Monday, 19 January 2015


The medium is still the message.  The product is not everything.  What is conveyed by telephone, emails, letters, websites, sales people, a receptionist’s greeting?  The grumpy signals transmitted by contacts through which a buyer does business speak volumes.

Change or get changed. Back in the ‘80s, Japanese companies working closely with their government’s bureaucrats seemed to make unstoppable advances.  There were books, articles, pamphlets and courses telling us what to do.  Since the mid-90s, there has been non-stop decline.  The problem was in the links between manufacturers, the financial sector and government, which were regarded as strengths.  The stock market was riven with corruption, banks made imprudent loans – they were too close to say no.  The consequential difficulties were compounded by built-in weaknesses:  inflexible labour markets and a structure of power which left little room for entrepreneurs.  However, shintoist capitalism is getting its act together and introducing some openness.  Note the lessons.

..... or go bust.  Downsizing is a dreadful word and a troubling symbol of continuous change and relentless competition.  It emphasises a future that is not only difficult to predict but essentially unknowable.  The primary cause of downsizing is acknowledged rarely:  companies have more employees than they need or can afford to pay.  A vast majority of managers are not callous scrooges shouting ‘good riddance’ as they shove loyal workers through the door.  Generally, they are responding to a reality which demands they become more productive.

It’s all a bit odd.  Small businesses are told daily they play the primary part in rebuilding UK’s economy and assuring growth.  Leaders of the major political parties confirm this certainty and the government’s ministers devise plans to retain their contribution and enthusiasm.  Our Establishment honours entrepreneurs. They receive a significant proportion of awards and titles.  BUT, formal behaviour shows we do not trust them.  For example, there is an almost universal objection to the idea of privatising any of the National Health Service.  Maybe, we ought to consider actions of the admired Scandinavians?  The approach entails a pragmatic judgement on public services.  So long as they work, it does not matter who provides them.

Sounds familiar. ‘Insanity : doing the same thing over and over again and expecting different results.’ Albert Einstein.

And. ‘How many crimes committed merely because their authors could not endure being wrong!.’ Albert Camus (1913-60), French philosopher in ‘The Fall’.

Tuesday, 6 January 2015

INTO 2015

Issues for managers include:
  • handling disillusionment. Expect an extension of austerity after the general election in May 
  • dealing with politics going local as economics move more global 
  • balancing the impact of falling costs. There are losers and prospects of deflation in some countries 
  • responding to the inevitable increases in taxation of assets/wealth. They are more difficult to hide 
  • alleged decline in social mobility. This topic will attract political intervention 
  • discovery of unusual friends for the UK in Eastern Europe and the Middle East 
  • the ‘internet’ of things. Cisco estimates that 25 billion devices will be connected by the end of this year. Up from 12.5 billion in 2010 
  • the end of cash. UK Payments Council expects 2015 will be the year when payments by cash will become fewer than half of transactions.
Parliament of pain in May. None of the main political parties denies the certainty of sustained austerity. All tell us about the ‘tough choices’ ahead. Indeed, Chancellor George Osborne in his Autumn Statement sought to convert economic failure into political success. He asserted that only the Conservatives can be trusted to complete removal of the deficit. Labour has popped up with the slogan, ‘Big reform, not big spending.’ The Liberal Democrats split the difference by pledging to reduce the deficit faster than the opposition, but in a fairer way than the Tories. George Eaton has pointed out that, ‘Here the truth telling largely ends.’ No party is prepared to itemise the next dose of financial severity. There are short populist statements. Labour and the Conservatives respectively target the wealthy and welfare. But seeking to raise more from these sources is the politics of easy choices, not hard ones. The Institute for Fiscal Studies (IFS) suggests that £12 billion of additional consolidation will be needed simply to maintain cuts in departmental spending at their present delayed level. Senior politicians have not come close to revealing plans for bridging this gap. Is there an unstated conspiracy of silence? The reality of Britain’s fiscal situation is being hidden. 

The business of government has been modified. Managing an economy is no longer about ownership/control, but to assure the conditions for flourishing businesses. Companies rely on the absence of despotism, not on democracy. Oligarchy in one form or another has become a fashionable answer. Real opposition has withered on the vine throughout Europe. There are some signs of disenchantment. We can expect a continuing fall in the quality of public debate. Consensus is all the rage. 

Culture. We talk a lot about culture and blame it for many managerial ills and some successes. But nobody tells us the meaning of this word or situation. So here goes. Broadly speaking culture is the adhesive that binds people to their employer and guides their actions when hard and fast rules are ambiguous, insufficient or absent. When it does not work, the company/institution has got a problem. Opinions and behaviour get ingrained in every group/level – from structure of pay, methods of promotion and how people are recognised. Employees are likely to do what they think their managers approve. You can declare values and encourage particular behaviour, but if there is not a constant link between the two, failure will come your way. You are not walking the walk. Success is not immediate. Consistency with a desirable culture can be uncomfortable. The result of shortcomings is rarely criminality or malfeasance. Incompetence and confusion can be just as damaging. 

Good idea. ‘First learn the meaning of what you say, then speak.’ Epictetus (50 – 120 AD), Greek philosopher. 

That’s experience. 'Management by objectives works if you know the objectives. Ninety per cent of the time you don’t.' Peter Drucker, American commentator on management.

Wednesday, 10 December 2014


Expenditure? On what? Those of us who pay income tax have been told we will receive a letter from the government. It will reveal where the money goes. 25% is spent on ‘welfare’, but the definition includes pensions for the public sector and benefits to people in work. To most of us, ‘welfare’ means payments made to those of working age who are not in work. Critics argue for closer clarifications. For example, how much of our personal taxation is passed to older people (17%); to the unemployed and those on low incomes (6%); to the sick and disabled (5%); and to families with children (5%). However, this information is only part of the story. We have to add national insurance contributions, VAT, fuel and alcohol duty and . . . capital gains tax. That’s before we get to council tax and the like.

Maybe Canada is an exemplar? The government decided in 1994 to have a ‘programme review’. Every activity was examined to decide if it served the public interest. ‘No’ brought removal. ‘Yes’ moved on to consider whether it was necessary for the state to provide the service or if it should be transferred to the private or voluntary sector. Within three years, the deficit had fallen from 9% of GDP to zero. By 1999, public debt was down by a third and expenditure had fallen by 20%. The UK’s politicians have never told us what they think is the job of government and, more importantly, what it is not for.

What is normal? The new normal as we emerge from the financial crisis is slow growth and continuing low interest rates. For all Britain’s supposed austerity, compared to continental Europe we are still trying to borrow and spend our way out of trouble. Our budget deficit remains the biggest in the European Union, alongside Spain. We may have avoided the depression-like conditions gripping much of the eurozone by failing to practise what we preach. This is limited comfort.  If the slide continues in the eurozone, its problems will eventually hit us.

Watch your step at the top. There is a law of marketing fallibility. This says that when a business pauses to enjoy the view from its hilltop is just the moment it will slide down the other side. Winners are likely to be those who renew themselves constantly by listening to, learning from and acting on what the weakest signals in their market places are telling them. Businesses are more open to these indicators when they are stretching to deliver tough targets, even for survival. They know they have to respond quickly. But once they make it, all too often their judgement begins to suffer. Success can be a poor school. It tends to filter challenges and discourages experiments. Too few firms understand why they have flourished and what they must do to sustain that trading position.

Is the system for charities working? David Craig’s book, The Great Charity Scandal, opens a can of worms. He emphasises that this is not ‘an attack on charity itself.’ It is a criticism of the UK’s systems. Nearly 200,000 charities employ more than a million people and spend £80 billion a year. Craig accuses them of duplication and inefficiency. For example, there are four major charities for cancer – and some smaller ones. They all prepare their own accounts and have their own expensive administrations. Why aren’t they forced to merge? Is there a need for at least four charities devoted to red squirrels? Second, often little of what they raise goes into actual charitable expenditure. Some pay out more on pension schemes than on their declared objectives. Third, what we think of as charitable work is not always the same as many charities consider to be proper pursuits. For example, lots of them spend substantial sums on political campaigns. None of this would matter much if the charities were funded by the post-tax income of private individuals. But that is not the situation. Craig estimates that 27,000 British charities depend upon government for 75% of their income. All rely on the taxpayer one way or another. We and the European Union give them direct subsidies. They receive our tax relief, gift aid and lower business rates on properties they occupy. HM Treasury must reallocate around £1 billion a year to our chosen charities. There is minimal control. They get our money and can do more or less as they like.

Time. ‘The supply of time is totally inelastic. Time is totally perishable and cannot be stored. Time is totally irreplaceable . . . there is no substitute for time.’ Peter Drucker in The Effective Manager. 1909 – 2005.

Everything. ‘All government – indeed, every human benefit and enjoyment, every virtue and every prudent act – is founded on compromise and barter.’ Edmund Burke (1729 – 97). British statesman, orator and writer.

Monday, 24 November 2014


Power to the English regions?  Politicians of all shapes and sizes have embarked upon a long, complicated and dangerous journey.  Britain is still one of the most centralised states in the world and has been run by a Whitehall-based civil service since the mid-1800s – and still is.  Bear in mind that talking about devolution is not the same as doing it.  So far, caution has reigned.  To obtain the full benefits of decentralisation, parliamentary politicians must have more faith in local authorities.  Central government has to take substantial action if electors are to notice changes.  Sir Richard Leese, leader of Manchester City Council has welcomed the Chancellor’s proposal but says he wants more; the transfer of all £22 billion of government expenditure in the area covered by the Greater Manchester Combined Authority.  A shift of this scale would challenge all the controlling activities and reflexes of Westminster and Whitehall.  There will be mistakes, bumps and misuses along the road which will test commitments to the plans and expectations.  Nonetheless, outlines of additional proposals for Leeds, Liverpool and Sheffield, with more in the queue, might be astute moves by government.  We know austerity will continue after next year’s general election. Only half of planned cuts in expenditure have been implemented by the Cabinet and public borrowing continues to increase.  Handing budgets to municipalities spreads the blame for cuts and helps to make sure that spending reflects local needs.  The dual rise of UK Independence Party (UKIP) and the Scottish nationalists emphasises the decline of faith in Westminster.

Pay of executives and results.  The alleged misbehaviour of bankers has made sure there has been analysis of their activities and performances.  The European Consumer Staples team at RBC Capital Markets found, ‘a minimal correlation between remuneration and long-term share price performance’. Another study said, ‘ ... attempts to link pay of Britain’s leading company executives to their company’s performance are not working’.  The consensus of research into the subject is clear and is receiving attention from Management Today and Banker’s Umbrella.  Executive pay has little to do with a business’s results. The figures are startling.  Of the companies in the Fortune 500 (USA) in 1955, only 13% remain.  The trend in increased pay for executives has not brought corporate longevity, business growth or increased shareholder value. Despite all the evidence, there remains an almost common belief that corporate executives are leaders who create and build value.  Is this a myth?  Is it possible executives are administrators, not leaders?  The real job is to sustain the business and control risk.  These are important duties but the incumbents are not risk-takers.  On average, they are paid eighty-four times the salary of an average worker.  There is an acceptance that when you take risks and they pay-off you deserve the related and substantial rewards.  However, the real situation is likely to create a lengthy sense of unfairness.

Jobs will disappear.  CBRE, a major consultancy firm and China-based Genesis, say their research shows that 50% of today’s occupations will not exist by 2025. This includes processing of all kinds, work relating to customers and middle management.  The report titled ‘Fast Forward 2030: The Future of Work and the Workplace’ suggests that advances in technology and artificial intelligence will help to transform organisations and the jobs people do.  Peter Andrew of CBRE Asia Pacific concludes there will be ‘new opportunities for companies to create value and enhance employees’ performance through innovative workplace strategies and designs.  Many of these opportunities have already arrived and by seizing them early, smart employers can gain a competitive advantage’.  The findings are reinforced by research from Oxford University and Deloitte.  It indicates that 35% of existing jobs in the UK – including office and administrative support; sales and services;  transportation and construction – are at risk of being replaced by robotics.  The ability to attract and retain top talent will be the commercial edge in 2030.  Employees now seek purpose, meaning and authentic values in their tasks.

Wisdom.  ‘Tact is the ability to tell someone to go to hell in such a way that s/he looks forward to the trip.’ Winston Churchill, 1874-1965.

Me too.  ‘I read the newspaper avidly.  It is my one form of continuous fiction.’  Aneurin Bevan, 1877-1960.  British  statesman.  MP from 1929.  Minister of Health, 1945-51.

Wednesday, 12 November 2014


Self-preservation?  Inequality of wealth and income has become a popular subject for bankers and economists.  Mark Carney, governor of the Bank of England, said earlier this year, ‘a relative equality of outcomes’ is necessary for capitalism to function properly.  Janet Yellen, chair of America’s Federal Reserve, told an influential audience, ‘The extent and continuing increase in inequality in the United States greatly concern me’.  The chief executive of Goldman Sachs said on TV, ‘If you grow the pie but too few people enjoy the benefits of it ... you’ll have an unstable society’.  What’s going on?  It is likely they have realised that capitalism does not work in a modern democracy if prospective consumers feel unable to spend on goods and services.

Ukippers.  The elite of the UK’s two major political parties has started to accept reluctantly that the UK Independence Party is a force to be reckoned with.  The economic establishment will have to do the same thing.  Matthew Lynn has pointed out that investors might have to adjust their portfolios.  Regardless of the number of constituencies Ukip wins at the general election, the other political parties are responding to its agenda.  The impact on our economy is likely to be substantial.  Both the Conservative and Labour parties have started to adjust their pledges on immigration and membership of the European Union.  These are pivotal issues for businesses.

The best advice. gives advice gathered from experience by Morgan Housel.

(1)  Changing your mind is one of the most difficult things to do.  It is far easier to fool yourself into believing a falsehood; (2) strong political beliefs limit your ability to make rational decisions more than almost anything else; (3) debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax-deductible; (4) finance is simple, but it’s made to look complicated to justify fees; (5) ‘unsustainable’ can last years, even decades; (6) ‘do nothing’ is the best advice for almost everyone almost all the time.

New plan, structure, idea or product.

(a) Focus is vital.  Do not try to do too many things at once.  You might lose time and money; (b) realise when you need to give up on an idea or change direction and make the move. Do not delay; (c) be cautious about being a pioneer.  You not only have to market/sell that new product but the overall concept as well; (d) never fall in love with the technology or the final product.  It will skew your focus; (e) launching a new product or business will always cost more than you think.  When you do your business plan, add 10% to 20% for contingency.  Make sure you set aside an even larger budget for marketing.

Motivation.  ‘I don’t want any yes-men around me.  I want everyone to tell me the truth, even if it costs them their jobs.’  Sam Goldwyn (1879-1974),  film maker.

Cold light.  ‘Your assumptions are your windows on the world.  Scrub them off every once in a while, or the light won’t come in.’  Isaac Asimov (1920-92), author and biochemist.