The 30 Day MBA (27 page)

The board of directors

One team stands apart from all the others within an organization – the board of directors, usually reduced to the title ‘the board'. Directors in major or public companies have a role outside of that of simply heading up a function such as production, sales or marketing, though they may perform one of those functions too. There is often confusion as to where the ultimate power rests in a company; with the directors or the shareholders. In private companies they are often one and the same body but in public companies, even where family ties remain, they are distinct and separate. In law a company is an entity separate from both its shareholders and directors. According to a company's articles of association, some powers are exercised by directors, while certain other powers may be reserved for the shareholders and exercised at a general meeting. If the powers of management are vested in the directors, then they and they alone can exercise these powers. The only way in which shareholders can control the exercise of powers by directors is by altering the articles, or by refusing to re-elect the directors of whose actions they disapprove. Some of a director's duties, responsibilities and potential liabilities are:

• To act in good faith in the interests of the company; this includes carrying out duties diligently and honestly.
  
• Not to carry on the business of the company with intent to defraud creditors or for any fraudulent purpose.
  
• Not knowingly to allow the company to trade while insolvent; directors who do so may have to pay for the debts incurred by the company while insolvent.
  
• Not to deceive shareholders and to appoint auditors to oversee the accounting records.
  
• To have regard for the interests of employees in general.
  
• To comply with the requirements of the Companies Acts, such as providing what is needed in accounting records or filing accounts.
  

Composition of the board

The board is made up of two types of directors, internal and external, and typically the board would exercise major decisions through a number of committees:

• Internal directors: Usually headed up by a chairman who runs board meetings, a CEO (chief executive officer) or managing director who runs the operating business and a number of other directors.
  
• External directors: Known as non-executive directors, they are usually people of stature and experience who can act as both a source of wise independent advice and a check on any wilder elements on a board.
  Financial Times
  Non-Executive Directors' Club (
  www.non-execs.com
  ) provides more information on the role of non-executive director, as well as being a potential source of appointments in smaller companies that might appeal to an ambitious, risk-happy MBA.
  
• Committees: The main board committees are those that oversee remuneration (particularly for directors), auditing, social responsibility (and ‘green' matters), mergers and acquisitions, and regulatory affairs.
  

People

If structures are the skeleton of an organization, people are its blood and guts. Douglas McGregor, a founding faculty member of MIT's Sloan School of Management, began his management classic
The Human Side of Enterprise
, published in 1960, with the question: ‘What are your assumptions (implicit as well as explicit) about the most effective way to manage people?' This seemingly simple question led to a fundamental revolution in management thinking. McGregor went on to claim: ‘The effectiveness of organizations could be at least doubled if managers could discover how to tap into the unrealized potential present in their workforces.'

Finding the right people, keeping them onside, motivating, managing and rewarding them are the defining distinctions between the most successful organizations and the mediocre. Over the past 30 years or so, organizations have acquired centralized HR (human resources) departments whose purpose is to facilitate people issues, as they often quaintly term their work. McGregor anticipated their arrival with this pithy quote:

It is one of the favourite pastimes of management to decide, from within their professional ivory tower, what help the field organization needs and then to design and develop programs for meeting these needs. Then it becomes necessary to get the field organization to accept the help provided. This is normally the role of the Change Manager; to implement the change that no-one asked for or wants.

None of this is to suggest that HR departments can't contribute to helping with ‘people issues'. It's just that people issues are too important to exclude their immediate superiors from. At the very least, MBA skills include a sound grasp of the key tasks that the HR department is charged with performing.

Recruitment and selection

Taking on new employees is often a more expensive exercise than buying a major item of machinery or a heavy goods vehicle. If that sounds improbable, just check out the figures; the advertising for a middle-ranking executive on a salary of, say, £40,000 may well cost £6,000. If they are taken on using a recruitment consultant you can expect a bill of around a fifth of the first year's pay (£8,000 ($12,500/€9,000)). Three days' interviewing, psychometric testing, preparing a contract of employment, perhaps paying a share of the new employee's removal expenses will bring the total bill up to around £20,000 ($31,700/€22,500). If you get the wrong candidate, and there is a good chance of that happening if you fail with any element of the recruitment process, then you may have to double that figure. Then, of course, there is the cost of not getting the job done that you were recruiting for in the first place.

These are the key stages in the recruitment process.

CASE STUDY
  
IKEA

Furniture company IKEA was founded by Ingvar Kamprad when he was just 17, having cut his teeth on selling matches to his nearby neighbours at the age of five, followed by a spell selling flower seeds, greeting cards, Christmas decorations and eventually furniture. IKEA targets young, white-collar workers as its prime customer segment, selling through 235 stores in more than 30 countries. Kamprad, an entrepreneur from the Småland province in southern Sweden offers home furnishing products of good function and design at prices young people can afford. He achieves this by using simple cost-cutting solutions that do not affect the quality of the products.

IKEA's entry into the international arena was not without its problems. Its launch in the US market hit a cultural barrier from the outset. IKEA does not give employees job titles or precise job descriptions. This arises from the founder's no-nonsense personal culture. Worth £16 billion, Kamprad is the world's seventh richest man, but lives frugally, in keeping with the functional nature of the IKEA brand. He lives in a bungalow, flies easyJet and drives a 15-year-old Volvo. When he arrived at a gala dinner recently to collect a business award, the security guard turned him away because they saw him getting off a bus. He and his wife Margaretha are often seen dining in cheap restaurants. He does his food shopping in the afternoon when prices are lower and even then haggles prices down.

Many of IKEA's new recruits in the United States quit after a few months because there was a gulf between the company's values and the culture and expectations of US employees, who were used to clear roles and responsibilities. The ensuing high turnover rate forced IKEA to review its selection criteria. Rather than just going for candidates with the best qualifications and experience the recruiters highlighted IKEA's culture and values, so letting those applicants who were going to be uncomfortable in that environment elect to withdraw early in the process. This saved the company the cost of high staff turnover and prevented the company from being saddled with a hire and fire reputation.

Writing the job description

Often employers draw up the job description after they have found the candidate. This is a mistake; having it from the outset narrows down your search for suitable candidates, focuses you on specific search methods and gives you a valid reason for declining unwelcome job requests from colleagues and friends. In any event you have to give employees a contract of employment when you take them on and the job description makes this task much easier.

Include the following in a job description:

• the title, such as area sales manager, management accountant or product manager;
  
• the knowledge, skills and experience you expect them to have or acquire;
  
• the main duties, responsibilities and measurable outputs expected;
  
• the work location and general conditions, such as hours to be worked, lunch breaks and paid holiday arrangements;
  
• the pay structure and rewards;
  
• who the employee will report to.
  

The University of Oxford's personnel services (
www.admin.ox.ac.uk/personnel/recruit/recruitproc/planapprove/
jobdesc
) has detailed guidance on writing a job description.

Where you find great employees

There are many ways to find employees; for finding great employees the choices are more limited. Research at Cranfield revealed some alarming statistics. First, nearly two-thirds of all first appointments failed and the employee left within a year, having been unsatisfactory. Second, there were marked differences in the success rate that appear to be dependent on the way in which employees are looked for.

Employing an agency or consultant
This is the least popular, most expensive and most successful recruitment method. Only one in fifteen private firms do so for their early appointments, but when they do they are three times more likely to get the right person. The larger the business the more likely they are to take external advice in recruitment. The reasons for success are, in part, the value added by the agency or consultant in helping get the job description and pay package right; and the fact that they have already pre-interviewed prospective employees before they put them forward. These organizations can help here:

• Job Centre Plus (
  www.gov.uk/jobcentre-plus-help-for-recruiters
  > Need to fill a job?) is a free government-funded service to help UK firms fill full- or part-time vacancies at home or overseas. They can offer advice on recruitment and selection methods, local and trade pay rates, training, contracts of employment and, importantly, can offer interview facilities in some of their national network of offices, which can be useful if you are recruiting away from your home base.
  
• The Recruitment & Employment Confederation (
  www.rec.uk.com/employer
  > Choosing an Agency) is the professional association that supports and represents over 8,000 recruitment agencies and 6,000 recruitment professionals. As well as advice on choosing an agent, there is a mass of information on employment law and a directory of members listed by business sector and geographic area.
  

Advertising in the press
You have a large number of options when it comes to press advertising. Local papers are good for generally available skills and where the pay is such that people expect to live close to where they work. National papers are much more expensive but attract a wider pool of people with a cross-section of skills, including those not necessarily available locally. Trade and specialist papers and magazines are useful if it is essential that your applicant has a specific qualification, say in accountancy or computing.

The goal of a job advertisement is not just to generate responses from suitably qualified applicants, but also to screen out applicants who are clearly unqualified. If you make the job sound more attractive than it really is and are too vague about the sort of person you are looking for, you could end up with hundreds of applicants.

You need to consider the following elements when writing the job advertisement:

• Headline: This is usually the job title, perhaps with some pertinent embellishment. For example, Dynamic sales person required.
  
• Job information: This is a line or two about the general duties and responsibilities of the job.
  
• Organization information: Always include something explaining what you do and where you do it.
  
• Qualifications: Specify any qualifications and experience that are required. You can qualify some aspects of this by saying that a particular skill would be useful but is not essential.
  
• Response method: Tell applicants how to reply and what information to provide.
  

Try to include something about your business culture in the advertisement. One firm puts its advertisements sideways on, so applicants have to turn the paper round to read them. They claim that this lets people see that they want people who look at things in unconventional ways to apply and that they are not a run-of-the-mill firm that works like any other firm. Using an active rather than a passive voice will give your advertisement a sense of buzz and enthusiasm.

You can find all the local and national newspapers listed at Newspapers.com (
www.newspapers.com
). From the individual newspaper web link homepage you will find a signpost to ‘Advertising' and from there you can find the readership demographics and advertising rate. For example, for the
Metro
(
www.metro.co.uk
> Advertising.metro.co.uk > Who reads us?).

Using the internet
Nearly a quarter of all jobs are filled using job boards, a website where employees and employers can get together much along the lines of a dating agency. The internet's advantages are speed, cost and reach. You can get your job offer in front of thousands of candidates in seconds. The fees are usually modest, often less than regional paper job adverts, and in some cases, such as with webrecruit.co.uk (
www.webrecruit.co.uk
), though the fee is a relatively high £595 ($933/€670), they will reimburse you if they can't fill your job. Services through job boards range from passive, where employers and employees just find each other, to the proactive, where online candidate databases are searched and suitable candidates are made aware of your vacancy. whatjobsite.com (
www.whatjobsite.com
> Jobsite Directory) has a search facility that lets you look for the job boards by country and region and that are most suited to the job on offer and the industry you are in.