All posts by Stuart Woollard

How OMINDEX predicted Barclays culture under CEO Staley

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.

OMINDEX methodology made available to boards, excos and investors

London, 24 February 2017: The Maturity Institute (MI), in conjunction with OMS LLP, releases today its OMINDEX (Organizational Maturity Ratings OM30+© template under a Shared IP Protocol.

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.

“We also see this as a crucial step in helping OM30+© become the defining global standard for measuring comparative organisational maturity which is linked to sustained value creation and risk mitigation. The original design of OMINDEX aimed for ratings to sit alongside traditional credit ratings, which are unable to provide good whole system insight into current and future corporate ‘health’. We have now begun to see this aim being realised and sharing this IP will greatly move us forward.”

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.”

ENDS

To obtain a copy of the OM30+ spreadsheet, for self-scoring your organization today, please send your details (Name, Organization, Job Title) to Stuart Woollard at OMS LLP. An outline pdf copy of the OM30+ is available online. The full working template is available from: stuart.woollard@omservices.org

About the Maturity Institute

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.

OMS LLP helps design new CEO Remuneration Model

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:

  1. An objective, independent assessment of CEO Value based on the MI approved and globally recognised OMINDEX©* ratings methodology.
  1. The setting of CEO pay based on a formula of Total Stakeholder Value (TSV©) comprised of Price-to-Book ratio (P/B)** and OMINDEX

TSV = P/B x OMINDEX

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.”

ENDS

Copies of the new CEO Rem Model are available here and more information can be obtained from: stuart.woollard@omservices.org

*OMS LLP’s OMINDEX© provides a unique perspective on company value creation, linking effective human governance with higher material value and lower risk.

**Price-to-Book ratio is market value divided by book value where market value is synonymous with market capitalisation and book value with net asset value.

Wells Fargo: business risk now needs a human governance lens

Wells Fargo wf 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.

Barclays rated at B- with low margin, poor quality and high risk

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 seSlide1e 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.“

ENDS

For more information please contact stuart.woollard@omservices.org or +44 (0) 7940 585661

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.

How can you price-in ‘good’ governance?

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“[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:

  1. 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?
  1. 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.