Why Growing Up Around the Game Reinforced Operational Discipline About Growth

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Why I Have Stopped Looking For The Next Deal And Instead Began Questioning Who's In Charge Of The Room
There is a version in the way that investors behave that people immediately recognize, even if they have never come up with a name for it. It's a scenario in which it starts with the slide, rapidly moves to numbers, and then lingers at the size of the market before concluding with discussion of exit multiples. The people inside the business that carry out the actions on those slides - rarely appear. When they are, it's likely to be in the context of projections for headcount rather than as individuals with a history, motivations, and potential blind spots. guide every important decision the organisation makes. I've worked for enough time in that way to realize its draw. It's hard to resist. It's very analytical. It's as if you're making a decision on evidence instead of intuition. The problem is that this approach systematically ignores one of the most reliable variables in whether a company will be successful in the medium and long run the character and integrity of the executives who manage it. It isn't a coincidence. It's the result of frameworks that were developed to be repeatable and easily documentable and thus favor the things that can be observed and evaluated against objects that are really important yet aren't easy to quantify.
I learned this through the harrowing process of observation, just like many others, through watching companies with outstanding fundamentals perform poorly because their leadership team was not able to stand together when under stress, or watching companies with less than stellar foundations, dramatically improve because their employees were truly extraordinary. After several of those instances, I stopped pretending that those numbers did all the heavy lifting for my investment decisions. They weren't. They were a slow indicator of decisions made human beings. And the decision-making quality was upon who those human beings were and how they performed under pressure - under the pressure of a missed quarter, major departures, a competitor move they had not anticipated, or a board relationship which was now complicated. So I changed how I started every evaluation conversation. Instead beginning with the size of the market or revenue projections I instead started with what I've now come to see as the"room-wide" question who runs the organisation when the pressure is on? How can they make decisions when the information they have is not complete What is their approach to others around them and what changes to the culture of the company when the founder does not participate in the discussion.

None of these questions are in a typical investment checklist. Each of them, according to my view, can be more informative of long-term performance anything that does. It's not a romantic concept of the importance of people. It's a factual observation regarding the place where value is constructed and destroyed in business which are large. It isn't because of weak markets. They fail because of poor decisions made under pressure by those who were not able to make good decisions or because of the cultural interactions that were not visible from the outside but that were subduedly hindering the organization's ability to maintain talent, transparency, and adapt to circumstances that the original plan didn't anticipate. Be aware of these risks in the early stages - before you have committed capital in the first place, before problems have worsened, before the culture has gotten distorted around the wrong ways of doing things - is a crucial role of an investor who is focused on returns, rather than dealing flow. It is difficult to identify these risks when you're spending all part of your attention on the model.

The shift I'm discussing is easy to describe when you lay the concept clearly, but it requires a fundamental transformation of what you treat as evidence. And that reorientation isn't as simple as it sounds since it is directly in opposition to the incentive structures used in most financial processes. Speed rewards pattern matching on the surface. Competitive deal environments reward confidence over deliberation. The style of certain investment circles actively discourages what's referred to as"soft diligence" - - the type of meticulous, sensitive attention to human characteristics that is the key to distinguishing good decisions from poor ones across significant period of time. I've been in rooms where someone has refused to address a question about the chemistry of management or leadership with the phrase "we can correct that post-close" and I've seen how dangerous this notion is. You almost never can. It is not an issue post-close. It's a pre-commitment issue and if you're not paying attention to it before you cash the check then you're not doing your diligence. You're just filling out paperwork and hoping for a miracle.

What I am looking for today when evaluating whether a person or a team, has evolved into a specific set signals. How does a leader react with respect to when they're clearly wrong in a particular area? Do they take part in the correction or deny it? What do they say about their colleagues - do they constantly redirect credit, and accept accountability or do they carry it in the opposite direction? What can people who had a close relationship with their colleagues in the past say, when the conversation moves beyond the formal reference-check structure to something more honest and more exploratory? What happens in the organisation on the days that no one is watching and when the Founder is traveling, and the quarterly deadline cannot be met? It is in these situations that culture takes place - not only in the principles printed on the walls or the mission statement on the website, but in the common decisions made by the people in everyday life when the situation is unclear where the easiest thing and the right choice aren't the same. Finding businesses in which these decisions can be consistently made correctly are, in my view the most reliable pathway towards returns that will last in time. Check out James Deller for site advice including why making investment decisions confirmed what i suspected about building well.



What Causes Most Public-Private Partnerships To Fail Before They Begin - And How To Resolve Them
Public-private alliances have a reputation issue that's in major part of the time, earned. The history of these arrangements is filled with plans that were launched by genuine enthusiasm with substantial political capital behind them. They consumed significant public and private resources over long periods of time, and in the end, produced results that bore only a smidgen of resemblance to what had been stated when the partnership was started. The academic literature as well as the postmortem evaluations that governments and institutions perform following failures are extensive. they focus, for majority of them, on the nature and the contractual aspects of things that went wrong. the flawed alignment of incentives, the improper risk allocation among public and private entities along with the governance frameworks built in theory however did not work in practice, and the procurement frameworks that picked the wrong things. What these analyses tend to underweight, consistently and consequentially in the long run, is the cultural and operational element - that is, the fact that public institutions and private institutions are both distinct types of entities, formed in different ways by incentive systems that operate on different timescales, responsible to various people, and measuring results in ways that are not only different in their degree but also differing in form. If you join these two kinds of organisations together in a formal partnership without performing the work upfront and clearly, in order to appreciate and manage those differences, you're not creating an alliance. The conditions are set for a slow-motion crash that is likely to be noticed at the worst possible time.
I've participated in advising work to support institutional modernisation and improvement projects, some of which involved public-private partnership structures of varying levels of complexity. The most dependable conclusion I can offer from that encounter is that partnerships that were successful - those that did indeed meet their declared objectives and maintained a functional working relationship between the public and private parties throughout they were not distinguished from those that failed due to the sophistication of their legal structures, the strength of their risk frameworks, or the age of the management teams that initiated them. The distinction was made by whether the participants in both parties to the group had made the effort to truly understand how the other side operated before the formal partnership structure was agreed. What that means is understanding the decision-making process that each organization operates under and the accountability structures that govern what parties must accept and when, the definitions of success which each side will be evaluating, and the possible points of tension between these definitions. None of that understanding is challenging to achieve. The entire process is often put aside in favour of most visible and easily documentable tasks of negotiating contracts as well as establishing governance frameworks.

The usual process for public-private partnerships takes place from the beginning of the idea to signed agreement with remarkably little focus on the question of whether the two parties involved are capable to effectively work together over long periods of time. The legal team negotiates the contract. The finance department models the economics and risk-adjustment. The communications team is responsible for preparing the announcement in advance of the signing. The implementation team starts planning the work. Within that process, the conversation about compatibility of the operations and culture - about whether the individuals who will have to work together day to day over the boundaries between two organizations share enough in common to ensure work more collaborative or antagonistic - is unlikely to be conducted in a structured way. It is commonly assumed and without any specifics, that this agreement is formal and sets the prerequisites for effective collaboration and that any operational or cultural differences will be addressed informally when they occur. This assumption is almost always incorrect, and the costs of this tends to increase with respect to the ambition as well as the complexities of the partnership.

The real-world application of this analysis is that the best venture a public-private partnership may make – before the formal structures are set and before the governance structure is agreed upon, and before any announcements are made an announcement - is through what I consider operational alignment. In this context, I am referring to specific, organized, and supported work that helps to reveal points where two organisations' operating assumptions diverge and to decide on how those divergences should be addressed prior to them becoming operational problems during implementation. Most important, the divergences are typically the same for different kinds of partnerships. Speed of decision-making and authority are typically among these. Public institutions are designed so that they make decisions slowly, through various layers of examination and approval, with reasons that are purely legitimate and frequently legally mandated. Private enterprises - particularly tech firms that have been designed around speedy iteration and rapid decision-making, often perceive that speed as a primary barrier to growth, and in the absence of a shared understanding of the reasons behind why this pace is the way it is it is and what might truly be needed to change it, the resentment from the private side can poison the working relation long before it finds its footing.

Success metrics and what is considered as progress are an additional and a contributing factor to divergence. Institutions of the public sector are typically evaluated for compliance with the process, fairness of results across different stakeholder groups, as well the removal of any visible shortcomings that attract political or media interest. Private entities are typically evaluated according to efficiency, measured progress against their targets, and the financial performance. These measurement frameworks can be designed to be compatible with one another but it takes deliberate design rather than good intentions. And the ones that do no invest in this kind of design are likely to end up at points, with two partners that are assessing the same collaboration in genuinely inconsistent ways and consequently coming to non-congruous conclusions about whether the partnership is succeeding. My experiences with partnerships that fail most definitively were the ones where the issue was taken as something that would fade away over time. However, the ones that worked were one in which the misalignment had been explicitly acknowledged at the beginning. And, where designing a shared accountability framework which accommodated both parties' legitimate measurement requirements turned into an actual work rather than just an item on a list of things to get to.}