The Rhythm is going to get you

No way you can fight it every day,

but no matter what you say.

You know it the rhythm is goin’ to get’cha.

So the great Gloria Estefan sang in 1987.

The video https://www.youtube.com/watch?v=CZkjeJKBI0M is gloriously dated but undeniably uplifting. The “Oye-yo” call to open, the terrific brass section and the driving Latin beat all get you tangoing around the living room. No wonder the song was selected in 2018 for preservation in the National Recording Registry by the Library of Congress as being “culturally, historically, or artistically significant.”

But is Gloria right? Are we all captive to rhythm?

Let’s start by understanding what is generally conveyed by the term “rhythm”. Whilst its core meaning is “a strong pattern of sounds, words or musical notes”, it is used in a much wider sense to describe “a regular pattern of change”- for example the rhythm of breathing or the rhythm of the seasons. Some rhythms just happen (breathing) and some are created, like music and regular behavioural ways of doing or saying things. Nadal’s serving routine and the strange rise of the expression “if you know what I mean” would be examples.

Building on that, I am going to suggest that that, like cholesterol, there is good rhythm which we should embrace but that there is also bad rhythm which we can and should “fight”.

Good rhythm

The 24 hour day

There is something wondrous about Circadian Rhythms - the internal process which regulates the sleep-wake cycle roughly every 24 hours, hence Circa (around) dian (the day). How amazing that, for all the sophistication around us, we are hard wired into nature and how unsurprising therefore that negotiating those debt/equity covenants at 3.30am in the morning, our very lowest point, is not a brilliant idea.

These are rhythms that make us what we are. Although therefore perhaps neither good nor bad, it is smart for business managers to understand them. As Christopher Barnes points out in his HBR article from 2015 (https://hbr.org/2015/01/the-ideal-work-schedule-as-determined-by-circadian-rhythms):

“Managers who want to maximise their employees’ performance should consider this circadian rhythm when setting assignments, deadlines and expectations.

The most important tasks should be conducted when people are at or near their peaks in alertness (within an hour or so of noon and 6pm).” I suspect that that 6pm peak is poorly appreciated and it is not a great fit with “going home time”. In a world which is more Work from Home maybe mangers can nudge more team members to “hit that high” (answers on a postcard).

Personal rhythm

The rhythm of daily routine is important and reassuring. My Mum puts on her pyjamas at 10pm every night, plays solitaire for 30 minutes and is then ready for bed.

Daily routine can also shade into an effort/reward cycle - if I complete that essay this morning, I will be entitled to a Mini-Magnum after lunch.

And then there is exercise. Aside from the obvious health benefits of regular exercise, I am often struck by the way in which rhythmic exercise can be helpful in generating ideas. I try to go regularly to the Porchester Swimming Baths in West London and do 40 lengths. I find that after 20 lengths my mind wanders free and will roam from family to politics to business to the future of the internal combustion engine (synthetic fuels, by the way). And I get out of the pool with two or three ideas which I did not have when I got in.

So, exercise as an ideas factory is worth embracing.

Corporate rhythm

Rhythm is, of course, a fundamental part of corporate life - anchoring good governance and, for listed entities, public reporting. A regular cycle of meetings of ExCo and the Board are essential bricks in the wall of strategy creation and execution, holding management to account and mitigating risk.

Each board meeting should be thought of in terms of rhythm. The Chair is the conductor and it is his or her job to facilitate the discussion on each topic, seeking contributions from the assembled talent in a balanced way, judging when the discussion is “mature” and summarising conclusions and next steps. In that context it is worth a look at the attached, fabulous, rendition of Piazolla’s Libertango https://www.youtube.com/watch?v=h8cNnxLsvdk. The conductor of the, refreshingly all female, orchestra brings new meaning to the term energy.

Rhythm is also an important element in succession planning. For example, the provision of the UK Corporate Governance Code which (although subject to “explanation”) effectively mandates a maximum of 9 years’ service for the Chair and non-executive directors is driving a rhythm of renewal in PLC boardrooms.

Not everyone loves this provision but I think it is healthy as, generally speaking, it will be hard for non-executive directors to bring freshness of challenge to bear for longer.

This is another manifestation of the Rule of 3:

• 3 years to get a grip on the role,
• 3 years to make a real difference and
• 3 years to be gone.

And there are plenty of examples of Chairs who went beyond 9 years overstaying their welcome - Peter Cowgill who was 18 years as Executive Chair at JD Sports and, in the USA where longer terms are normal, Jeff Immelt who was Chair and CEO of GE for 16 years.

…and then there is Bad rhythm.

Populism

I’m afraid that this will sound grandiose but I do see the rhythmic beat of populism which is sweeping the world as a powerful example of bad rhythm.

Whilst there are various definitions of populism, it is generally taken to refer to an ideology which presents “the people” as a morally good force and contrasts them with “the elite” who are portrayed as corrupt and self-serving. Populism is often combined with other ideologies such as nationalism or socialism and thus populists sit at different places on the political spectrum. So, you have Lopez-Obrador in Mexico or Melanchon in France to the left and Orban in Hungary and Le Pen in France to the right.

The seeds of today’s prevalent populism lie in the Global Financial Crisis and the wage freezes, job losses and austerity which followed it. From those seeds it is striking to see how strongly and widely it has taken hold.

It was surely a major factor in Brexit - the chastening of the Cameron Chipping Norton set, ironically at the hands of another Old Etonian - and it has brought us Donald Trump and the Capitol riots, Gabriel Boric in Chile, the Five Star Movement in Italy, Narendra Modi in India and much more. Populism is genuinely troubling because, and this is not meant to be patronising, it favours slogans over methodical analysis and it tends to political extremes (such as acute wariness of immigration) rather than the economic and social centre ground (seen as “wishy-washy”). Far too often populism does not foster tolerance and inclusion - and that should worry us all.

And, as Janan Ganesh observes in the Financial Times, populist leaders will often leave an intolerant and illiberal legacy.

The Trump-promoted conservative majority in the US Supreme Court has not only over-ruled Roe v Wade but has also handed down a number of other decisions which, in the words of The Economist, seek to “refashion, not conserve, America’s legal structures”. They have, for example, given a radical and expansive new interpretation of gun rights and, in what Joe Biden described as a “devastating blow”, struck down the Clean Power Plan making much harder the achievement of the USA’s 2030 emissions goal.

In the UK, we need to be concerned by the Government’s approach to the rule of law. The Queen’s Speech talks of a desire to “restore the balance between the legislature and the Courts”. And the Northern Ireland Protocol Bill seeks to authorise breaching an agreement that the same Government signed at the end of 2019 relying on the “doctrine of necessity” - a “necessity” surely created by the Government’s own decision to enter into the protocol in the first place.

So, populism is rhythm that we should be “fighting” through support and advocacy for, and engagement with, parties and individuals who look to promote tolerance and inclusion. Whilst we may assume that the cycle will turn against populism in time, as it has in the past, Janan Ganesh cautions that that cannot be taken for granted given the rise of “competent populists”.

ESG

We should all celebrate the increased focus in business over recent years on pursuing better Environmental, Social and Governance (“ESG”) standards. Investors have embraced ESG as they evaluate investee entities and, according to the OECD, there are over US$1Trillion of ESG related traded investment products available to investors.

The ESG Rhythm is powerful, for sure.

But, as thoughtful commentators are increasingly observing (see this week’s Economist), it is a rhythm which flatters to deceive.

There are three important reasons why we should be weaning ourselves off ESG:

1. most strikingly it seeks to bring together, and often reduce to one “score”, a huge array of potentially conflicting objectives. Chris Saul PLC could close down its oil refining facility in Tynenouth (good) but put 1,000 employees out of work (bad). Or it could sell its refinery to Rubbish Refiners Inc (good or bad?). Hence the bemusing exclusion of Tesla from the S&P 500 ESG index whilst ExxonMobil is included;
2. the whole multiple indices thing (MSCI, Sustainalytics, FTSE4Good etc) is (a) confusing as scores often do not tally, (b) unregulated and (c) very distracting for corporates who can spend too much time and expense completing hundreds of questionnaires; and
3. through being too diffuse a concept, ESG risks taking eyes off the really, really central issue of addressing Climate Risk.

So, it is time to jettison the combined ESG moniker and reform the industry that it has spawned. In its place, one might look for:

• clearer and more standardised assessment criteria and disclosure requirements around environmental matters, particularly emissions; and
• a recognition that social and governance matters can be assessed dynamically by investors according to sector and market (in the UK ,for example, premium listed companies have to disclose compliance with the UK Corporate Governance Code). Such matters do not need to slot into a grid which may well give rise to unreliable comparisons.

A final thought

A sense of rhythm is a big part of us all and one might say, as Katy Perry does, that we are “chained” to it. Although, as I suggest above, we are sometimes overly seduced by rhythms that are troubling we should celebrate the fact that the rhythm of restless human enquiry and endeavour has had a remarkable impact. The digital transformation of the last 40 years offers a whole new world of opportunity to our children and, according to the World Bank in 2018 “over the last 25 years, more than a billion people have lifted themselves out of extreme poverty”.

And rhythm also brings us dancing and laughing. As to which, do click on this Reebok or Nike link https://www.youtube.com/watch?v=BQ4c54rCJ_k. Great fun.

Christopher Saul

Christopher Saul provides independent trusted advice to senior executives and key stakeholders within publicly quoted and privately owned businesses and professional service firms. His areas of focus are governance, succession and the moderation of differences.

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