The start of 2018 was marred by the news that construction behemoth Carillion had collapsed.
The firm employed 43,000 people worldwide – 20,000 of them in the UK – and was a major client for many businesses both domestically and overseas. Critically it was also a major contractor for the UK government.
That such an important business and major employer could go bust came as a shock. But the warning signs were there – and not just the profit ones issued by the company in the five months before it finally rolled over.
In the space of two years Carillion went from boasting £5.2bn in annual sales and a market capitalisation of £1bn, to buckling under the weight of £1.5bn in debt.
Clearly the first sign was the organisation’s over reliance of debt. It has been good business sense to borrow over the past ten years when interest rates have been at historic lows. For many this is the best way to finance start ups or new projects.
Yet in cases where businesses have been able to gorge on debt without striking an important balance between incomings and outgoings, the damage is plain to see.
The second sign was Carillion’s size. The company was vast, both in capitalisation but also in number of personnel.
The more physical bodies a company employs, the more emotional intelligence it needs to manage them. It is easy to forget that each employee is a human being who comes with emotional baggage. They have feelings about their job, their capabilities and their employer. In some cases, those emotions will be channelled into positive behaviour; the individual will care about the job they do, the clients they serve and employer that pays their wages.
But in other cases, some employees solely will care about themselves. They will have their own agendas, be there out of self-interest or necessity rather than to benefit the business.
While it is unclear the extent to which destructive emotions and personalities were at play in Carilion, there was undoubtedly some poor decision making. A lack of due process and attention to detail allowed projects to spiral out of control, along with its excessive borrowing.
The temptation in many organisations is to explain away emotions as ‘office politics’ but this fails to appreciate the importance of the different dynamics at play when conflicting, or complementing, personalities are brought into close quarters.
The larger the organisation the harder it may be to spot where emotions and characters are a destructive force and when they are positive.
Businesses need clear systems and processes in place to encourage the right balance of emotions. There needs to be drive and ambition, but this must be countered with an appreciation of the responsibility to care for employees, clients and wider society.
Carillion was a victim of its own success – it took on too much – but it also failed to look inside the organisation itself.
This was made abundantly clear during a select committee meeting into the construction giant’s collapse. On hearing that Carillion chairman, Philip Green, was due to deliver an upbeat message in a statement to the board just five days before the collapse, MP Rachel Reeves said: “Philip Green’s assessment of Carillion as ‘a compelling and attractive proposition’ shows either a woeful lack of leadership or no grip on reality.”
The best, most successful and sustainable businesses recognise the personalities within their organisations, and work to identify those individuals who will push themselves and others for the benefit of all.