact, that I refused to pay the bill and called for a VP of the organisation to see me.

He was first rate. He didn’t argue, try to excuse the restaurant or bang the desk and demand payment. Instead he said he would be in touch with me. After a sensible few days cooling off he called me, listened to my story, accepted it and asked me to give them one more chance. I did so and am back as a regular customer now.

But the really good part of this story is that the VP made himself take on the restaurant and become acting head waiter. He doesn’t stand there giving orders. He works; he helps the waiters and waitresses. He cares. I am truly impressed. I have not seen such good recovery before.

Someone is running that organisation very well and I congratulate him or her. An employee will only put himself out like this if he, in turn, feels cared for by the company.

What does that mean?

Of all the conditions of employment that go to make good management, the single most important is clarity of objectives. If your employees know what you are trying to achieve, if their part in your purpose is clear and if you update them regularly on your objectives, they will respond. But don’t ask them to second-guess badly communicated, ill thought-out plans. They can’t and they won’t. Companies where employees repeatedly make mistakes characteristically have a lack of clear objectives.

Hot on the heels of transparent purpose is a willingness to listen to the point of view of those who are doing the work. They won’t always see the whole picture nor will they understand the economics of your business model. But they face the customer and the real world in which the company lives. Ignore their views at your peril. Regular dialogue (that means listening not lecturing) is a vital part of good management.

Clarity and transparency go hand in hand. They are the foundation of good employee relations. In my next article I will deal with some of the other issues vital to helping your employees do their best for you. In these days of staff shortages these issues are not an option; they are a must.

What is mentoring?

Mentoring is helping people to realise their own abilities. It is not coaching, although the two are not far apart. But coaching involves teaching techniques for achieving short-term and very specific, limited objectives. At the right time and for the right purpose coaching is a highly important tool.

Mentoring takes a more holistic view of a person’s career, ambitions, needs and ultimate fulfillment. Every Mentor will devote some of his mentoring time to coaching but he will look beyond the immediate future to the longer-term rewards and achievements.

A good Coach imparts ways of doing things. A good Mentor gets his Mentee to discover what he or she really wants and helps them to achieve it – but does not achieve it for them.

“If you truly care for someone you help them to stand on their own feet, not on yours.”

Why should in-company mentoring be adopted?

To be helpful a Mentor must understand something about the work his Mentee is doing. It is usually possible to pick this up fairly quickly, but not always. Where the Mentor is already employed in the company the learning curve is much shorter, almost non-existent, and the process gets off to a flying start. Most jobs have a technical element about them and all companies have unique cultures; to have these pre-understood is a great way to speed up the Mentoring process.

There is a built-in stability in a company. Those who will become Mentors are likely to be either the very bright, young staff who will want to make their mark and climb the promotional ladder or somewhat older members of the organisation who have no intention of moving on.

How is in-company mentoring done?

Different companies have adopted different models for their in-company mentoring; there are many ways of approaching the task. Looking at the record of those few companies who have actively promoted in-company mentoring I am impressed by the success of those who have clearly separated mentoring from authority.

While there is no one ‘right’ way to introduce mentoring, the following seems to be the most efficient, effective and rewarding approach.

What are the do’s and don’ts?

The best Mentor is one who has been selected by the Mentee. Sympathetic understanding, a predisposition to listen and shared interests are the basic tools of good mentoring. No Mentor has the same amount of these for everyone. Good communication between Mentee and Mentor depends significantly on chemistry.

Authority is generally a bad basis for mentoring because the lines of command are difficult to disentangle from an essentially personal relationship. A Mentee is left in an ambiguous position as to what his / her response can be. Telling the boss what to do with his ideas is still not advisable as a basis for promotion, however egalitarian the organisation or society.

It follows from this that any formality or procedure is in danger of getting a Mentor / Mentee relationship off to a stilted or shaky start. A company that wants to introduce mentoring has, therefore, to be sensitive to the fact that personal likes and dislikes play a legitimate part, in much the same way as they do with counseling.

In my next article I will set out the seven steps I regard as likely to lead to the most successful mentoring for an organisation.

My experience is that any organisation wanting to introduce mentoring should follow these simple steps to maximise the chance of success.

1. Senior managers and top HR staff should be given a half-day exercise explaining what is to be done and how. This will tell them what mentoring is, why the organisation wants to adopt it and the sort of people who will make good Mentors.

2. Those attending should then be asked to submit the names of any members of the organisation they think fit the criteria for a good Mentor. They should be encouraged to include those approaching retirement as well as those showing early promise of becoming top rate managers. The young are often excellent Mentors and those at the end of their careers have much experience and wisdom to bestow – indeed, they can be encouraged to continue as Mentors after they have retired, to the benefit of both themselves and the business.

3. Senior management, together with the help of the best HR staff, should decide which of the names submitted are likely to be viable candidates and these should be asked if they would like to be considered. It must be made clear that saying "no" does not in any way lead to a black mark.

4. Those who select themselves should be given a two-day course of explanation and role-play with real examples of successful mentoring. Being a Mentor is enormously rewarding for those predisposed to helping their fellow humans, but it can also be demanding, often requiring much patience and perseverance.

It is essential that the candidates understand that mentoring is not another form of appraisal or talent-spotting. Senior management and HR will participate in this two-day exercise with a view to identifying the truly dedicated potential Mentors.

5. Once candidates have been identified, have had a brief training and have agreed to become Mentors they should ideally be given an external mentoring contact to act as a "Guardian Angel" during the first six to twelve months in which they are acting as Mentors. They will not be required to submit reports or verify the way they are handling their Mentees but they will be able to call on their Guardian Angel Mentor for advice if they feel they need it.

6. Once Mentors are in place they should be identified to all staff, preferably by a one-hour meeting at which the Mentors’ roles will be explained and staff will be told how they may access a Mentor of their choice. Short written introductions to Mentors will be made available to staff voluntarily seeking a Mentor. They must understand that the choice is theirs, not their boss’s, and it must be made clear that the Mentor will not be reporting back to their boss or management in any specific way.

The relationship between Mentor and Mentee is sacred, in all respects.

7. Mentors should be asked from time to time – but not at appraisal time – to comment on their experiences generally without betraying confidences of a personal nature. Their views on the value of mentoring will be revealing – as much about themselves as Mentors as about the concept.

In-company mentoring is set to become a major way of developing new managers. Enlightened organisations that adopt it will certainly see the very real benefits from improved staff morale to enhanced profits. Those who do it well will make a dramatic difference to the lives of their employees and create a high level of entrepreneurial stability – the goal of every business.

I know it works because I did it.