Even though 2020 has been the worst year on record for many companies, due to the global pandemic, it has proved to be the breakthrough year for OMS LLP and our OMINDEX® company rating system. We trained 25 equity/investment analysts to furnish them with the capability, for the first time, to respond to the growth in ESG investing by fusing traditional, company research with our own methodology, to create a total, holistic company analysis that captures all areas of value and risk.
As a result, we have witnessed companies engaging directly with the insights that OMINDEX® offers them. When they have received their own, unique, Organizational Maturity Rating (OMR), they begin to understand how human intangibles drive value and risk and how they can improve communication with investors about their own leadership and management practices.
So we are now delighted to be able to offer OMINDEX® training to in-house company professionals, together with individual licenses to practice, under the auspices and assurance of the Maturity Institute. This offers companies the opportunity to develop in-house OMINDEX® capability; to utilise and operationalise our ground-breaking approach without the need for external support (and at a fraction of the cost).
We would be pleased to discuss how this can be of value to your company. The training programme already has a proven track record to ensure replicability and consistency of quality outcomes, while individuals learning the methodology have responded enthusiastically and proactively to developing their own new skills, which many now regard as essential to their job.
Please contact email@example.com for more information
Coronavirus exit strategies can pave the way to a new social contract: where all stakeholders are able to serve society to the best of their abilities, for the benefit of everyone. A new kind of leadership and management practice based on diagnosing true ‘organisational health’ and pursuing Total Stakeholder Value will make this happen.
Amidst the unfolding tragedy of COVID-19, it is heartening to read that the Financial Times sees the present pandemic as an opportunity to rewrite the “social contract”; the moral, political, social and economic relationships that bind us all within civil society. The fact that the FT’s Editorial Board put their collective name to this piece reveals the extent to which the current global crisis is forcing many commentators, business leaders and policymakers to fundamentally rethink organisational purpose, values and principles. In 2012 the Maturity Institute was established with the clear and explicit remit of redefining organisational purpose as the pursuit of maximum societal value. MI set about reworking the systemic foundations for a renewal of corporate legitimacy. By 2017 we worked with MI to progress to the stage of producing a blueprint, based on exemplar corporations, as measured against our universal OMINDEX® scale and framework in terms of their Total Stakeholder Value (TSV™).
TSV™ is a contract by which all stakeholders are afforded equity. It also provides a comprehensive, practical roadmap to help society transition away from the ‘shareholder primacy’ era of capitalism that was summarily brought to a close by the US Business Roundtable Statement issued on Monday 19th August 2019. The BRT statement, that ‘all stakeholders matter’, may have been a declaration of intent but it offered no alternative model for a better society; and business was largely carrying on as usual until the global pandemic brought the world economy to a shuddering halt. No doubt most CEOs around the world are viewing this pandemic as catastrophic, from a business viewpoint. Yet the coincidence of this event, following so closely on the demise of shareholder primacy, should be seen as a once-in-a-lifetime opportunity for every single person on the planet to experience a world that is permanently changed for the better.
Forming alliances to build a Total Stakeholder Value society
Roger Burnley’s epiphany (right) is one that awaits the vast majority of boards and CEOs who have been under the yoke of quarterly results for decades. Total Stakeholder Value frees them from this narrow view of ‘performance’ while benefitting shareholders in the process. This is the apparent paradox of maturity – how can everyone gain while no one loses? The answer is very simple, no ‘social’ contract can be fashioned from a zero sum gain; where the shareholder’s gain is society’s loss. Instead, the social contract that underpins OMINDEX® is already proven by exemplar companies. Our TSV™ system is built on the most sustainable foundations that satisfy all the criteria now generically referred to as ESG (environmental, social, governance). So why, and how, should corporations willinglingly enter into this contract, post-COVID-19?
In the last few years, we have been building partnerships to help corporate management practice transition and transform into Total Stakeholder Value organizations. In 2017, we collaborated with Hermes Investment Management to produce our groundbreaking study of the health of the global banking sector. We have taught our methods on MBA programmes and our evidence has powered research with Cambridge Judge Business School. We have also worked with company valuation and strategy consultants to demonstrate, quantifiably, how human intangibles drive intrinsic company value.
More recently our revolutionary, analytical methods have formed the basis of our alliance with Redburn Research. This enables Redburn equity analysts to use OMINDEX® ratings to integrate ESG into their company analyses and investment appraisals. The analysis they produce are the world’s first measure of whether business leaders are working to a much more responsible, and financially valuable, social contract. It has already creating excitement within the investment community and is providing a renewed basis for corporate engagement, where everyone is interested in building the most favourable, long-term value outcomes.
OMINDEX® also serves as an organisational diagnostic that provides a clear and simple series of practical steps; that will improve the value of a business, continuously, through its enhanced capability for increasing the value of its people. This model is already working but its continued success is dependent on executives and managers being dedicated to the task of realising true ‘organizational health’. Doctors and nurses are vocationally committed, and bound by oath, to always put the patients’ interests first; even at the personal risks they are now having to endure. This is the same standard we use for management; along with a stipulation that they have to employ the same scientific, evidence-based, methods used by the medical profession for over a century.
Commercial opportunities – emerging market for Mature Leadership & Management
OMS LLP is now ready to scale up its range of partnerships by developing professional practice collaborations with organisations and individuals who can adapt their own expertise to work in a mature, and more responsible, capitalist system. We are specifically seeking alliances with organisations engaged in board and c-suite advisory & consultancy; audit and accounting; and risk management.
Our Banking Governance & Culture Project is already producing clear evidence of the challenges society faces in trying to restore even a modicum of integrity to banking and finance. Its Organizational Maturity Rating (OMR) methodology predicted this sort of behaviour by Staley before he even joined Barclays. As our Barclays OMR Analysis & Research Note of February 2016 stated – “Whatever Jes Staley brings from his career at JP Morgan that must include learned behaviours. If banking CEOs have been seen to ignore, endorse or lack awareness of illegal behaviour we could assume they may do so again.” See our latest Human Governance Briefing for further information.
Paul Kearns, MI Chair said: “We have made an important decision to share our OM30+ methodology (that produces Organisational Maturity Ratings for the OMS LLP OMINDEX). This is a crucial route to develop both greater understanding and the professional practice of organisational maturity and human governance, which will directly improve Total Stakeholder Value (TSV) as a result.
Stuart Woollard, Managing Partner OMS LLP said: “Sharing this methodology will show boards, investors and key stakeholders the power of Organizational Maturity to analyse and measure so called intangibles such as corporate culture, human governance and workforce management and, at the same time, understand their impact on sustainable value and material business risk. We know from our own experience with companies and the investment community that this is compelling technology that enables comparative measures of critical organisational factors that are currently missing. It also facilitates the design of roadmaps for powerful organisational change to make companies fit for purpose in today’s evolving business paradigm.”
The Maturity Institute (MI) comprises a global network of professionally accredited leaders, practitioners and academics creating value for all stakeholders through organizational maturity that realises the full value of human potential for the benefit of society.
About OMS LLP
Management quality and capability has been missing from conventional company management, valuation and investment decision making. Company failures and material value loss occur on a regular basis yet approaches to identify root causes use ineffective and weak diagnostics. Traditional analysis may identify certain corporate exemplars but not why they are able to generate long-term value differentiation. OMS fills that gap. OMS LLP researches, rates and advises on effective Organizational Maturity and Human Governance; a brand new discipline that finally makes whole, the way we examine, value and engage with companies to generate true, lasting value for all stakeholders.
London, 6 February 2017: The Maturity Institute (MI), in conjunction with OMS LLP, releases today its CEO remuneration model: a unique CEO valuation and remuneration system developed from MI’s ground-breaking framework and its highly rated exemplar organisations.
The CEO Rem model is MI’s Global CEO pay and value standard and can be utilised by boards, investors and other corporate stakeholders. The key features of the MI Model include:
Paul Kearns, MI Chair and Senior Partner, OMS LLP, said: “Boards, investors and other key stakeholders now have a coherent model and a responsible and highly practical CEO Remuneration System that they can use to drive lasting value for their organisations, including for CEOs themselves, who can now be more accurately valued and rewarded in terms of their contribution to the business.”
John Mansfield, MI Project lead said: “After many years working in executive remuneration it has been truly exciting to develop a unique CEO Remuneration Model that replaces an executive pay paradigm that is now widely recognised as unfit for purpose. For the first time, we have put forward a proven and workable solution that fits with long term, sustainable value goals.”
Wells Fargo has found itself embroiled in yet another corporate scandal. This one looks more serious than previous episodes and has already seriously impacted stakeholders of the bank, including investors.
This article, written by members of MI and the Human Governance research team at OMS LLP considers why business risk must now incorporate the use of Human Governance expertise in order to help predict the likelihood of such occurrences within the corporate world.
London, 11 February 2016: OMS LLP announced today that it has re-rated Barclays to B- ; a low point 7 on the 22-point OMR Human Governance rating scale. This rating is supported by a full analysis and research note issued today. Paul Kearns, Senior Partner OMS LLP, says:
“We see Barclays as missing huge value opportunities, equivalent to a minimum 10 percentage points on operating margin, and material revenue loss arising from poor utilization of human capital. The company has quality issues affecting client and customer engagement and we see little strategic coherence or appetite for better performance in human capital management terms. We also see evidence of limited human capital risk mitigation through adopting a combative attitude to regulatory compliance. With this rating material human capital risk remains high. For Barclays’ investors holding a long-term position, and seeking above average returns with this stock, we recommend pursuing an active engagement strategy with Barclays in order to encourage senior management recognition of the material risks and missed opportunities associated with its present approach.“
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NOTES TO EDITORS
About OMS LLP
Management quality and capability has been missing from conventional company research, valuation and investment decision making. Company failures and material value loss occur on a regular basis yet approaches to identify root causes use ineffective and weak diagnostics. Traditional research may identify certain corporate exemplars but not why they are able to generate long-term differentiation and sustained value. OMS fills that gap. OMS LLP researches, rates and advises on effective Human Governance; a brand new discipline that finally makes whole, the way we examine, value and engage with companies to generate true, lasting value for all stakeholders.
“[we are] trying to join the pinpricks of light coming out of the boardroom” Paul Lee, Aberdeen Asset Management, PLSA December, 2015
In one short comment came the admission. Corporate governance teams at investment firms are struggling to make sense of company boards, how they function, and how they drive value creation and manage business risk. In short, conventional governance analysis is not able to give investors the complete picture and the reassurance they need. Moreover, finding ways to help direct companies in a more value-focused direction is often simplistic and sometimes extreme, e.g. pushing for heads to roll when things are going badly.
Why is this so? The room full of governance professionals at a recent PLSA event mentioned a number of factors. Poor information, little transparency, board dysfunction and a lack of senior level ‘quality’ were some of the insights. Ineffective board structures (auditors not gauging risk effectively, for example), weak industry expertise and inappropriate or excessive incentives (executive pay) were others. All contributors made valid points, to varying extents, but all painted a depressing picture of weak boards and blunt tools for investors with which to examine, diagnose and offer coherent advice.
Is this a failure of governance both within organizations and by the people trying to bring higher standards? Can the present approach to governance be fixed? There appear to be two inherent problems:
There is no coherent framework that defines and measures “good” governance – as was admitted by the UK IOD earlier this year. When you look for factors at board level that drive value and risk, to what extent are each actually material? Is the existence of effective NED’s as important as the nature of executive pay? Is board level industry expertise a sign of good or inferior management quality? Does each factor work together to make analysis meaningful on a comparative basis? If we do not know what ‘good’ looks like and how this drives value, how can it be improved?
Corporate governance is one part of a much bigger, whole human management system that must be considered – traditional governance analysis concentrates efforts on the nature and activities of the board. But what about the rest of the organization? Is the board a good proxy for how the organization manages itself? For example, if the board is good at acquiring and sharing critical knowledge, does this mean that the rest of the company is too?
Our approach looks at the governance problem in a different way – something we have called Human Governance analysis. The question we seek to answer is to what extent is a company maximizing value and effectively managing risk arising from its entire human capital management system? This acknowledges and includes important board and C-suite factors but, critically, evaluates how this plays out and connects to the entire human capital management system; including for example, the management of supply chains.
When we analyze Human Governance, we look at all the key facets of value that arise from human capital. Our starting point is to identify underlying organizational purpose, how this relates to business strategy, and then to the performance of all a company’s human capital. We are interested in how value and values are intertwined and permeate and inform both senior leader actions and people outcomes across the entire human system. We are, of course, interested in key aspects of a traditional governance focus that materially impact value, such as executive reward and decision-making. This is an analytical whole system methodology that specifically assesses corporate Human Governance and the extent to which an organization is aiming to achieve maximum value from its human capital.
At the same time, we also analyze company capability to consciously and explicitly manage and mitigate human capital risk. Human capital risk arises out of unclear, distorted or non-committal organizational purpose and seeps through all company systems: from decision-making, resourcing, reward, learning and performance management to quality assurance. We view people risk arising from 12 core dimensions and only by understanding risk in this interrelated context can we understand and predict the likelihood of corporate problems or failure.
So back to the original question – how can you price-in governance? Through our ratings, we carry out comparative analysis across firms and sectors. We are able to identify not just the nature of value and risk areas but also the potential value and risk quantum for particular organizations. We believe you can price the nature of this whole system Human Governance, either through a value or risk factor built into an investment algorithm, or perhaps through more qualitative stock picking processes. Investment professionals can also use the analysis to ask better questions of the board and demand better information: companies are wasting too much time measuring and reporting on meaningless metrics such as training hours rather than learning impact. It is something which investors and investment professionals are now beginning to understand.