Weasel words too popular with the modern manager

Westpac CEO Brian Hartzer urged executives to focus on lifting NPS amid the bank’s money-laundering scandal.

Of the many thousands of words written about the revelation that Westpac faces multiple charges of breaching money-laundering and counter-terrorism financing laws, one statement from departed CEO Brian Hartzer caught my attention.

He was explaining to the 50-odd top executives that news of the breaches wasn’t really worrying the ordinary folk of Australia and that Westpac was no Enron. He urged the assembled staff members to get on with the job of writing new loans and lifting that all-important NPS.

NPS? Have I missed something new in relation to defining the profitability of banks?

Turns out NPS stands for “net promoter score” and is a favourite of some big company executives. Devised initially by consulting firm Bain & Company, the idea is relatively straightforward.

Employees are asked whether or not they would recommend the products or services of their company to friends or colleagues. A scale of one to 10 is used, with only those marking nine and 10 counted as promoters: one to six is seen as negative and seven to eight are passive.

The scores are added up and averaged to create the NPS — the higher, the better. The argument is that NPS is directly correlated with the performance of companies. Lots of enthusiastic promoters mean higher profits.

If you think it sounds a bit simplistic, you wouldn’t be wrong. And do CEOs really need to be paid millions of dollars only to be fixated on vacuous buzz concepts such as NPS? Did Hartzer really think Westpac’s NPS was about to soar in the context of a company whose reputation had been so seriously damaged by the revelation of the breaches, some involving child pornography in the Philippines?

It’s entirely possible that the NPS at Enron was running at high levels before that company’s collapse. It had been a darling of the stockmarket and its CEO, Jeffrey Skilling, was seen as a corporate champion — before he went to jail.

And I am not picking on Westpac; the practice of managers being driven by passing fads, inane phrases and consultant-led cookie-cutter tools is widespread.

NAB, for instance, runs a leadership program that goes by the name EPIC: empathy, performance, imagination and connection.

The previous CEO even set up a “centre of excellence” — these have been very popular in recent years — in customer remediation. Evidently no one saw the irony in ripping off customers only then to set up a centre of excellence to pay them back.

If you can bear to read the 2018 NAB annual review, you will find pages of vacuous guff that read more like a political pamphlet than a considered summary of the bank’s performance.

Here’s a flavour of the hollow waffle contained therein. “Our purpose, vision and strategy are: becoming Australia’s leading bank, trusted by customers for exceptional service, takes an unwavering commitment to living our values every day; passion for customers; win together; be bold; respect for people; do the right thing.”

You really have to wonder who writes this drivel and thinks it’s worthy in a document sent to the owners of the business. And not just any business, but a business that was strongly criticised in the final report of the royal commission into banking for multiple instances of misconduct.

Asinine business-speak has been around for some time. It goes back to the days of Dale Carnegie and Peter Drucker, but both had some commonsensical ideas about how large business could be better run.

But anticipating a potentially profitable line of business, the consulting companies took control of devising various management strategies in the hope they could be widely sold, particularly if they attained cult-like status.

Examples include management by objectives, matrix management, total quality management, leadership (there have been many incarnations of this fad), re-engineering, 360-degree feedback, knowledge management, Six Sigma, teamwork, delayering and consensus management. And don’t forget NPS.

Certain words and phrases are also part of the trend: disruption, road map, synergy, granularity, curate, dashboard, sweep the shed, move the needle, thought leader, bandwidth, strategic fit, paradigm shift, run it up the flagpole, open the kimono, cultural inclusion, digital transformation. It goes on.

The floors of one large company are referred to as neighbourhoods, the stairs connecting them are “vertical alleyways”.

Also associated with the adoption of this passing parade of management fads has been the very marked escalation in executive salaries, which have been repackaged in pseudoscientific terms of cash base, short-term and long-term incentive.

Again led by self-serving consultants, these arrangements have been a means of ensuring the CEOs and the leadership team — yes, I can get with the program — are paid salaries that are vastly higher than the average company employee.

In the past, the CEO may have earned four to five times the pay of the average worker; it is not uncommon for that to be 40 times or more. Qantas CEO Alan Joyce was paid $24m last year, having managed to achieve the agreed criteria of the various components of his package.

It is now dawning on many shareholders that numerous executives of large companies are seriously overpaid and that short-term bonuses are essentially a rort, providing close to guaranteed additional remuneration for highly paid managers.

They are early days, but what seems to be emerging is a trend towards lower cash salaries for newly appointed CEOs combined with share price-related bonuses based on long-term performance.

And with these bonus arrangements, executives must have skin in the game and stand to lose out, partly or completely.

Of the management messages that have been popular over the years, the one that rings most true is sticking to your knitting. Had the banks done this and been less influenced by the business fads and less distracted by promoting various woke causes, it’s possible that the outcomes might have been different.

It’s probably time to retire the NPS.