What Running Organisations Deepened My Conviction About People About Results

Why I Have Stopped Looking For The Next Deal And Began To Ask Who's In The Room?
There's a kind of investor behaviour that people recognise immediately, even if they have never thought of naming it. It's when people begin their conversation with a deck, moves quickly to numbers, then lingers in the market's size and closes with a discussion of exit multiples. The people inside the business they are the ones who carry out the actions on those slides - don't even appear. The ones who do come, it is likely to be within the context of headcount projections instead of being individuals with their own motivations, histories, and blind spots that be the determining factor in every important decision an company makes. I've had enough time in this way to appreciate its benefits. It's quite rigorous. It's like you're being analysed. It's as if you're making a choice based on evidence rather than instinct. The problem is that it routinely excludes the single most important factor for determining how a company will actually be successful over the medium and long run: the quality and character of the individuals who run it. The reason for this is not a matter of chance. It is the product of frameworks crafted to be repeatable, and easily documented and consequently favor those that can be assessed and compared to things that are truly important however, they are harder to measure.
I have learned this from the wrong way, similar to the majority of people, when I watched companies with extraordinary fundamentals struggle because the management team was not able to keep it together at times of stress and by watching businesses with modest fundamentals significantly outperform due to the people in them were truly extraordinary. After all of those learning experiences I stopped pretending the numbers were doing all the heavy lifting for my decision-making. They weren't. The numbers were a lagging indication of the decisions made by humans, and the effectiveness of those decisions was upon who those humans were and how they performed under pressure in the face of a failed quarter, the departure of a key employee, a competitor's action they hadn't anticipated and a board relationship that had become complex. This is why I changed the way I started every evaluation conversation. Instead of opening with market size or revenue trends I began opening with what I've now come to see as the"room-wide" question Who actually manages this organisation when the pressure is on, how do they make decisions when the information available is not sufficient and what is their attitude towards their colleagues, and what happens to the culture of the organization when the founder isn't in the room.

The answers to these questions don't appear on the typical investment checklist. All of them, in my personal experience are better predictors of performance over the long run than any other thing that has. This isn't some romantic concept of the importance of people. It's a pragmatic observation on the way value is created and destroyed within businesses which grow. The failure of companies is not because of weak markets. They fail due to bad decisions made under pressure by employees who were not prepared for making them correctly or due to the impact of culture dynamics that were invisible from outside but subduedly hindering the organization's ability to hold onto talent, maintain responsibility, and adapt to the changes in circumstances that its original plan could not anticipate. Be aware of these risks in the early stages - prior to committing capital and before the issues have been exacerbated, and before the culture has calcified around the wrong conduct - is really the work of an entrepreneur who is more concerned with returns than dealing flow. You can't identify them when you're spending all of your time scrutinizing the model.

The shift I'm describing is easy to describe when you lay it simply, but it requires an utter reorientation in what you think of as evidence. This reorientation is more challenging than it seems since it is directly at odds with the incentive structures in many investment procedures. Speed is a reward for pattern matching at the surface. Competitive deal environments reward confidence over deliberation. The tradition of certain investment groups willfully discourage what is described as soft diligence - the type of meticulous, constant attention to human aspects that makes good choices and bad ones in meaningful time frames. I have sat in enough rooms where somebody has been able to dismiss a problem with the chemistry of management or leadership by saying "we can make it better post-close" to know how dangerous that notion can be. You almost never can. It is not something that happens after closing. This is a pre-commitment occurrence, and if you are not paying attention to it prior to you sign your check and you're not doing diligence - you are doing paperwork and wishing at the very best.

What I look for now when I'm evaluating either a leader or business team, has evolved into a fairly specific set of signals. What is the response of this leader when they're proven to be wrong on something? Does the leader accept the correction, or do they deflect it? What are their thoughts on the people around them? do they consistently redirect credit and take responsibility or do they handle this in reverse? What do people who have worked closely with them in the past as the conversation progresses beyond the standard reference check structure to something more honest and open-ended? What happens in the workplace during the times when nobody is watching and when the Founder is travelling and the quarterly target cannot meet the target? That's the place where culture is found - not just in the principles printed on the walls or the mission statement on websites, but in everyday decisions made by ordinary people when the circumstances are unclear where the easiest thing and the right choice are not the same. Finding businesses that make decisions that have been consistently made and consistently successful is, to my knowledge the most secure path to returns that hold up throughout time. Have a look a James Deller for more info including why working across industries shapes every decision i make about the long game.



Why Most Public-Private Partnerships Fail When They First Begin - As Well As The Best Way To Fix Them
Public-private partnerships face a stigma problem that's in the majority of cases made up of. The history of these arrangements includes many initiatives that were announced with genuine enthusiasm, as well as substantial investment in political capital, involved significant public and private funds over prolonged periods, and then produced outcomes that bore only a passing similarity to the outcomes promises when the partnership was established. The academic literature and postmortem studies that governments and institutions commission after these errors are vast, and they concentrate, for majority of the time, on the structural and contractual dimensions of problems: the lack of alignment between incentives, inadequate risk allocation between private and public private companies as well as the governance arrangements that were designed in the theory but never worked in practice, and the procurement frameworks, which were designed to prioritize the wrong things. What these analyses tend to ignore, and in the end, is the cultural and operational dimension - the fact that public and private organizations are in fact different types of entities, formed using different incentive frameworks, operating on different timescales, accountable to completely different individuals, and measuring their results in ways that are not just different in terms of degree but different in kind. If you attempt to bring these two kinds of organisations together in a formal partnership, without taking the necessary steps, both upfront and in writing, to fully understand how to manage these differences, there is no way to create an alliance. It is creating the right conditions for a collision in slow motion that could be apparent at the most untimely moment.
I've been involved with advisory work in support of institution modernisation efforts, many that have involved public-private partnership structures with varying levels of complexity. The most dependable conclusion I've gleaned from that encounter is that partnerships that were successful - those that have actually accomplished their stated goals and maintained an effective working relationship between the private and public sectors throughout was not distinguished from those that failed by the sophistication of their legal frameworks, the robustness of their risk frameworks, or the affluence of the team of leaders that created them. These partnerships were distinguished by the fact that the people who were on both sides of the table had the opportunity understanding how the other party operated prior to the formal partnership was agreed upon. What this means in actual practice is understanding the decision-making process in each institution and the accountability structures which limit what each side can determine and the speed at which it can be reached each party can achieve its goals, the definitions for success that each partner will evaluate itself against, and the potential points of tension between those definitions. It isn't difficult to build. All of it is put aside in favour of more obvious and immediately documents-able task of negotiating contracts as well as the creation of governance frameworks.

The common public-private partnership model evolves from an initial idea to agreed upon agreement. There is hardly any concentrated attention to the issue of whether the two organizations involved are actually capable of working in a productive way over all the time of the arrangement. The legal team negotiates the contract. The finance department models the economics as well as the risk distribution. The team responsible for communications prepares the announcement in advance of the signing. The implementation team begins planning the project. Somewhere in that sequence then comes the discussion about cultural and operational compatibility - about whether the people who are expected to work day-to-day across the boundaries between the two organisations share enough in common work that is truly collaborative rather as antagonistic, isn't likely to take place in any formal manner. It is generally assumed, without being explicitly stated, that agreements in formal form create foundation for collaboration and that any operational or cultural issues will be handled informally whenever they emerge. It is nearly always untrue, and the financial burden of this is likely to grow in line with the ambition as well as the complexities of the partnership.

The practical consequence of this analysis is that one of the most profitable investment a private-public partnership could invest in - before the legal framework is finalised and before the governance structure is agreed upon, before any announcements are made the partnership is in what I would describe as operational alignment. By this I mean specific, structured, supported work that helps to reveal the areas where the two partners' operational assumptions diverge and to decide on how those divergences will be dealt with before they become operational issues when the plan is implemented. The divergences that matter most tend to be the same in different kinds of partnerships. Faster decision-making time and authority are usually among them. Public institutions are designed to take their decisions slowly, through various layers of examination and approval, based on motives which are legal and are often legally mandated. Private organizations - specifically technology companies built around quick iteration as well as rapid decision-making – often view this pace as a major roadblock to progress. without a mutual understanding of how the pace works it is and what would really be needed to alter it, the anger that develops on the private side can poison the working relationships long before the collaboration is established.

Success indicators and what counts as progress are an additional and significant source of disagreement. The public institutions are usually judged in terms of process compliance, equity in outcomes between different stakeholder categories, and evitance of public failures that attract political or media interest. Private partners are typically evaluated in terms of efficiency, quantifiable progress against targets, and financial ROI. These measurement frameworks can be adjusted to work together However, this requires an intentional approach rather than just good intentions. Those partnerships who do not make the effort to invest in the same design will meet at critical junctures, with two parties who measure the same partnership in differently and therefore coming to an incompatible conclusion about whether or not it is working. The collaborations I've observed not to be successful were ones where this misalignment was considered to be something that would improve over time. However, the ones that worked were those where the issue was clearly identified from the beginning, and creating a shared accountability system that met the legitimate measurement needs of both parties requirements turned into an actual work, not an item on a list of things that someone would eventually get to.}