Importance of Private Businesses to Business

When one looks at business, it is easy to miss or not appreciate the importance of private businesses and entrepreneurship. How often do you look to the larger public companies for opportunities, marketing and jobs? Probably a lot. This is what many first think of doing.

I would like to suggest that you change your thinking and focus on private companies. Information from the recent G8 Summit in Italy shows that 70% of the world’s jobs are provided by private companies and 100% of job growth. This would mean the energy forces are with entrepreneurship for many business opportunities.

Think about this next time you hold a strategy session for your business.

Global Transition for High Net Worth Individuals

I have just read KPMG’s Swiss Financial Services Newsletter for August 2008. The newsletter provides very sharp insights into the increasingly complex international needs of high net worth individuals. The outcome is that the consulting team will need to have a greater global outlook and more sophisticated approach to the technical and human issues impacting the HNWI client.

Some of the key trends driving the changes in how HNWI’s need to be serviced are:

  1. Investments of HNWI’s are continuing to become more global and diversified
  2. Stronger demand for superior life quality resulting in lifestyles taking on a growing international flavor
  3. Family members living and working internationally away from the home base
  4. HNWI’s want their consultants to play a collaborative role – working with them, not for them
  5. Demand for a higher set of values including ethically correct behavior, social recognition and reputation

Specifically for the consultant this will mean their service model needs to meet the following requirements for the HNWI:

  1. Capability to deal with many different legal and tax jurisdictions, which means increased complexity and recognition of cross border issues
  2. A personal approach and outlook which is cross cultural and able to adapt to diverse human requirements
  3. Focus on comprehensive, customized solutions with a holistic perspective that take into account the concerns of the HNWI, short and long term goals in life and multi-generational family issues
  4. Clearly understand their vision and be able to anticipate their unique needs
  5. Understand them in the context of a larger relationship which encompasses both family and business matters
  6. Provide a single point of contact with access and the ability to coordinate a worldwide, comprehensive network of professionals
  7. Be free from conflicts of interest and exercise absolute independence
  8. Innovatively deliver and implement best in breed solutions
  9. Have systems that assure complete security and confidentiality
  10. Provide the reliability of a recognized brand name

I definitely believe this is the new world order for HNWI services. Very few can do it individually. Great collaboration will be needed to be successful.

Personally, over the past 10 years my approach to this has been to play the role of “brains trust” to HNWI’s by firstly understanding who they are at a deep level. Then as part of this role, be the independent sounding board to deal with the complex issues and bring in the right specialists as and when needed.

Effective Board Behavior

In recent months I have written a few blogs about corporate governance and business risk management. I have expressed the view that many of the corporate problems we have today are related to ineffective board governance. It has been interesting being in Europe for the past 2 weeks where this subject has come up in many discussions with business leaders and in the press. Clearly, the topic of corporate governance is high on the agenda. It needs to be because this is the source of so much corporate damage.

The 2 business problems related to corporate governance getting mentioned the most are executive remuneration and then acquisitions. In both of these areas, executives have allowed their own greed to take over at the expense of the company. This is where the business leaders have really lost sight. The key point then is that the Boards have been too weak to stop them. This gets back to the structure of the board, in particular separation of chairman and CEO/President, majority of non-executives, minimal conflicts of interest and then importantly the right mix of non-executives who have the right behavioral styles to oversee the executives.

Remuneration is a hot topic because it is visible and generally reported in some way by public companies. However, acquisitions are a major issue because of the high potential for destruction. Of course, there are executive remuneration motivations by expanding the company. How many acquisitions really work? Not many and there are plenty of stats to show that. Although, some do. The business integration and financing issues are very difficult. From a governance perspective how much are the boards really looking through these transactions? To what degree has management pushed them through? What is the DNA of the leaders? What is motivating them?

As we move through these turbulent times I hope that more companies will start to look at their board behavior and make changes. This is the first step to true leadership development. Investors also need to look at these issues when making long-term investment decisions.