That was week ending 22nd June 2012

Carr crash

The story that attracted a great deal of the attention last week was Jimmy Carr’s tax avoidance scheme. Left to itself this story would not have had made so much of a stir.  However the Prime Minister chose to single out Carr, calling his perfectly legal tax avoidance scheme “morally wrong”.

Trust me - I'm in business

I don’t intend to add anything more to the debate on this but it connected in my mind to the results from an Ipsos Mori poll published last week. This indicated that fewer than one in twenty British people think “business” is a reason to be proud of the country. The connection is that a number of prominent UK businesses (i.e. Vodaphone) and business people (i.e. Lord Ashcroft, Philip Green etc.) don’t appear to pay the taxes the rest of us think they should be paying.

At a time when UK government and business are banging on about the need to “rebalance” our economy from public to private sector it is of some concern that most of us don’t appear to think much of  business or business people. The Ipsos Mori poll is just the latest indication of a widespread mistrust of business and of business people in general.

Now you might think a general mistrust of business is hardly surprising given the effect of the credit crunch and subsequent recession on people’s lives. However the Edelman Trust Barometer which assesses levels of trust in business across the world shows that the British public are becoming more distrustful of business. This is in contrast to the global trend which shows trust in business rising overall.

Ultimately business will pay a price if customers, employees and the wider population perceive business as some form of parasite rather than as a valued member of the society in which it operates. In particular politicians become tempted or even compelled by public pressure to intervene. This invariably results in higher costs, disruption and unintended consequences. For example the government announced its proposals last week to separate investment banking and retail banking. This will make life more difficult and costly for the banking sector but taxpayers just cannot trust the banks not to screw up again.

Trust matters

"Trust” does matter and what's more it works. The Edelman research shows that people are far more likely to believe good news about a company they trust and far more likely to disbelieve good news about a company they distrust. The implications for the long term sustainability and success of any enterprise are both obvious and significant and last week saw a particularly outstanding example of this.

In 2007 Stefano Pessina took Alliance Boots private with a £11.1bn leveraged buyout, the largest ever in Europe. The deal was done at the top of the market and could easily have to come to grief as many others have in the subsequent financial crisis and recession. Boots was and is one of the most trusted brands in UK retail. Pessina did not muck about with what he could clearly see was working and in particular made sure that any changes he did make enhanced the trust factor. Profits have shot up by 88% since the buyout. Last week they announced an agreement to sell a 45% stake to Walgreens the largest pharmacy chain in the US, representing a 2.7 times return for the investors in the buyout and huge new opportunities for the company.

Building Trust

So how do you build, maintain and enhance trust to drive levels of business performance and success to these standards? Based on experience and research I believe it’s about always “doing the right thing” by shareholders, employees, customers, suppliers and society. No business, including Alliance Boots is perfect in every respect on this but those business that stand out as highly trusted do seem to constantly strive to do “the right thing”. When my wife was in Boots recently she had forgotten to bring a money off voucher with her, but without hesitation the assistant gave her the discount anyway. A small but significant sign of how this business tries to think and behave.

However there is one other factor that in my view is crucial. You must do the right thing but you must do it ”really well”. Attempting to do the right thing but not doing it well invariably results in compromise, short cuts, short term thinking and before you know it you are not doing any of the right things. What this means is that doing the right thing may be simple as a concept but it definitely is not easy to do.

Carr repair

Back to Jimmy Carr, did he do the “right thing” by apologising and cancelling his tax avoidance arrangements? Well he was certainly at risk of losing the “trust” of his fans and with a high risk of damage to his reputation and his livelihood.  He also did the apologising rather well at his first live show after the story broke and it looks like he has pulled things back for himself.

And finally

I had a small chuckle to myself about the downgrades for some UK banks announced by the “Big Three” credit rating agencies last week. RBS criticised the decision by Moodys to downgrade its credit rating, saying the agency was “backward looking”. I am sure the response from many small business owners would be “now you know what it feels like”! Oh yes and then came the IT failure.


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.

That was week ending 15th June 2012

Looking back on the week before this week there is one question that seems to run through many of the news stories and that is “what is going to happen”?

Eurozone debt crisis

We would all like to know what is going to happen with this one. Or rather we all want to know what someone (anyone) is going to do about it.  So let’s have a go at working out what is going on.
First we have Ireland, Portugal and Greece who receive bailouts of various sizes and implemented a range of austerity measures to put their public finances in order. Then Greece says it likes the money but not the austerity so holds a series of inconclusive elections in the hope this will achieve a different result. What this different result might be is not clear even to the Greeks so it’s no good asking them what is going to happen.
In the meantime the bailouts for Portugal and Ireland appeared to be working. Then suddenly they might not be working and then again they might be. So the Irish and Portuguese are confused as well.

Spain absolutely definitely did not need a bailout but wouldn’t mind a bit of help to sort its banks out. This “bit of help” turns into a €100bn loan with no new austerity strings attached according the Spanish Prime Minister. For a very brief moment it seemed as if the Eurozone had at last actually come up with a solution for one country at least.  However all this did was to move the problem off the Spanish banks’ balance sheets and on to the Spanish government, demonstrating once again that filling a black hole with thin air leaves you with … a black hole. So the Spanish still do not know what is going to happen, even with the €100bn!
Then we have Italy who can’t even understand why they might have a problem at all and finally France. They elected a socialist government mainly to punish previous President Sarkozy for agreeing to austerity measures which were not first thought of by the French. The French belief is that there is no crisis in France and even if there was then only French solutions can be contemplated. Last week these included lowering the retirement age from 62 to 60 “in the interests of social justice” and making it much more difficult and costly for businesses to shed employees. Quite how this is part of a solution is something only the French can understand so not helpful for the rest of us.
And then we come to Germany whose Chancellor Angela Merkel has the answer which is that everyone else should become more like the Germans. What she has overlooked is that one, everyone else is starting from a different place and two, its never going to happen!
All of which means that looking to the Eurozone to provide the answer to “what is going to happen” will get us and them nowhere.

Meanwhile … back in the UK

Our government’s approach is that it is much more important to hold an inquiry into press standards and relationships with politicians than to address the needs of the economy. Indeed politicians from all sides seem to support this, as last week we even had Alex Salmond and Ed Milliband in front of Leveson.  The PM spent 5 hours there which, with all the rehearsal time he would have had to put in must have pretty much wiped his week out.

It does connect to the question “what is going to happen”?  In the case of Leveson the questions are can anyone remember what the point was of setting up this enquiry and has anyone any idea of what will happen at the end of it all, if we ever get there? Or will it just go on and on until every man, woman and child in the land has been questioned?

However in the middle of the week George Osborne (who I think has not so far appeared before the Leveson Inquiry) popped up to announce £145bn of cheap money for the banks. Wow that’s a big number, eat your heart out Espana! If George had this amount stashed away somewhere you would think he might have mentioned it before now. I mean it’s not the sort sum you would find down the back of a sofa.

Initially headlined as a boost to growth it quickly became apparent that it was actually pre-emptive action to help the UK economy deal with whatever fall out from whatever eventually happens in the Eurozone whenever that may be. Whilst this might seem a sensible and even bold step to take when it comes to the debt crisis you can think of a number, any number and it will still not be enough. However it is at least a signal from the UK government that something is going to happen and maybe soon.

So …..?

So that is all we have. Something is going to happen and it might happen soon. Nobody knows what will actually happen so it’s pointless worrying about what is going to happen until something does.

Is there anything the rest of us can do? The evidence is that there will be little or no growth in the UK or the world economy overall for the foreseeable future. What I believe we must do is to ensure we are “moving our businesses forward”, deliberately and effectively. This means defining what “moving forward” would mean for any particular business. This is not the same as the simplistic concept of business growth, or though that might well be an outcome of “moving forward”.

So have a think about what “moving your business forward” would look like for your business and why this could be the best way to cope with “what is going to happen”.

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.

That was week ending 8th June 2012

After a week off to celebrate the Queen’s diamond jubilee, which whilst a bit damp was one of the best parties anytime, anywhere we look at some of the non-jubilee stories from last week.  This week our theme is “why would anybody think that was a good idea”?

£80 million plus to save £8 million

The Royal Mint issued new 5p and 10p coins in February. They’re 0.2mm thicker than before and made of cheaper steel coated in nickel. The Treasury claimed switching to steel in the new coins would save the Royal Mint £8million a year.

However one council has already had to spend £7,200 widening the slots in 24 meters in its car parks to accommodate the new coins at a cost of £300 per machine. The estimated cost to councils and private car park operators is a massive £80million over the next two years. The bill for modifying ticketing and vending machines and the like could be similar.

So why would anybody think that was a good idea? The Royal Mint thinks its purpose is to produce and issue coins and bank notes. But what are these coins and notes used for? They are used for financial transactions. Coins are used for small financial contractions often involving some form of “slot” machines.
Because the Mint does not understand that its actual purpose is to provide the means by which citizens can make financial transactions it can come up with a money saving scheme that makes it impossible to carry out a significant proportion of those transactions. We are speculating here but we would not be surprised to discover that senior managers and civil servants at the Royal Mint and Treasury will receive significant bonuses in recognition of the “savings” they have delivered.

Spanish practices

The Eurozone crisis continues to dominate the economic and political debate with the prospect of a bailout for Spain the main focus. One of the triggers for this has been the request from the Spanish bank Bankia for £15bn of state aid.

What you may not be aware of is that Bankia was formed from the merger of seven regional lending banks and, wait for it, was floated on Spain’s stock exchange in July 2011. Now who in July 2011 would think that buying shares in a Spanish bank formed from a merger of regional lending banks was a good idea? Those that did have so far lost 70% of their investment with the rest disappearing fast.

Spain’s Attorney General has now ordered the country’s anti-corruption unit to investigate and they may or may not uncover illegal practices. However we think that the massive potential short term rewards that senior management and their advisors can earn from floatations like this push the greed factor into the driving seat. It is the only rational explanation for why investors can be persuaded to throw common sense and sound judgement out of the window.  This is not just a “Spanish practice” it goes on everywhere and it needs investigating everywhere.

Good news and “I don’t believe it”!

The biggest story for me last week was the arrival of our fifth granddaughter Freya Marie. That was the good news. The not so good news was when Mum told us that all the mothers who like her had stayed in the maternity unit overnight had to queue up to collect their own breakfast!

Why would anybody think that was a good idea! Who on earth came up with the money saving idea of a self service breakfast for mothers who have just given birth and spent a virtually sleepless night on a maternity ward? It has to be a man and what’s more a man who is only thinking about catering and saving money and no connection with providing care for new born babies and their mothers. Given the proliferation of “efficiency savings” bonus schemes throughout the public sector we would not be at all surprised if this wasn’t a factor as well.

Harvey Wet Nicks

First prize in what was clearly becoming a “why would anybody think that was a good idea” competition goes to Harvey Nichols. They sent out a mail shot showing a woman with her clothes soaked around the groin next to the slogan “The Harvey Nichols sale … Try to contain your excitement”.

Now why a top fashion store would think that associating human waste with their clothing ranges would boost sales is beyond me.  The individual golden prat award goes to their spokesperson who explained that the images were “a visual representation of a well-known phrase” which depicted the expression in “playful, inoffensive manner, which was in keeping with the tongue-in-cheek spirit with which we intended our campaign to be taken”. Where do these people spend their time?  Was there a bonus in it somewhere? It wouldn’t surprise me!

Unite … can’t be right?

The Unite union is threatening to call a strike of London Transport workers if employers do not agree to pay a bonus of up to £500 to their employees who work during the Olympics. Whilst I can see why Unite would think “this was a good idea”, at first sight the claim does seem unreasonable. After all if you are driving a bus you are driving a bus. Apart from more passengers than normal what’s different about driving it during the Olympics?
However the spraying around of bonuses for almost anyone connected with the Olympics has obviously caught Unite's attention, starting with the Olympic Delivery Agency. Here the directors will be paid a bonus "if they deliver the Olympic facilities in time for the Olympic Games in 2012". Quite why ODA directors need a bonus to remind them that the Olympic facilities are needed this summer and not February 2013 is a mystery. However the principle is in line with driving a bus during the Olympics so you can see where Unite got the idea from.


So thought for last week is: "If you are thinking of giving someone a bonus to encourage them to do what you want them to do, don't be surprised if that's exactly what they go and do"!

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.