Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Private versus Public companies

20 January 2015

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Yesterday I was notified about an interesting article in my favourite newspaper. One of my favourite FT columnists, Lucy Kellaway, had written about the fear within companies of being found out and the lack of common sense.

“The trouble with business today, he complained over coffee, was that there was no common sense any more. Such sense, he insisted, had always been uncommon — but now was extinct.” A beautiful fragment at the start of the article following her interview with a former senior London banker.

She states the enemies of common sense being: insecurity (fear of being found out), self importance, and “departments such as HR and PR [which] routinely eliminate any lurking pools of rationality, while interdepartmental rivalries, budgets and regulations of any kind all tend to ensure that few things are ever done sensibly”.

Indeed it is a common phenomenon but usually only in companies with a clear separation between ownership and management. Such companies may be public companies (e.g., banks), foundations, (building) societies, and (semi) governmental or municipal organisations.

During my entire business life I have noticed that many people use goods, money, services, or time within public companies in a very different way than they would be doing if they would own that company themselves. None of these persons would ever acknowledge that it may also be seen as theft. Most likely they would see it as an informal labour agreement item or that they deserved it. In all fairness this cultural behaviour usually starts at the top and then spreads like a cancer.

Another phenomenon in the same area is the lack of accountability in public companies following violations of any kind. The public image is almost sacred. The corporate fear of being found out may even be leading. In the absence of clear accountability, a work culture is doomed.

Another public company issue is interdepartmental rivalries or even warfares. The bigger the company, the worse it gets. It’s an utter waste of time but a main part of the job. These rivalries often continue as CEO’s come and go and do not take sides. Perhaps using the saying “divide and rule”.

Lucy Kellaway and I both see the solution in private companies although both of us are coming from a different angle. Owners of private companies tend to value common sense and dislike hiring pompous managers. I do recognise Lucy’s statement that abundant cash may cause erratic behaviour. At least the owner is then spending her/his own money rather than investors’ money.

This is why I prefer private above public companies. With the backing of the owner it is actually possible to make a difference and add value.

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