Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Accountability and responsibility in Corporates

Yesterday a past nuisance resurfaced. A Kenyan friend told me that she was upset as a new hire does not perform well. His underperformance affects her variable remuneration (ie, sales commission) as she may lose a key account. I asked her if his remuneration structure could be the underlying cause. She replied that the guy was new and wants to prove himself. I asked: “Who hired him??”

Her answer recalled my past nuisances: “Group HR”. It was actually even worse as this new person had been hired without any involvement of the persons who need to work with him. Today, I realise that this situation is caused by a split in accountability and responsibility in the hiring of employees and managers. Decades ago, it was just a frustrating nuisance to me.

Usually, the words “Group and “HR” already stir up emotion when used separately. Together it’s often worse. Group functions often live their own life, regardless of how much – or little – money is earned by the businesses. As a former CFO, I am an advocate of small group functions. Sometimes the discussions on intra-group cost charges even find remarkable solutions: group charges become non-responsible items for establishing the remuneration of managers (eg, bonuses, profit targets).

Hiring employees and managers by Group HR poses a problem when firing them becomes an issue. Non-performance of employees and managers causes accountability in the business (ie, front-office) while hiring and firing is a responsibility of Group HR (ie, back-office). These situations can – and thus will – easily escalate into corporate frictions – or outright wars between individuals and/or entire departments.

As mentioned in several earlier blogs, “efficiency, effectivity, user friendliness, and processing speed often conflict with internal control and/or risk management requirements”. Setting up Group functions suggests better control and the use of economies of scale. In practice, Group functions just grow bigger and more expensive and control in the businesses starts to deteriorate.

In dealing with certain European countries, I noticed another striking phenomenon. The mere existence of Group functions is reason to blame them for not meeting local targets. The underlying mottos usually are: (1) divide and rule, and (2) if you can’t beat them, confuse them. Such confusion is aimed at people who can’t see the wood for the trees (NL: door de bomen het bos niet meer zien). It’s amazing how long you can survive by just confusing the people around you.

Accountability and responsibility should be in one hand and exceptions should be minimised. This same principle also applies to the level of individuals: authority and responsibility should be in one hand. Accountability and responsibility for certain tasks without authority (eg, budget, manpower) is also meaningless. You require the tools to do your job properly.

I’m suddenly reminded how appropriate and similar Ronald Reagan’s famous 1986 words are in the Corporate world: “I’m from HeadQuarters and I’m here to help you”.

President Ronald Reagan – The 9 most terrifying words (1986) – video, Wiki-1, Wiki-2

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