Business lessons from Iraq

It was a typical “yabanci” mistake! That’s the word for a foreigner in Turkish and I completely forgot that Eid holidays are not fixed and were coming up on the first of the month.

I was working as the finance manager for a Turkish-Swiss joint venture in the Kurdistan region of Iraq and we had payroll to do. Cash is king in that part of the world and the bank would be closed if I didn’t do it soon. In theory I could just delay it by a few days, but it was Eid holidays and would make a nice thank you to pay the workers before.

There was only one problem.

Every other company in the region had the same idea and when I got to the bank in Erbil, they had run out of money, or more specifically large denomination Iraqi dinars. The only notes remaining were 5000 dinars or the equivalent of $US4 and I had to withdraw $US 250,000 worth of them.

There’s certain practical treasury management issues when working in the developing world. Like how much does the money weigh and is it physically possible to carry it.

The security team that was escorting me solved the first problem by pulling out a couple of potato sacks and as we filled up the bag with what turned out to be 50 kilograms of cash, I turned to the local office manager and asked, “what’s the chances of being kidnapped?”

He confidently responded, “don’t worry, they don’t bother kidnapping anyone for less than half a million dollars.”

So that was my kidnapping keynumber. Half a million dollars!

That evening, we got back to the operations, managed to pay out the cash although I couldn’t fit it all in the safe so packed it into my suitcase and slept with it before paying out the payroll over the next few days. That’s the photo you see in the top of the article.

How did I end up in Iraq?

Bad grades.

Let’s face it, get good grades at university, join a big 4 accounting practice, switch across to industry, house in the burbs, coach kids’ football and retire.

Get bad grades in the middle of an Australian recession and end up in Iraq. Well not quite that directly but when I started out, the only jobs available were basic clerical roles. And I was lucky to get this. Computers were a new thing, and companies were seeing the potential of doing all the number crunching online. My job was to feed the machine.

Seeing the writing on the wall, I ended up doing a post-grad in computing and although not the best bean-counter or programmer, I worked out quickly that accountants hate computers and IT geeks hate boring accounting which meant there was a demand for people who could work with both.

This led to work as a consultant setting up back-office systems for all sorts of organisations. Philip Morris Tobacco in Switzerland/Russia, the Mayor of London, charities like the National Trust and an LNG plant in Nigeria, they all work off the same systems.

My specialisation was trying to understand what the bosses needed in order to make decisions, find where did all that data needed to come from and how to connect it up so there was no need for any-more manual processes like thinking. The end result was usually a fancy looking chart or report and as computers became more powerful, the reports became more sophisticated and fancier.

But as the reports became bigger, a funny thing happened.

Looking at chart trend-lines we forget about the how or the why. Revenue goes up but why? Costs decrease but how? ?Charts are great at focusing on and highlighting a trend, but this becomes its weakness as we lose sight of everything else including the reality on the ground.

And the reality was I was also losing focus and was ready for a career change. Luckily the Kurdistan regional government and the central government of Baghdad agreed to be friends again and allowed oil companies to work in the region. I got a call saying they were looking for a finance manager and that’s how I ended up an hour outside of Erbil working on an oil field!

Keynumbers in Iraq?

Building a company from scratch means there’s no trend lines. You can’t take last years budget and add 10%, there is no last year. So, when decisions are made each department needs to understand the impact on them and create more often than not, their own key numbers so they can keep an eye on whether they are in line with the rest of the company.

Produce 10,000 barrels of oil a day, how many trucks do you need to export it? ?If a truck can hold 25,000 litres of crude oil and a barrel of oil can hold 160 litres, that’s 156 barrels. Round it down to 150 barrels and you need about 70 trucks. Head office says production is going to increase by 1,000 barrels, then go and source another 7 trucks.

A diesel generator produces 3 kWh of electricity per litre of diesel. How much electricity does a camp need, divide this by 3 kWh to get the diesel consumption.

And look to solve the great chicken incident of 2009 when head office refused to believe the field was able to consume 2 tonnes of chicken a month. How to solve the problem of seeing big costs? Divide the chicken by head count of 200 personnel and number of chicken meals (too many!) and it worked out to be about 250 grams per person per meal. Turning a big number into a small cost so that everyone understands, solves a lot of problems.

But what about putting solar panels on the porta-cabins to save diesel costs?

Impossible, we were clueless on how much they cost, how much we could save, no one knew the key numbers for solar because everyone was thinking in dollars and barrels.

Listening to experts keynumbers

Over the next two years, I ended up learning about geology, drilling an oil well, building facilities and oil production. Each manager and engineer took out a piece of paper and patiently explained how they did their job, what numbers were important to them (including the unit of measure) and used a simple maths called dimensional analysis to convert the numbers so that I could understand.

Also known as the factor label method, it involves writing the numbers as fractions and then netting them off to give a result. It’s simple and pretty fool-proof. The smart ones can do this in their head and look all fancy and consultant-like. The rest of us mortals scribble it onto a paper or spreadsheet. The result is a really easy way to understand the key drivers of any business.

And this got me thinking about keynumbers as an app. The reality is drilling for oil and gas is a pain in the ass. It’s really difficult and who knows how much is left in the ground. With the energy transition coming around, we’re back to square one where we’re trying to understand new technologies. Most people can understand the maths behind solar and wind. We’re still scratching our collective head on what’s a battery but when we get to novelties like hydrogen, compressed air or distributed energy systems ?we’re back to being clueless, or worse, tracking trend lines on charts.

How can we simply crunch the numbers to understand the value proposition of these technologies? That’s the keynumbers app.

But the immediate problem I had was transferring $100m out of Iraq!

After my time there, I was promoted to head office in Turkey and that’s when I got the phone call. Almost $100m is being transferred to the local bank account in Iraq. Get on a plane, deposit the cheque and get it out of the country.

Then the fun starts. The computer systems couldn’t handle big numbers as they converted them to Iraqi dinars which meant it was in the hundreds of billions. Other banks were willing to accept the money but getting it out was another story. The Kurdistan Central Bank used an intermediary bank in Lebanon. I saw a guy walking out with a potato sack of cash on his back and wondered is that how settlements works here??

My boss said to put it on a plane and then I did the maths, a million dollars in $100 notes is 10 kilograms which meant this was a tonne of money. When I explained the physical issue, he was like onto plan C. And that’s what keynumbers should end up as. You have 5 seconds to explain an issue before it sticks in a decision makers head and is impossible to unstick.

In the end, plan C worked, and we eventually got the money out via a bank… and without putting it on a plane. Then the money became someone else’s issue and I’m sure they were using their own keynumbers to deal with it.

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I can’t finish without stating how much gratitude I have for the people of Iraqi Kurdistan. After the Iraq war, the region was decimated and isolated. Their plight is embedded in the Kurdish proverb, “no friends but the mountains.”

During my time there, I saw the resilience of the people, literally building everything from scratch and when I write about the antiquated banking system, it’s out of awe that they managed to make it work.

It’s easy to point out what is wrong but when you cannot get everything right on day one, leadership is about accepting problems and knowing it will eventually be ok. ?

Zor spas.