Tuesday, 26 May 2015

KEEP MANAGING


George Osborne is back as Chancellor.  Pity him, says James Meadway, neweconomics.org/blog. He has inherited a mess from the last government.  Here are five of his major problems. 1. Spending cuts will not work.  He had to slacken harsh austerity as the economy slumped.  So, he missed the targets on reduction of deficit. Things have not changed much.  2. The easy reductions in expenditure have been made; for example, capital expenditure on buildings and some benefits. There will now be difficulties in avoiding politically damaging cuts. 3. Household debt is rising again.  Maybe a crisis looms? 4. We are less productive. Since 2002, productivity of labour has slumped.  There is little scope for raising pay. 5. The current account deficit – the gap between what we earn from the rest of the world and imports – is nearly 6% of GDP.  If interest rates in America go up and/or credit in the PR China collapses, then there would be reductions in exports accompanied by trouble.

A different place.  It’s easy to forget the changes between 1950-51 and 2010-14.  The figures were started by David Butler, the psephologist. Remember him? He appeared on television and radio during the results of every general election.

This information is important to marketers.


1950-51
Total UK population
 51 million
2010-14
Total UK population
 64 million
Top rate of income tax
90%
45%
Women in the workforce
31%
65%
Life expectancy
67
80
Population over 65
11%
19%
Non-white population
0.4%
16%
17s – 19s entering higher education
6%
47%
At school after leaving age
31%
76%
Airline journeys
2 million
160 million
Owner-occupied households
29%
69%
Car-owning households
12%
77%
Telephone-owning households
12%
99%
Computer-owning households
Nil
76%
Television households
1%
99%
Armed forces regulars
688,000
174,000
Self-described working class
47%
31%
Mining and heavy industry jobs
39%
10%
Unemployed
1.5%
8.1%
Criminal convictions (England and Wales)
17,100
352,000
Prison population
20,000
83,000
Major party members (combined)
4 million
476,000

Do as we say, not as we do.  It is crucial that politicians and other public officials do not commit acts of corruption or behave unethically.  But it is just as essential they are not seen as unscrupulous and immoral. With the recent suspension of Malcolm Rifkind (Conservative) and Jack Straw (Labour) from their political parties for allegedly offering influence for money, questions are being asked again about whether members of parliament should be allowed to sell their services to individuals or groups. Simultaneously, the UK presses other countries to stamp out corruption of all kinds. Our government has a long history of trying to prevent unethical activities by people in public office.  However, the laws passed to prevent them are not enforced effectively. There is nothing wrong in principle with trying to influence politics and using money to do it. Practitioners include single-issue lobby groups, campaigners of all kinds, trade associations, non-governmental groups and trades unions. They spend their funds on compiling briefings and other materials to persuade decision-makers who can make or reject changes which affect them.  Problems arise when the relationship becomes a direct transaction.

The British public has, for more than 10 years, been urged by politicians and public officials to pay their taxes, work harder, take responsibility for their children, respect the environment and support the government’s military actions overseas. There seems to be questionable connections behind these moral advocacies. This country needs to demonstrate it insists upon good governance at home. Jon Moran, University of Leicester, has done valuable research on this topic.

Paying the price.  John Ruskin (1819-1900), gives a warning. ‘It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.  The common law of business balance prohibits paying a little and getting a lot – it can’t be done.  If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.’

Experience tells. ‘Live by the sword, die by the sword.  I just didn’t realise there’d be so many swords.’ Rt Hon Nick Clegg MP, deputy prime minister of UK, 2010-2015.

Predictions. ‘Nothing is more fickle than people in a crowd, nothing harder to discover than how men intend to vote, nothing trickier than the whole way in which elections work.’  Marcus Tillius Cicero (106-43BC), Roman statesman and orator.

Monday, 11 May 2015

SITUATIONS WILL SHIFT



A good contest to lose?  Richard Batley of Lombard Research suggested that last week’s election is ‘the harbinger of a new era of persistent political fragility’.  Britain could go from being a comparatively stable economy, with an attractive tax regime ‘to a much more uncertain home for anyone’s money’.  Look at the figures.  The figure on gross domestic product showed the rate of growth halved to 0.3% in the first quarter.  The Observer suggested that ‘the upturn of which the Tories are so proud may already be starting to fade’. There are several other warning signs.  Higher productivity is essential for economic growth, but the record since 2008 is poor.  The Office of National Statistics describes ‘a prolonged period of essentially flat productivity unprecedented in the post-war era’.  The UK’s continued reliance for economic growth on consumers’ borrowing and the housing market might be dangerous.  The weakness of sectors unconnected with personal expenditure is a third concern.  ‘Confidence is certainly higher than five years ago, but aside from notable successes such as the car industry, there is little sign of a radical shift in the economy.’ Nonetheless, Roger Bootle said in The Daily Telegraph, ‘Macro-economic data are notoriously unreliable, and the GDP figures are frequently revised, usually upwards.  .... my money is on a rebound’.  Managers would be wise to be cautious.

Go where angels fear to tread.  Not so long ago, if you managed a business you had a clear notion of what industry you were in, which trade association represented your interests, and those customers you counted as yours.  There was talk of SICs – Standard Industrial Classifications.  This has all come unstuck because of rapid technological change.  The former industrial boundaries have become irrelevant.  Kamil Munir, Judge Business School (Cambridge) pointed to this prospect several years ago. The concept of ‘industry’ is obsolete.  All of this has huge implications for managers.  First, anyone who still thinks in terms of ‘industry’ and traditional ‘expertise’ is doomed.  It is an illusion.  The successful ones will think only about which business model they can establish.  Also, business schools must stop telling students about ‘manufacturing’, ‘banking’ or ‘high tech’. The new competitive world has no limits.  Everybody has to learn about sectors and capabilities other than her/his own. We have to handle four interacting patterns: a digital economy; an eroding middle-class and democracy; one world; and, a requirement for new narratives. Technological change is so fast it has outstripped political and legal frameworks.  The social glues – religion, nation and class – are losing their power.

‘Anglicisation’ of politics.  The Conservative and Labour parties have realised there is need for catch-up with devolution taking place in Northern Ireland, Scotland and Wales.  England has solidified as a distinct national and political community.  There is more emphasis now on England in political outlooks and policies.

Leadership.  Styles of leadership are changing as responses to globalisation, technology, digitisation and demographics of ageing employees.  People are working longer, so there will be more generations in a business or institution.  The oldest person will not be the most senior. Seasoned managers will have to learn the importance of opinions and expectations of younger and less experienced people.  They are the future.

Words.  ‘To exploit and govern mean the same thing ....  Exploitation and government are two inseparable expressions of what is called politics.’  Mikhail Bakunin (1814-76).  Russian anarchist and writer.

Get ahead.  ‘The only limit of our realisation of tomorrow will be our doubts of today.’  Franklin D Roosevelt (1812 - 1945).  Former president of America.

Monday, 27 April 2015

WHAT WILL THEY TALK ABOUT ON TV AFTER THURSDAY 7 MAY?



The auction.  Right now we are in election campaigns.  ‘What will you promise to give me?’   ‘OK, but I’ll wait for another offer.’  Merryn Somerset Webb reminds us that the Coalition came into office promising to resolve this country’s dreadful financial problems.  Its ministers suggest they have rescued our economy. Look at the numbers and you will see this is a doubtful claim.  The underlying budget deficit is still 6% of GDP – an overspend of £90bn a year.  And the total public debt is 80% of GDP, up from just over 60% in 2009.  Another vital figure is that our government collects 36% of GDP in taxation.  Since the 60s, this component has been between 34% and 36%.  However high or low tax rates go, that is how much is raised by the Coalition.  HM Treasury knows that if citizens are taxed too much, they stop paying, one way or other.  But the state spends around 45% of GDP.  We are told the good life is imminent, but we know the funds are not available to pay for it.  What we are hearing from politicians is delusional.

Growth and productivity – silence.  Words on the economy are receiving prominence in the UK’s general election.  John Van Reenen and Anna Valero (both of the London School of Economics) point out that the main parties spend most of their time arguing over the speed and extent of cuts and which one would be more ‘fiscally responsible’. We do not hear much about growth.  Productivity collapsed in 2008 and has failed to recover.  Output per hour is 15% below what we would have achieved based upon pre-crisis trends and is about 30% below America, France and Germany.  Of course, several policies affect growth; for example, action on businesses, promotion of exports, infrastructure, skills and taxation.  But an emphasis missing is an overarching and longer-term framework. Productivity is probably the biggest challenge facing the UK’s economy.  In summary, the current problem is that each worker (from top to bottom) is not as efficient as s/he should be (or has been in the past).  This is not a simple issue.  The LSE Growth Commission shows that Britain has a chronic problem of low productivity rooted in the failure to make investments. Such an initial statement might start research and discussion.

Surprise, surprise?  The latest World Happiness Report has just been published by Sustainable Development Solutions Network.  The first one was launched in 2012 by Ban Ki-moon, secretary general of the United Nations.  It uses a questionnaire designed by Gallup.  The ten happiest countries are: Switzerland, Iceland, Denmark, Norway, Canada, Finland, Netherlands, Sweden, New Zealand and Australia.  The survey covered 158 countries.  America is in 15th place, with the UK at number 16.  Warm climates do not seem to assure a spot at the top.  With the exception of war-torn Afghanistan and Syria, the ten unhappiest nations are in Saharan or sub-Saharan Africa. Poverty and violence is likely to be a major factor.  Many of our locals’ holiday destinations are quite low in the list.

Managers are at it again.  Satisfying their need for magic is in good shape. Listen to the buzzwords in conversations, speeches and chats over coffee. Observe the focus on holistic approaches to help us envision the ownership of proposals.  In this way, their impact is cascaded in ways which empower the workforce. All this and more in the world of quick fixes, but keep your eye on the margins.

Eye on the ball.  ‘At some time in the life-cycle of virtually every organisation, its ability to succeed in spite of itself runs out.’  Richard H Brien, American educator in Educational Record.

Making decisions.  ‘Facts do not cease to exist because they are ignored.’  Aldous Huxley; (1894 - 1963).  English novelist.

Monday, 13 April 2015

ONE OR TWO REFLECTIONS FOR MANAGERS



Why do we listen? Economists had a collective failure to predict the financial crisis and unwisely ignored John Maynard Keyne’s advice to make sure they were thought of as humble, competent people. Nonetheless, they are an influential group. They are retained as expensive consultants, advise politicians, and write articles for respected publications. As the subject has become more mathematical, their confidence has grown.  The Economist magazine has pointed to the ‘odd thing’ that we believe in economists almost as much as they believe in themselves. Journalists and politicians like strong argument and clear answers. Most academics are diffident. An economist talks with all the confidence of a witch doctor.

Inflation.  0% has been declared as good news by the Government.  In truth, it is a sign of failure. The target is 2% and for good reason.  This objective allows room for rising prices which help to stimulate demand.  If periods at below the target become prolonged deflation, then purchase of goods and services could fall as a result of a combination of delayed expenditure by consumers and a rise in the real value of debt.

Unaltered perception.  Hilaire Beloc and Cecil Chesterton wrote in their 1911 book, The Party System: ‘The House of Commons has ceased to be an instrument of Government.  Its ancient functions have been killed under the prolonged and continuous actions of hypocrisy.  It affords today ... no more than an opportunity for highly lucrative careers.  That career is founded upon the bamboozlement of the public (whose faculty for being duped these professionals hope to prey upon indefinitely), with the complicity of nobodies content to write MP after their name as a sufficient reward for supporting the Party System; to whom, of course, must be added the lawyers and businessmen for whom Parliament offers definite financial rewards, and that in proportion to their indifference to their representative duties.’

Wealth and inequality. Thomas Picketty is the author of the best-selling book on economics, ‘Capital in the Twenty-First Century’. He is not the first person to suggest that wealth assures increased assets.  This tends to bring unsustainable inequality. Nonetheless, when his conclusions were published last year, they received a warm reception. Earlier, Barack Obama said economic inequality is the ‘defining challenge of our time’. Moreover, the issue was seen as a major threat for the world at the recent World Economic Forum in Davos. Financial inequality has been regarded as a social topic for many years. However, there is evidence now that its effect on economic growth and employees’ well-being is quickly adding this subject to agendas for managers. It’s essential this awareness does not become a resentment of wealth.

Tribal politics going, going ...  Loyalty to a particular political party has decreased in the UK.  The major ones have converged ideologically in recent times. Scandals seem to be a constant feature. These factors make electors feel there are difficulties in finding distinctions between the offerings and understanding why their votes matter. The Conservative, Labour and Liberal Democrats have lost large numbers of members. Yet, there was a remarkably high (84.6%) turnout in the recent referendum in Scotland.  So, it is reasonable to conclude that voters can be motivated into participation when there are clear electoral choices and important consequences. But it might be too late.  There must come a time when decay of political parties will be followed by dilapidation of the structure of power they inhabit and preserve. Change is on its way. This can revive, as well as undermine.  The main opponents will be present politicians of all shapes, colours and sizes.  They will protect their over-populated chambers.

Dangerous complacency.  Those who travel the country lanes of industry and commerce will have noted a whiff of complacency. Just the odd comment : ‘our economy performs relatively well in periods of slow growth elsewhere’ or ‘we are responding well by reducing costs’ or ‘we have been so bad that we do not have to do very well to do better’.

Doers.  ‘What we think, or what we believe is, in the end, of little consequence.  The only consequence is what we do.’  John Ruskin (1818 – 1900).

And.  ‘So much of what we call management consists of making it difficult for people to work.’  Peter Drucker;  American academic/economist, born in Austria.