17 December 2012

That was week ending 14th December 2012


This is the last TWb4TW until after the Christmas and New Year break. I started writing these articles in April and can hardly believe it is now nearly the end of the year and I am still writing them. I have been encouraged by the kind responses from you the people that read them and I thank you for those.
This week I thought it appropriate to produce my Christmas wish list, wishes for myself and others.  Here goes.

Cable not able

Last week Vince Cable took yet another swipe at big global companies that don’t pay enough or any UK tax. For Mr. Cable it is still the moral high ground that matters so no mention of our unfit for any purpose tax system. If the companies concerned are obeying the law then it is clearly the law that needs changing if it is not producing the result the country needs and that is the job of government.
Whilst Mr. Cable has done some good work at BIS underneath he is fundamentally anti business, or if isn’t he certainly sounds like it. I once heard him speak and claim that he was experienced in business because he had spent time as an economist at Shell. Anyone who knows anything about what economists do in organisations like Shell will know this doesn’t count as business experience.
So my Christmas wish for Mr. Cable is that he should get another job.  Minister for Overseas Development might suit his moralising better or perhaps being made to run an SME for a year might give him some “real” business experience.

It’s the economy stupid

Talking of experience my Christmas wish for George Osborne is that he too should find an opportunity to get some real experience. He is an example of yet another politician who is no doubt very intelligent but has done nothing but politics almost since he left primary school. This was demonstrated in the Autumn Statement and its aftermath where he was clearly more interested in scoring political points over Ed Balls than coming up with radical policies that would really get the economy moving. You can usually leave Ed Balls to score political points over himself, so why not get on with the job we pay you for, George because it really is the economy that matters and you are not stupid.

Does one more make a difference?

After the announcement that Canadian Mark Carney is to succeed Sir Mervyn King as Governor of the Bank of England last week we heard that Hector Sants was to join Barclays as head of compliance. Sants was previously Chief Executive at the FSA.
Now you can’t blame all the FSA’s failings on Sants. However he did step up to Chief Executive in time to rubber stamp RBS’ acquisition of ABN AMRO and he did publish just a 12 line press release on the FSA’s investigation into RBS, rather than publish the full report.
I understand that Barclays already have around 1800 compliance officers. So whilst Carney’s appointment does represent a new direction at the BoE you have to ask what real difference appointing a regulator to head up compliance will really make at Barclays.  My Christmas wish for Mr. Sants is good luck, but I have a feeling he will end up between a rock and a hard place with this one.

Train the trainers

The investigation into what went wrong at the DfT over the West Coast Mainline fiasco continues but with growing signs of avoidance tactics from anyone in the DfT who could possibly be blamed. My Christmas wish is that anyone at senior level in the DfT should be given a train set for Christmas and  required to assemble it in to a working model of the West Coast line in 30 minutes or be shown the door. Simple and effective.

HP used to work

I own an HP printer which I bought in the days when you could truly say buy HP because you just plug it in, turn it on and it works. What’s more my printer still does work, even though HP has had about 5 CEOs since I bought it. My Christmas wish for HP is that they should make me an offer for my old printer, with a suitable Autonomy sized premium and I would be delighted to sell it back to them. Then they could examine it and discover what it was that they used be really good at.

Oh no it's Silvio

You could not make it up; Silvio Berlusconi is running for Prime Minister of Italy again. This proves the view of a previous British ambassador to Italy who said “it is not difficult to govern the Italians, it is simply unnecessary”. Sr B’s first public pronouncement was to state “who cares about how much interest we pay to people who invest in our debt obligations compared to Germany”. This will be music to many Italian’s ears but maybe this time not enough of them will buy the message. So I wish Silvio Berlusconi everything he deserves.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. TWb4TW will be back in the New Year so have a great Christmas and New Year holiday.

10 December 2012

That was week ending 7th December 2012


The theme for this week’s TWb4TW is “and now for something completely different” or not as the case may be.

This is the Autumn of our discontent - or should that be Winter?

Last week the Chancellor delivered his Autumn Statement. Now I may be a bit pedantic and old fashioned but for me December is winter. In fact over the last few weeks I kept thinking I must have missed the Autumn Statement, we seemed to wait a long time for it to appear. Given that it required the Chancellor to admit he is going to miss almost every target that he has been telling us are essential to achieve, he may have needed more time to think of plausible excuses.
Much has already been written and spoken about the statement so I am not going to add to that. However one thought did strike me.  Suppose you are on the board of a holding company reviewing the performance of the MD of one of your subsidiaries, which has been making losses for some time. He tells you that sales are static, that whilst he has cut some costs overall they are still increasing and that several new projects he announced either haven’t started or are taking longer to deliver results. However he assures you that everything is on track, but it may take 2 or 3 years longer before profitability is restored. When you quiz him about what he is doing different that might get a different result he mutters vaguely about taking some of the spend from one part of his operation to spend in another.
How long would you put up with an MD who keeps on doing the same things and assuring you that this will deliver a different result? Not long I suspect. Did the Autumn Statement contain anything really different that looked like it might deliver a different result? Well I couldn’t spot it.

What could be different?

Most commentators had some sympathy for the Chancellor saying that he had a difficult hand to play. However I am grateful to Fraser Nelson of the Daily Telegraph who highlighted some countries that have tried something completely different and are getting different results.
Estonia is a tiny country surrounded by large and powerful neighbours, with every reason to blame global forces for its own economic problems. However throughout the downturn it has kept its tax rates low at 21pc. It cut state spending by a tenth in one year compared to our average of 2.5pc a year. The result is Estonia now has the fastest growth in Europe.
Socialist Sweden made a permanent tax cut for the lower paid that encouraged so many people back to work that the extra revenue covered the cost of the policy. The tax cut amounted to a whole extra month’s salary a year. The increase in tax allowances here will benefit about 20 million people, but the tax cut amounts to 90p a week. Not enough to spend in pound shop, much less kick start the economy!
The Swedes also reduced corporation tax from 26pc to 22pc, but they did it in 3 months, whilst our reductions are being phased over several years. So is it time to try something completely different like significant tax cuts, delivered hard and fast that will stimulate significant economic activity that in turn will deliver higher tax revenues and lower government spending? Just a thought.

No change from Tesco

It is now a year since Tesco’s Chief Executive Philip Clarke launched a £1bn turnaround plan. However like for like sales fell again in the third quarter and now around 29pc of UK consumers choose to do the majority of their food shopping at Tesco, down from 35pc in 2011.
Some analysts have said it may be too early for consumers to have noticed the improvements Tesco has been making in staff and products. I believe that the problem is more that they have not noticed anything really different and that’s because it isn’t. Some of you may recall the experience recently of my business partner who when he was unable to access an offer on Tesco’s website reported it to customer services. They insisted first that there wasn’t a problem with their site it must be with my partner’s system. They went further suggesting ways he could spend his time fixing what was their problem and of course “nobody else has complained”. Eventually last week he was contacted by a technical person (significantly not from customer service) who admitted there was a problem with the Tesco website and there had been hundreds of messages about it.
So does £1bn to revitalise stores and products and hire 8,000 extra staff make a difference? Not so far apparently and maybe it’s because it won’t make the slightest difference to Tesco’s attitude to its customers, because Tesco doesn’t think it has an attitude problem.

HP full steam on to the rocks

Last week HP’s market value fell to $27bn which is now below the $31bn it has spent on acquisitions in the last 5 years. Research has consistently shown that mergers and acquisitions usually destroy value. HP’s management seem bent on proving this by setting an all time record for value destruction. Indeed they may have already achieved it.
Market speculation is that the company may be broken up as the sum of its parts now looks significantly greater than the whole. What is clear is that it needs to do something radically different as the current strategy which is to straighten out the huge mess that is today’s HP seems highly unlikely to succeed.

Other stories from last week, worth a mention

Starbucks offer to pay voluntary corporation tax was an appropriate way to kick off the pantomime season and it was different!

Sir Philip Green’s 25pc sale of TopShop leaves his Arcadia Group debt free and with £600m to fuel further growth. Sir Philip doesn’t have to do anything different, just carry on doing what he is really good at. Unlike HP who seem determined not to do what they used to be really good at.

The report into the West Coast rail bid fiasco was published confirming what we already knew about the levels of incompetence and dishonesty at the DfT. Now it’s official will it make a difference? Not holding my breath.

The Tchenguiz brothers started their claim for £200m against the Serious Farce Office for losses incurred as a result of their wrongful arrest. This is the largest claim ever brought against a government department. You could almost wish them well until you remember it is us the taxpayers who will have to stump up the £200m. Those responsible for the mess at the SFO at the time have all left with large payoffs, again paid by us. So no change there then.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

25 November 2012

That was week ending 23rd November 2012


What goes down must come up

I have emphasised before that I am not any kind of expert on the stock market. If I was, I would not be writing these articles every week. However I have learnt that in general good news from a company tends to lead to a rise in the share value and bad news to a fall.
So what do think might happen to a company that has issued 5 profit warnings since May, whose loss will now be 6 times higher than it forecast in July and is under investigation by the FSA for how it handled inside information? Following the fifth profit warning its shares increased last week by 17pc!
The company is Lamprell an oil rig maker and wind turbine installer. This story seems to demonstrate that you can't have too much of a bad thing. However incoming Chairman John Kennedy has moved fast and cleared out the former CEO, CFO and COO. He also brought in PwC to give the big projects a good going over and although this produced a lot more bad news the markets seem to prefer to know the worst. The better news is that there is still a pretty good and now verified order book and the company’s bankers are supportive.
Now this may not last and I for one will not be piling in to the shares any time soon. However maybe the lesson is that if you have the courage to front up on all the bad news and to take decisive action then this just might be the beginning of some good news.

Did, didn’t, did, didn’t

By far the biggest business story last week has been the Hewlett Packard (HP) Autonomy pantomime. HP paid $10.4.bn for Autonomy in 2011, an 80% premium and 34 times projected revenues! Then in May, just seven months later, HP announced a disappointing quarter for Autonomy and 25,000 job losses, including Autonomy founder and CEO Mike Lynch. Last week they went further and alleged that Autonomy had misrepresented its financial results resulting in HP paying more than the company was worth. Not surprisingly Lynch disagrees, claiming that HP has mismanaged the business.
HP have taken an $8.4bn ($5.4bn for Autonomy) write down and their shares fell 10% to their lowest for a decade. Naturally investors are hopping mad and are asking about what happened with the due diligence. The list of advisers (and £40m of fees) appears to back Meg Whitman’s (HP’s CEO) claim that “we did a whole host of due diligence”, there were certainly enough of them. However she went on to say “it is a little challenging to go in and say gee we need to double check Deloitte (Autonomy’s auditors)”. This must qualify as the “I wish I hadn’t said that” CEO quote of the year.
HP has been thrashing around for years trying to find its way to a future away from the dwindling PC and IT peripherals market. The future is software they decided hence the purchase of Autonomy, which they appeared determined to do at almost any price. This is just the latest in a series of expensive accidents for HP. It demonstrates they simply don’t have the capability to make the changes needed in their own business, much less be capable of taking on other businesses they knows nothing about.
Whether HP’s allegations or Mike Lynch’s claims of mismanagement are eventually proved to be right is frankly irrelevant, this result was always going to be the same. Ms Whitman insists that Autonomy will remain a key part of HP’s future. However with Autonomy personnel leaving in droves as I say, the result is always going to be the same.

Euro Crash?

I was at the CBI conference on Monday to hear speeches from David Cameron and Ed Milliband and to witness a “performance” from Boris Johnson. (If you want to see Boris’ speech there is a link to CBI website below)
Both Cameron and Milliband had much to say about Europe. Cameron talked tough playing shamelessly to the euro sceptics even though he has no intention of taking Britain out of Europe. Milliband talked about how he would not let the country “sleepwalk towards the exit” and the need for Britain to be “in the room and at the table”. Quite how much of this is Milliband’s sincere belief and how much is political opportunism to prise open the cracks in the coalition and the Tory party on Europe is hard to tell. His answer to the short comings of Europe and the Eurozone is that he would seek to bring about reform. He did not explain what reforms or how they might be achieved. The fact that the European commission is building itself palatial new premises in Brussels and the wine served to Europe’s leaders this week cost £120 a bottle might give him some idea of the challenge involved.
The sentiment amongst the business people at the conference was to support what Milliband had to say. Most, though not all UK business leaders do not want us to end up outside of Europe.
However what nobody appears prepared to talk about is the very real possibility of the Eurozone imploding. Greece is supposed to have run out of money this month, yet still the tranche of bailout funds they need to avert this has not been cleared, even though the Greek government managed to get its latest austerity measures through its parliament. Several other countries are just spiralling down with no bottom to their economic well in sight. France lost its AAA credit rating last week, mainly because there is no sign the French government has even recognised, much less is prepared to deal with its fundamental uncompetitiveness.
If the roof does fall in then I would rather be near the exit or even through it. Could it happen? Maybe, maybe not. However remember when Russia defaulted everyone said it would never happen and it did, in just one day!


Is it a bird, is it a plane? No it’s a black swan

Talking of the unexpected and unthinkable last week Nassim Nicholas Taleb published a new book – “Antifragile”.  This is the latest of his extended argument about the requirements for business success in our modern world.  Starting with “The Black Swan”, he has now produced a number of densely written and intensely demanding publications. A reviewer pronounced “Antifragile” as probably a good idea but almost unreadable.
For me, this is maddening and frustrating – because Taleb is right but has failed to communicate an immensely important idea that I and my business partners identified in 2004 and have been promoting from our tiny corner ever since! So I am able to explain a concept that could really matter for your survival and prosperity in this uncertain world and save you reading a series of books and still being none the wiser for it.  Here goes –

Idea 1 -– Unexpected things are inevitable and can have totally unpredictable consequences.  Taleb calls these Black Swans.  We say S*** Happens!
Idea 2 – A few Organisations can withstand unexpected events substantially better than most others.  We call this Competitive Strength, (Taleb’s “Antifragile”)
Idea 3 – Outfits with outstanding Competitive Strength have extraordinarily agile, adaptive and flexible mindsets, combined with superb operational competence (i.e. not HP!) and so deal rapidly and effectively with whatever happens – either bad news (Black Swans) or good news (Market Opportunities).  We call this Changeability, (Taleb conflates this into “Antifragile”, wrongly)

And there you have it, 3 challenging ideas you should pay attention to and no need to read 4 or 5 challenging books on the subject. The future is massively uncertain, S*** Will happen. Only outstanding Competitive Strength can deliver the Changeability to secure the future for you and your business in an uncertain world.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

18 November 2012

That was week ending 16th November 2012


No deal to Green deal

In last week’s article I explored the difference between “knowing what you are there for” as opposed to “knowing what you are there to do” A piece of news from last week demonstrates just how wrong everything goes when you forget “what you are there for” and blunder blindly into areas where you have no competence and are therefore bound to fail.
The “Green Deal” is a flagship government policy to make homes more energy efficient and ultimately cut energy bills. If you haven’t heard about it or are not clear what it actually is then you are not alone. Announced in June last year, so far not a single household has registered for the scheme. The scheme enables people to borrow up to £10k to have loft and wall insulation installed. The loan is repaid over up to 25 years through higher bills but the expected savings must be equal to or greater than the cost of the work.
Now if you old fashioned like me this sounds like a second mortgage. Perhaps your walls and lofts may be at risk if you fail to make the repayments. Joking apart, the scheme is so riddled with uncertainty that it is no surprise that even people who have heard of it don’t find it attractive. Also if like me you have had a rash of pimply youths (pun intended) knocking on your door and claiming to be from a government grant service and are not trying to sell you anything, it has also become intensely irritating!
One of the things government is to there for is to ensure that the country’s assets are maintained and improved, so developing a policy to improve insulation in our housing stock is fine. However they didn’t stop there. They went on to design and launch a consumer home improvement product with a personal finance component included. What experience or competence does government have in this field? None. So no take up is no surprise. Can you imagine Proctor & Gamble launching a new cleaning product without thorough market research and testing and a carefully planned and fully resourced launch and marketing campaign?
This is not the first time this has happened. A previous spectacular example was the Millenium Dome. This a was a Tory government scheme but the Labour government decided to not only to proceed with its construction but also to go into the entertainment industry as well. Civil servants were appointed to run it with the inevitable disastrous results. Since it has been run by entertainment industry professionals it has become a great success.
All politicians and government officials have become so sure they know what’s good for us that they can’t resist going into areas they know nothing about. The same happens in business when instead of setting clear directions for the people who know what they are doing and letting them get on with it, managers have to micro manage every aspect of what their people do.

Taxing Times

The debate about how much tax businesses pay or don't pay rumbles on. The week started with Amazon, Starbucks and Google appearing before the Public Accounts Committee (PAC). Amazon made the mistake of sending Andrew Cecil their “Head of Public Policy” or PR man to you and me. He was eaten for breakfast by Chair of PAC Margaret Hodge describing his responses as “unacceptable nonsense” and accusing him of being clearly “not credible”. Why some businesses when they are clearly in a hole over an aspect of the way they do business persist in sending out these lightweight PR people to continue digging I don’t know!
The politicians have now moved the debate to the moral high ground where they take the high ground and make it very clear that business is on the low ground. Ms Hodge accused the companies of using accounting strategies that were “cynical” and “unjust”. She didn’t stop there, adding “we are not accusing you of being illegal; we are accusing you of being immoral”. When politicians start “accusing” others of being “immoral” we are well into pot and kettle territory. Just how many jobs with their accompanying income tax, NI and VAT tax revenues have Ms Hodge and her colleagues on PAC created recently? Any chance of a grown up dialogue that could get to the root of the problem and find practical solutions goes out the window as soon as the “M Word” is deployed.
Whilst there is a ”moral” dimension to the problem of some companies being able to legally reduce their tax liabilities to near zero, this is not a helpful argument. The real point is about competition. If these businesses can save huge amounts of money by paying very low tax on their profits this gives them an unfair and unearned advantage over their competitors who are not able to access the same mechanisms. Andy Street, Managing Director of John Lewis put is finger right on it.
“There is less money to invest if you are giving 27pc of your profits to the Exchequer. Clearly, if you are domiciled in a tax haven you’ve got much more. They will out-invest and ultimately out-trade us. And that means there will not be a tax base in the UK”.
Not a single mention of morality just plain common sense that highlights what the real problem is and what the consequences could be.
What this whole episode is demonstrating is that the taxation system for any business based or operating in the UK is a mess. Even a dog would not want it for dinner. The world has changed a great deal but the tax system has not, apart from continuous tinkering. This is why Tolley’s tax guide is now twice the size it was 10 years ago.
Politicians think a “competitive” business tax regime is just about tax rates, but it is not, it is also about the system itself. Reasonable rates of business tax based on a simple, transparent and above all stable system is what businesses really want. There are lots of reasons why businesses would want to operate in the UK but a tax system that mean they pay little or no tax shouldn't be one of them.
Several other commentators made this point about the failings of our tax system last week. However not one politician, whether a government minister or an MP lauding it on a House of Commons Committee, gave it a mention. Those of us in business need to give them an earful on this at every opportunity.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

12 November 2012

That was week ending 9th November 2012


Last week could be described as momentous, given that Barack Obama was elected for a second term as US President and the Chinese continue ponderously through their leadership change process. It is difficult to work out what is going on with this. However it seems pretty certain that one of the blokes in suits will become the new leader of China sometime soon.
This and some other stories from last week prompted me to think about the difference between “knowing what you are there for” and “knowing what you are there to do” and whether this difference matters. The connection is not immediately obvious between this and Presidential election and Chinese change of leadership, but bear with me.

Hurricane heroics

I am grateful for this story from my business partner in Melbourne, Barbara Craven. It concerns a US company called Squarespace who provide cloud based services including running hundreds of thousands of websites for customers. When hurricane Sandy struck their data centre in downtown Manhattan it suffered a total loss of power in spite of multiple levels of back up systems and resources. It took out much of the building services including fuel reserves for back up generators. And yet none of their customers experienced any down time as a result of the power outage!
How did they do it? For three days employees carried fuel manually up 17 flights of stairs to fuel the remaining back up generator. By day four they had installed a pump system to deliver fuel to the generator on the roof. They now have plenty of fuel on site and a further generator connected at street level but they are still not connected to the power grid. Yet the service to customers has never faltered.
This for me this is an example of people who know what they are there for, to serve their customers. So when struck by a disaster of such unprecedented proportions that they could not possibly have planned for it, they quickly worked out what they had to do. So maybe there is a difference and the difference can make a difference.

Obamarama

However a positive rather than negative “purpose” can, I believe, influence results. In the 2008 Presidential election much was made of Obama’s election machine, particularly that part of it that “got the vote out”. In 2012 the Republicans said they would match or even exceed this. However it looks as though they didn’t and that it was a crucial factor in their defeat. From what I have read it wasn’t about money or about the numbers of people involved. The Obama people just seemed to have the more positive sense of purpose which was to get their man elected. Consequently they had a very clear understanding of what they had to do, which was to find every single possible voter who might vote for Obama and make sure they voted. The Republicans on the other hand gave the impression that they were there to stop Obama being elected, rather than to get Romney elected. This showed on the ground in the lack of purpose, drive and resources they put into getting their vote out.

The lone voice

I came across an example of what happens when people are not clear what they are there for when talking last week with a friend of mine who works for a European manufacturer of capital goods. The company has brought in consultants to improve “sales” performance and they have introduced a sales performance management system. This requires everyone in the sales force to log every phone call, e-mail, meeting etc. and to carry out their sales activity in line with performance standards set by the system. Even though my friend has been the top sales person in Europe for most of the past fifteen years, they want him to conform to the new system as well. Their argument being that if he doesn’t do it then no one else will.
The company has also spent €35m “rationalising” its manufacturing facilities. Whilst this has produced cost savings, these have not been used to offer lower prices or even better delivery times to customers. My friend is clear on what he is there for, to sell machines to customers, but others don’t appear to share this view. They think they are there to tell others what to do and to micro manage them into doing it.

Whitehall revolving doors

However I also think you often need time and experience to understand what you are really there for. This is not surprising when most of our education and experience of work has been all about WHAT we must do rather then why we are doing it.
Regular readers of these articles will know that I regularly castigate government for its lack of competence and capability to deliver what the country needs. This week a report from the Better Government Initiative (BGI) will be published highlighting the shortcomings in government which have caused so many policy failures, including record levels of staff replacement in Whitehall.
Did any of us realise that staff turnover in the Treasury over the last two years has been 50% and the average age in the department is now well under 30?  High staff turnover is affecting all departments from the lowest to highest levels. Only 2 of Whitehall’s 16 departments have the same Permanent Secretary as they did two years ago. The Department of Transport is now on its fourth Permanent Secretary since the election. No wonder it screwed up the West Coast Mainline bid.
It seems that no one has given a thought as to whether this indicates a serious problem at the heart of government. With staff turnover at these levels people will hardly have time to figure out what they are there to do, never mind what they are there for.

China Syndrome

Judging by some of the rhetoric from the Chinese leadership last week they know what they are there for - to maintain one party government so as to keep the communist party in power in China. A key component of the strategy to maintain this political status quo is government control of state enterprises that dominate key areas of the economy. Many of these behemoths make huge losses and are a source of much of the corruption in the Chinese economic system.
However the other goal set is to double per capita income by 2020. This is an example of where what you have to do to achieve what you think you are there for is actually an obstacle to achieving your goals. I may be proved wrong, but in the last 100 years autocratic government with state control of the economy has not been a successful formula for delivering sustainable growth in prosperity for its citizens. This is because it favours the relatively few to the detriment of the many and always encourages corrupt practices by the few to maintain their privileges.

It’s all about outcomes

If you can set a clear outcome that both you and your people can relate to and find inspiring, then quite extraordinary things can happen. A positive outcome will nearly always beat a negative outcome. Focusing just on what people are there to do can make it really hard work to make anything happen at all. Even when you have set an outcome people need time and support to work out how they personally can relate to this and consequently what they are really there for. Finally if the outcomes you set are about you having your cake and eating it, this is likely to be self-defeating.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

5 November 2012

That was week ending 2nd November 2012


My purpose in starting this series of weekly (well mostly weekly) articles is to take a different perspective on some of the news stories from the previous week to see what lessons might be learnt. However I am beginning to find that many of these lessons keep coming round again. So here is a quick canter through some of last week’s news stories with my take on the lessons they contain.

Barclays to slash pay – senior employees at Barclays are to have their pay cut by up to 50%, with the bank happy to take the risk that some will leave rather than accept this. This is one of the key outcomes of Project Mango, a three part review into the future of the former Barclays Capital. So it appears that reality does catch with everyone eventually and the longer you ignore it the bigger kick in the backside it gives you. The mystery that remains is why big corporates continue to give major projects such silly names.

BT Sports Channel – perhaps to its surprise BT came away with two of the seven Premier League broadcasting rights packages plus the rights to Premier League Rugby from next year. The idea behind this move is that it will enable BT to compete with Sky in offering bundled telephony, broadband and TV services. However it is unclear how BT will earn a return on the near £1bn of its shareholders money that it has spent so far when it doesn’t even have a sports channel yet.  The major impact so far is that BT’s entry into the bidding process forced Sky to pay 40% more than in previous Premier League auctions. Perhaps the lesson is be careful what you bid for, because you most likely will end up with some of it, having paid a lot more than you expected.

PPI miss-selling hits banks profits – one clue as to why Barclays and the other banks feel confident they can reduce the pay of their senior people without any mass exits is the scale of the financial headwinds facing all banks. In addition to PPI compensation, the consequences for interest rate swap miss-selling, HSBC’s money laundering and Libor rate manipulation have yet to be fully quantified. PPI compensation alone could top £12bn and be the biggest miss-selling scandal of all time. PPI miss-selling wasn’t just wide-spread; it had become a way of life. If it made money for the bank and for you, it was alright. The lesson is that these days HOW you make your money is just as important as how much you make. Dubious practices that society deems unacceptable will find you out and cost you dear.

Official, West Coast bid fiasco was a fiasco - a preliminary report on the investigation into this sorry saga has confirmed that the DfT’s part in the fiasco is every bit as bad as we thought. Officials in the department knew that they had neither the resources nor the expertise to manage the bid process effectively but they went ahead anyway. They even accepted the “risk of a challenge” from Virgin Rail Group. This wasn’t a risk; it was a cast iron certainty!
Given that rail is a key part of this country’s infrastructure and the DfT has a key role to play the least the government could do was to ensure it was up to its job. Right now it is the equivalent of sending a village football team with just seven players out to play Manchester United. The lesson for those of us in business is that we must demand that government massively improves its own competence and capability before it starts telling us how to run our businesses.

Hitachi buys in to UK nuclear – this Japanese white samurai came riding out of the sunset to buy up RWE and E.ON’s nuclear business in the UK. This is good news because before this the only nuclear game left in town was the Centrica/EDF joint venture. Hitachi has a record of building reactors on time and on budget which would make a welcome change if they could do this in the UK.
However major obstacles remain before this investment will become a reality, notably getting Hitachi’s Advanced Boiling Water Reactor licensed for use in the UK. This could take four years. Once again a key role is played by government, not just in the licensing process but in settling the price to be paid for electricity generated from the new plants. Get this wrong on the scale of the West Coast rail bid and we are in serious trouble.
The lesson is that when you have pulled a rabbit out of the hat, don’t then starve it to death.

Royal Mail delivers Parcels! – another bit of potentially good news was the announcement by Royal Mail that it is to invest £75m into a four year expansion programme that will fuel a decisive shift away from delivering letters to servicing online retailers instead.
Many of us can be forgiven for thinking about time too! To be fair Royal Mail has had a stack of legacy problems to deal with before they could get to a position where they have a chance of making this investment a success. Successive government indecision and general messing about with Royal Mail hasn’t helped. However the lesson is that when it’s obvious what you need to do, best get on and do it. You will be surprised by how often doing the bleeding obvious doesn’t get done.

And finally – I have a feeling in my water that overall things are starting to get better. This is not to do with last quarter’s growth figure, but just a general feeling in spite of all sorts of potential further difficulties that there are more signs pointing up rather than down. Two big events this week may turn out to be significant, namely the result (if we get one this week) of the US Presidential election and the change of government in China. In one millions of American voters will decide the result, in the other a few thousand people turn up in Beijing and put their hands up when they are told to. I am not sure which I find the scarier!

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

28 October 2012

That was week ending 26th October 2012


Last week saw the end of recession with growth of 1% in GDP in the last quarter. This is of course the end of the second technical recession we have experienced; it may not be the last. If you are just about keeping your head above water it doesn't take much to push you under again. The government keeps coming up with a variety of schemes to kick start growth in the economy but they don’t seem to be generating much traction. However two events from last week made me think about why this might be.

Pay me now, tomorrow, sometime, never.

On Tuesday the government announced its new “supply chain finance” scheme, with David Cameron hailing it as a “win-win” solution for large companies and their suppliers. The principle is that a large company will notify a supplier’s bank when an invoice has been approved for payment. The bank can then offer an immediate advance of 100pc of the invoice value to the supplier at lower interest rates knowing the bill will be paid. Government estimates that this would enable leading companies to make available as much as £20bn of cheaper finance to their suppliers.
There has already been a fair bit of comment on the idea with the consensus that this scheme could work but only in a limited number of situations.  However the question that occurred to me when I first heard the announcement and which began to be voiced by others towards the end of last week was:
If a large company approves an invoice for payment why doesn't it then just pay the invoice? 
To quote Philip King, Chief Executive of the Institute of Credit Management (so he should know), “my preference would be that people just paid on time”.
The real problem for small and medium size businesses financing their debtors is the UK’s slow and late payment culture, which is now endemic throughout the UK business system. The late payment legislation has now been in force long enough to prove it is not the answer, certainly not for small businesses trying to extract payment from large customers.

Paying on time pays off

Apart from the obvious benefits to cashflow for many suppliers to large businesses would paying on time actually benefit business and the economy overall? Or is it just an ethical argument and I am being naive in thinking that paying bills on time is a realistic proposition? Well here’s a true story.
A family owned specialist retailer based their growth strategy on 3 principles, the latest products and technology at competitive prices, outstanding customer service and advice and, paying suppliers on time. This last principle was the key to enabling the other two. When goods were delivered, provided they conformed to spec, quantity and agreed price, the invoice was approved and logged for automatic payment on the agreed date. The supplier knew that provided they performed they would always receive payment on time. Consequently they did perform and gave this retailer their best prices and service and always offered them the latest products and technology first.
This is an example of how a sufficient and balanced flow of credit through the business system creates competitive advantage. The retailer expanded from one premises in one location to a nationwide chain to become a household name in its sector and highly profitable. Eventually the family sold out to a venture capitalist for a handsome sum. The new owners’ strategy was that having bought the market leader all they had to do was to further expand the number of stores and then float the company to make a handsome return. Financing this was simple, or so they thought; just cut stocks and extend the payment terms to suppliers.
However this disrupted the flow of credit which removed the business' competitive advantage. The business rapidly lost market share, plunged into losses and eventually into administration and the shareholders lost everything.

Two black holes for the price of one

Has the recession made things worse? The continuing tight credit conditions won’t have helped but there is a more deep seated problem in the banking sector that is reinforcing the late payment culture and making it part of the problem.
Last week Sir Mervyn King, Governor of the Bank of England warned that the banks have significant amounts of undeclared losses on their books from loans that are just never going to be repaid.  He pointed out that this is a significant drag on the economy. Until banks own up to this black hole in their balance sheets and are fully recapitalised we will not be able to return to the levels of banking provision we need to drive economic recovery.
Many of these bad loans are with creditors who are managing to survive and pay the interest on their loans but are unable to repay the principle. Moreover in order to survive they pay their trade creditors as late as they can.
The inability of banks to deliver adequate banking provision also means that many viable businesses just cannot get the finance they need from their bank to grow. Many are then forced to push out their own payment terms to creditors and so on through the system. There are undoubtedly some companies that are accumulating cash at the expense of their suppliers. However there is also clearly another black hole in UK plc’s overall balance sheet, which manifests itself in the widespread and counter productive late payment culture.
The effect of all this is to disrupt the sufficient and balanced flow of credit throughout the UK business system. As the story of the retailer's demise above demonstrates, when the flow through any system is disrupted in this way it becomes inefficient, incurs unnecessary cost, fails to deliver as required and ultimately can break down altogether. We are disrupting this flow on a national scale with the inevitable adverse consequences for economic growth.


And the solution is ...

Right now I don't have a solution to offer. Clearly clamping down on all the bad loans in banks' balance sheets too quickly risks Armageddon  However what I do believe needs to be done first is to recognise the problem and get to understand it. So this is not about coming up with one off schemes like “supply chain finance” that do little or nothing to address these two fundamental weaknesses in our economic and business system. Government has a key role in this and part of that role is to set the parameters for the UK business system. That in turn means deciding whether doing business in the UK means that on time payment to your creditors should be part of those parameters or not. Only then are you in a position to start devising effective solutions to bring this about.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

14 October 2012

That was week ending 12th October 2012


The merger that never was

The proposed merger between BAE Systems and EADS was killed off last week by stern Auntie Angela who made it very clear she wasn’t having any of it. What interested me about this was the human behavioural aspect and how people who are clearly very intelligent can get caught up with propositions that do not succeed.
BAE is now a pure defence company. Indeed it sold its 20% stake in Airbus to EADS in 2006 as part of its strategy to focus on the defence sector, especially in the US. However defence spending globally is now substantially reduced and likely to fall further so BAE needs to find a way of reducing its dependency on the defence sector. At the same time EADS is trying to find ways of reducing its dependency on its core Airbus commercial aircraft division.  The leaders of both companies appeared to take one look at each other and saw the solution to their problems. Let’s merge the businesses and hey presto, our problems are solved.
Something strange seems to happen to business leaders when they get involved in mergers and acquisitions, especially when they see it as the answer to their problems. They get so caught up with the idea that in one bold stroke they can transform their situation that it does not occur to them that other people whose support they will need do not see it the same way at all. It has happened with BAE and EADS and it is bedevilling the proposed Xstrata/Glencore merger right now. It happened with G4S' failed bid for ISS last year and with Prudential’s proposed $35bn dollar acquisition of AIA a few years earlier.
The other aspect of the BAE and EADS proposed merger is that each company had the same problem. How does merging two of the same problems produce a solution? I am not saying it never can but it should at least make you stop and think. However mostly people don’t stop and think.
These examples demonstrate once again that poor process produces poor results. Coming up with the brilliant idea (and it may well be a brilliant idea) but making that the focal point of the process will almost inevitably mean that you miss the other vital stages of what it takes to achieve success. Ask yourself how often a really good idea, project or proposition you tried to make happen in your business came to nothing for reasons you can’t quite understand. What did you miss out and why?

Swann song

Last week Kate Swann announced she would be stepping down as CEO of WH Smith next summer after 7 years during which she has transformed the company.
When she arrived the business was in a mess with hundreds of shops scattered across Britain’s high streets selling a bit of everything and doing nothing very well. Ms Swann’ strategy was a text book example of KISS (keep it simple stupid) and of applying robust process to implement it. First she separated the wholesale business from the retail business with separate management teams for each business. Then she identified which categories of merchandise customers wanted to buy at WH Smith and where they wanted to buy them. She then set about getting rid of products where they could not compete, such as entertainment and focusing on areas such as stationery, books, art & craft and others where they could.  Then she opened stores where customers wanted them including railway stations, airports, motorway service stations etc.
Then she concentrated on making WH Smith a better business, with ferocious attention to detail which has driven out £17m of costs to date with more to come (a further £12m this year).
In doing all this she sacrificed the sacred cow of retail investment analysts, like for like sales increases. If you are taking out product, as a retailer maintaining sales increases is hard work. In the year to August 31st like for like sales fell 5% but profits rose 10% with the dividend up 22%. The shares have generated a total shareholder return of 306% in the 7 years Ms Swann has been in charge, more than M&S, Morrison's and Sainsbury’s put together.
All achieved without a single merger or acquisition. It could have been different, a merger with Woolworths perhaps or with HMV, both with similar problems to WH Smith 7 years ago. Now does that sound like a good idea?

Tesco – a straw in the wind

It is funny how a straw in the wind can sometimes tell you more about the state of the haystack than the farmer might know.
Last week, one of my partners had a promotional email from Tesco on his main computer. Unusually, he chose to follow one of the links. It did not work. Because he is a bit geeky, he checked it out on his laptop, where it did work. All of the other promotional emails he gets do work.
He decided to do Tesco a favour and let them know there was a problem – obviously thousands of others with the same (totally standard) PC set up were also not going to get to Tesco’s email promotions. Their Customer Services did an initial good response but managed to miss the point. Eventually they sent detailed advice on how to change the computer settings so that their advertising emails would work!  The fact that solution didn’t work is totally irrelevant to this story.
However, all the way through this tiny little saga, the Tesco tried to get the customer to do something to sort out the problem. They have not recognised that:

The customer doesn't want to read Tesco adverts badly enough to bother 
Tesco do want the customer to read their adverts 
TESCO OWNS THE PROBLEM, not the customer.

Tesco are not doing well in their competitive Market.  Overall, they are not winning hearts and minds – people just don’t seem to like them.  We know that attitudes, beliefs and behaviours have a massive effect on competitive success. 
Customer Service experiences can be one the most revealing insights into a corporate culture. If they can’t get these tiny little things right, because they are not thinking about them the right way round, then there is probably something much bigger to worry about.

Shares for rights

Normally the term “rights issue” means existing shareholders being offered the right to buy new shares in a business ahead of non-shareholders. The Tories announced a new twist on this at their party conference, give up your employment rights in exchange for shares in the business you work for.
Plenty has and will be written about this policy but once again this started me thinking about the process behind this idea. To me it is like a confectionery manufacturer thinking that there are people who like chili and there are people who like liquorice allsorts. What’s more there are lot of people who like both so maybe there is a market for a chili flavoured liquorice allsort.
However before developing and launching this new product it is a good idea to do some research and some market and product testing. Maybe the people who will like the product or the flavour combinations they prefer are not what you thought they would be. There are host of questions to find answers to before you can judge if this has a chance of success and if so, how to make it succeed.
To me, this looks like yet another policy that is announced then pushed out by government without applying a similar robust process and that may be why many good ideas in principle have failed at implementation.
By the way if anyone does come out with chili flavoured liquorice allsort, remember I thought of it first!

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

9 October 2012

That was week ending 5th October 2012


Don’t bank on it

Last week I wrote about Vince Cable’s announcement of the setting up of a state business bank. My thanks to the ever vigilant Bill Good for pointing out that this will not actually be a “bank” but yet another government backed loan scheme routed through conventional banking channels. This is what I understood as well but should have made clearer. I hope none of you got too excited about the potential of there actually being a real alternative source of business lending and banking.
However this is what John Longworth Director General of the British Chambers of Commerce called for last week. He wants to see a state backed, properly constituted British Business Bank. Current schemes merely “provided slightly cheaper finance to businesses that banks were already lending to” he said
I think he is right, but not just because this would help channel more finance to those businesses that need it but cannot get it from conventional banking sources. If a British Business Bank not only offered business loans but also business banking, i.e. business current accounts, direct debits etc. then this could have some real impact on competition. Very few businesses can operate without a business bank account, which means that if a business is turned down for a loan by its bank, more often than not it still leaves its business bank account with that bank. However if a business was able to access finance from an alternative source which also offered business banking then maybe many more businesses would consider switching their banking over as well. If significant numbers of small businesses did this then it would bring some significant competition into the small business banking market. Isn’t this after all what we really need?
Will it ever happen? Well last week it was announced that Metro Bank would be a primary business partner for the Growth Accelerator scheme. A small step in the right direction but much more could be done.

West Coast Blues

When ah woke up this morning, thought ah had a railroad to run
Yes when ah woke up this morning, thought ah had a railroad to run
Then ah got this call from the old Deeefftee Ministree
Saying they done screwed up the bid process and screwed me.
(with apologies to all blues singers who have ever lived!)

Yes I have sympathy with Tim O’Toole of First Group who I can fully understand must be feeling “sad and blue”. Winning the West Coast franchise wasn't just a contract win it was the answer to a lot of FirstGroup’s problems. Now all the concerns about the balance sheet, cashflow and profits have returned and FirstGroup’s share price sank 20% on fears that a dividend cut is now likely.
Since I wrote about the decision to award the franchise to FirstGroup in the middle of August, 2 out of 3 of my predictions have come to pass. It has ended in tears and after Justine Greening moved on from Minister of Transport to International Development. However I did say it would take time when in fact it only took 6 weeks! Had she still been Minister of Transport it is likely Ms Greening would have had to resign after insisting she had overseen a “robust” process. There has been no sign of her offering that, in fact not a word from her (again). I suspect she is too busy down on her knees thanking the powers that be that she got reshuffled (Justine Time perhaps?) and parliament is still in recess.

Confidence – not if we can help it

It does look increasingly like FirstGroup put in a rather "desperate" bid but even so the company does not deserve to be treated this way. Apart from being a spectacular display of government incompetence the West Cost episode is another dent in business confidence. There are now 4 rail franchise bids in a state of limbo with all the implications that has for stalled investment and job creation in the rail sector. I wonder how many rail franchise bidders are having second thoughts. Also last week Ofgem reported that thanks to years of government dithering we can look forward to energy blackouts as early as 2015 and as for any clear policy on aviation strategy don’t hold your breath.
There really are enough uncertainties in the world without our own government inventing any more. We seem to have a real problem with politicians and civil servants having the slightest understanding of what business confidence is, why it matters and the damage inaction, muddle and sheer incompetence in government can do. A clue as to how politicians and civil servants think about this and how they view their priorities can be found in a statement from the Department of Energy in response to the Ofgem report. It said that there is "only a very low risk to householders".
No mention of businesses, especially those with interruptable supply contracts. Then of course householders have votes and businesses do not.

Euro tragi-comedy continues

After the lull during the summer whilst most European governments were on holiday we are now back to the run of announcements, counter announcements, demonstrations and confusion we had before. One minute Spain needs €100bn to prop up its banks, now it appears it’s only €60bn.  Then up pops Moodys saying that it needs twice as much as that, i.e. €120bn. I hope you are all following all this so far. Meanwhile Super Mario Draghi is still dancing around the ring shadow boxing and saying “he is ready to act” that is if anyone is man enough to take him on.
The Greek comedy moved into Greek farce last week with the announcement that they propose to spend €95m on a state of the art motor racing circuit, with ambitions to stage F1 events. Now I know that spending on infrastructure can be part of the answer to boosting economic growth, but I don’t think F1 circuits count. Neither is Greece noted as any kind of centre for motor racing. I think the last time they won anything major involving wheeled transport the date had the letters BC in it! To be fair neither Bahrain, Singapore nor Malaysia were noted centres of motor racing and they all have F1 circuits. However they do have plenty of money. If you have ambitions to get in to motor racing especially F1 then you need to talk to Bernie Ecclestone and he only talks to people with plenty of money.
However shortly after this news broke the Greek PM Antonis Samaris announced that the country will run out of money in November. Stern Auntie Angela is due to visit this week and I think the PM was hinting that it would be helpful if she could stop at a euro cashpoint on her way and bring some cash to help them through the weekend.
As I said there really are enough uncertainties in the world without our own government inventing any more.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

3 October 2012

Week ending 28th September 2012


I am now returned from a very relaxing holiday in Mallorca where I managed to remain oblivious to anything that was happening in the world outside of the small area of my hotel pool and nearest beach. Ignorance is indeed bliss and I can thoroughly recommend it.

Party Time

On my return I find we have entered the political party conferences season. People we only ever seem to see or hear from at this time year seize their moment to tell us what they think will be good for the rest of us. The fact that they can actually say some of these things in public without embarrassment is a demonstration of the almost infinite human capacity for self-delusion. But hey that’s what politics is all about!
However I have to give credit to Nick Clegg for going against this political norm in his closing speech to the Lib Dem conference. “If we fail to deal with our debts and tackle the weaknesses in our economy our country will pay a heavy political price. But the human cost would be higher still. Not only would we fall behind internationally, we would leave a trail of victims at home too”. This to my mind is going further than any other politician to date in demonstrating real leadership and being prepared to tell it like it is to both his party and the voters.
However this moment of real leadership did not last long, because when it comes to what we should actually do about it the best he can come up with is the idea of a mansion tax. He is positioning the Lib Dems as the party of “fairness”. So anything that sounds like “fairness”, even if it is of no practical use in dealing with the problems of the economy is going to get his backing. That’s politics Mr. Clegg not leadership and many voters can tell the difference.

Banking on the State

Another highlight of the Lib Dem conference was Vince Cable’s announcement of a £1bn state backed Business Bank. I would bet that when they first took office no member of the coalition government, Tory or Lib Dem, would ever have thought that they would find themselves setting up a state bank. However the government has finally had to accept that there is a failure in the market for finance for small business that is not going to be addressed by the big banks.
Whilst I accept the need the whole idea of a bank run by the government makes me nervous. Danny Alexander, Chief Secretary to the Treasury has promised that the bank will be “fast tracked” into existence. However what he means by this is the legislation required to bring it into existence. I accept he might know how to do that, but I am not at all sure that he or any other politician knows how to run a business bank. We need to know a lot more about how it is actually going to work before we can have any confidence that it will.

Oh BUMi!

Not a good week for Nat Rothschild whose stake in Bumi Resources lost another 25pc having lost 33pc the previous week. Bumi is an Indonesian mining and natural resources business that Rothschild bought in to using a cash shell for which he raised £707m with a London listing in 2010. By changing the name of his cash shell to Bumi, Rothschild achieved a London Stock Exchange listing for the Indonesian Company.
Bumi’s main shareholder is the Indonesian Bakrie family and it is now apparent that their corporate governance fell short to say the least. Missing funds, “development assets” that are nothing of the sort and compensation liabilities are just a few of the problems that have come to light in a document sent to the board by a whistleblower.
Regular readers of these articles might expect me to launch into a scathing criticism of Nat Rothschild. It certainly appears that the words “due diligence” didn’t feature in support of his boasts that investors would make “two or three times their money”. However Rothschild is what he is, a merchant adventurer and they don’t do things like due diligence. If you get involved with this type of business person you might make a lot of money or you might lose the lot. He has lost his own money as well as other people’s in this venture. But the city knows Rothschild and they know what he is like, so why was the London listing allowed? Could it be that the chunky fees involved have once again enabled greed to triumph over common sense?

Nothing is forever

Another company with bad news last week was model train maker Hornby. A combination of disappointing sales of Olympic merchandise and disruptions in delivery of products from a Chinese supplier, will wipe out any profit for this year. Hornby shares fell by a third.
For Chief Exec Frank Martin, following disappointing Christmas sales and poor final results announced in June, this could be the third strike that signals out. However it is the Chinese supply situation I find most interesting.
When Hornby switched all their manufacturing to China they appeared to have solved their cost problems and acquired the ability to produce product with the level of detail that customers wanted. The company went from strength to strength on the back of this strategy. However its Chinese supplier has passed from one owner to another and is now struggling to cope with the problem of rising costs.
The Chinese owners’ response has been to close factories thus reducing supply of Hornby products. So even if they can generate increased demand Hornby won’t be able to meet it. A strategy is that in effect saved the business is now causing serious problems. So the first lesson is that nothing is forever. You cannot stand still, however well it all seems to be going. You have to go on changing and innovating in your business constantly. The second lesson is that forever can be a very short time these days.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

2 September 2012

That was week ending 31st August 2012


Paralympics beats all

During the Olympics I wrote about Peter Wilson, our gold medallist in the double trap shooting. When his funding was withdrawn following the Beijing games Wilson persuaded a member of the ruling family of Dubai, a 2004 Summer Olympics gold medallist to coach him for nothing. I cited this as an outstanding example of “where there’s a will, there’s a way”.
Well the Paralympics is a world class demonstration of “where there’s a will, there’s a way”. I think we have all been completely gobsmacked by what we have seen. Swimmers with no arms racing through the water like torpedoes were just one example of events that had me open mouthed in both astonishment and admiration for the athletes involved. It had not even occurred to me that it would be possible to swim without arms, never mind put in the performance these fantastic people achieve.
Apart from the massive determination and commitment required what has also impressed me is the level of innovation in thinking, process and application of technology. It really does demonstrate that there is no problem that cannot be solved, no challenge that cannot be overcome.There are lessons these people can teach us all, starting with ...


Insurance companies

It’s that time of the year for me when car and house insurance comes up for renewal and I am once again reminded of the strange way insurance companies deal with their customers.
It starts with the run up to the renewal dates when I get cold calls from insurance companies offering to quote for my business. They seem to think I have been waiting by the phone with all the information they will need ready for them to call. When I say it is not convenient the attitude is that it’s convenient for them so what’s my problem.
Then I received the renewal quote from my existing insurer which they always claim is lower than last year’s when usually it is not. This prompts me to get some other quotes and I found one that was over 40% lower. However when I proceeded to attempt to take this insurer up on the offer I was offered a host of extras that would have more than doubled the premium. I had to opt out of each of them to avoid paying for them.
I decided I did not want to do business with a company that played these sorts of games with its customers. I contacted my existing insurer and told them I had a much more competitive quote and they immediately dropped their price to a £1 under the competition’s quote, a reduction of more than 40%!
They can clearly afford to do this so why quote such a ridiculously high premium in the first place? I can only think that the strategy is to quote a high premium knowing that many existing customers will just accept it and unknowingly pay over the odds. I have the same experience every year. Everyone I talk to about this has the same experience and cannot understand why insurance companies all seem to treat their customers with such contempt. This has to be an expensive and frankly daft way of doing business, but they nearly all do it. They all think the same and they all behave the same and the only performance criteria they have is what other insurance companies are doing.
A disabled person cannot copy what able bodied people do to achieve the things they want in life. What the Paralympians have demonstrated for me is that determination and commitment coupled with innovative, “different” thinking will find a way that works. Is there an insurance company out there who is brave enough to think differently and start treating its customers fairly and honestly? If there is then they are likely to put in the level of business performance equivalent to that being achieved by the Paralympians.Another area we need some different thinking on is …


Employment for young people

We all know that there is a problem with youth unemployment both for graduates and non-graduates. However it should be no surprise that in a low growth or no growth economy the conventional work hard at school/college/university, get your qualifications approach is not working the way it used to for young people. Overall their employment prospects have been hit hardest by the recession.
One of the biggest obstacles is lack of practical experience which almost by definition is what most young people coming on to the jobs market will suffer from. However I was reading last week about a national initiative called Entrepreneur First. Basically it means instead of looking for a job in the conventional way, why not try starting your own business first. The programme provides support and advice as well as inspiration from successful entrepreneurs to help plug the experience gap.
Personally I think more young people should be encouraged and supported to start their own business and bypass the conventional jobs market. This is where lack of experience can be turned to advantage. You don’t know what can’t be done, whereas those of us with loads of experience know all there is to know about what can’t be done.
As with the Paralympians doing things the conventional way may not work for many of our young people struggling to find jobs in the current climate. Creating their own job by starting their own business is different but it could work for many of them.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.