Monday, 25 April 2016


Free markets. Economic orthodoxy has been telling us for forty years that market forces would clear the dead wood from manufacturing; financial deregulation would make sure funding is available to young, thrusting start-ups; and free trade would keep British industry competitive. Industrial policy would create an open door to inward investment and low corporate taxes. The political decision-makers have not been successful. Larry Elliott has described how they have sat back and watched as the economy has stumbled from one housing/consumer-driven boom/bust to another. The UK has been here before, but the figures are more frightening. Rebalancing the economy and solving the country’s deep-seated problems is a bigger issue than simply devaluing sterling. There is no shortage of ideas and an important, but ignored link between them. Britain needs a considered and determined industrial strategy. The starting point has to be an awareness that the current model – low investment and competing on cost rather than quality – has failed and will continue to fail.

Costs of living wage.  Few people would say that the living wage is a bad idea. It has been clear for some time that our economy has become too reliant on cheapish labour. Matthew Lynn has emphasised the connection between the system of tax credits and the labour market. It meant tax payers were subsidising employment on a huge scale. Things will change. We can expect more automation.  As the cost of labour rises, use of information technology will become more cost effective. Immigration is likely to fall. Low-skill jobs was one key reason for many people coming to the UK, especially those from eastern Europe. The wages were not generous, but better than at home. Productivity will start moving upwards at last. The increases in pay will stimulate incentives to invest in capital. Of course, those with the least valuable skills will be unable to get a job. The outcome might be higher productivity, but additional unemployment. The trade deficit is high at above 5% of gross domestic product. It will increase. Some manufacturing will not be viable with higher wages. This kind of work will move to other countries. We will import these products, making the deficit worse. There will be closures, especially of retailers, which have the highest concentration of poorly paid staff.

Engagement. Giving information matters. Planned and consistent communication puts managers in the driving seat. Regular dialogue with shareholders, employees, customers and suppliers creates an atmosphere of understanding and builds trust. It enables the inspiration of confidence in the business and integrity of its management. Such an approach is essential in setting expectations and guidance for all stakeholders relating to values.

Value for money? There are strong suggestions that our Government is convinced that some top universities are not worth the £9,000 in annual fees most of them charge. The Russell Group of higher education institutions has demanded ministers provide proof of the allegations. A study by the Institute for Fiscal Studies has found that male graduates from twenty-three universities earned less, on average, than men who had not been to university at all.

Fair day’s pay for ...  ‘I wonder if BP’s Bob Dudley, whose £14m pay package has angered shareholders, could walk into a room of 30 Royal Navy admirals, 30 Army generals, 30 Crown Court judges and 30 NHS consultants and say: ‘I am so good at my job that I should be rewarded better than all of you put together.’ Christopher Knight in The Week (23 April).

Being misled. ‘Can there be a more horrible object in existence than an eloquent man not telling the truth?’ Thomas Carlyle (1795-1881). Scottish historian and essayist.

Monday, 11 April 2016


A worry.  Too big to fail.  The Financial Stability Board is chaired by Mark Carney, governor of the Bank of England. It advises the G20 group of countries and has said that the world’s thirty biggest banks should raise up to $1.2 trillion in loss-bearing debt, in addition to their equity capital. The goal is to make creditors liable for a bank’s failure, rather than taxpayers.  The proposals recommend that a bank would fund at least 18% of its risk-weighted assets with such a debt and equity by 2022. Mr Carney said that the plan would ‘support the removal of the implicit public subsidy’ of banks that are ‘too big to fail’.

Productivity and?  Forecasts for the UK’s economy indicate that a growth will be anywhere between 2% and 2.5% this year and slightly above the higher end for 2017. HM Government continues to tell us things are tough, but with defined reform and hard work we can expect the economy to move ahead. Against this background, including Tata and steel, Markit’s Purchasing Manager’s Index registered last month one of its weakest performances in the last three years. Production was flat after February’s seven-month low and according to Markit, any increases in output reflected better inflows of new business.

This is regarded as confirmation of a major problem associated with productivity, units per hour. Registration of motor cars seems to be a notable exception. An offering of solid and practical support to manufacturers must remain firmly on the Prime Minister’s agenda.

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. In ‘Competing with Information’, Xavier Gilbert argued that being better at doing more of the same leads to competing solely on costs. This is a short cut to annihilation.  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 fighting to deliver stretching targets, even for survival. They know they have to react quickly. But once they make it, all too often their judgement begins to suffer. Success is not a good 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.

Ladders have gone. Several analysts have examined the change of jobs by UK’s managers since 1980. They switch employers more often, make more moves sideways and downwards and have fewer promotions. Managers are likely now to be mobile because of necessity. They have to leave. A steady progression upwards is no longer on offer. Managers are finding their skills and careers are obsolete. They have toiled long and had to climb the corporate ladder only to find it pulled from under them. These are permanent alterations to working lives. A ‘career’ will mean the experience of each person, not one path in one industry.

More time.  ‘There is no pleasure worth forgoing just for an extra three years in the geriatric ward.’ Sir John Mortimer, English dramatist, novelist and barrister.

Tuesday, 29 March 2016


Differences and pensions.  Jane Parry (University of Southampton) has unpicked that in the UK we have never lived so long as we do now.  Public Health England announced recently that life-expectancy has risen again.  With baby boomers (born between 1946 and 1964) moving into retirement, the number of pensioners is exploding once more.  We may be living longer, but many are not reaching old age in good health.  Quality of life is a growing concern for institutions of all kinds, with three-quarters of us likely to reach the state pension with compromised health.  Also, the age for payment edges upwards but early or forced retirement remains a norm for the majority.  The option of working longer is not open to everyone.  Shouts that we will have to carry on earning into our 70s fail to recognise how impossible this is for many.  Policy-makers must review those outdated formats of retirement based upon the professional male notion of an upwardly moving career in a single workplace.  The breadwinner model has almost gone, few families can live comfortably on a single income and women now enter the labour market at least as well-qualified as men.  The country needs pension schemes that reflect these demographic changes and amended working patterns.  The challenge is not so much how to keep the well-off saving, but how to open up the possibility of saving to those focused on surviving in the new approaches to work and employment.

Spotting poor managers.  Is as important as discovering talent.  Alastair Dryburgh has considered the characteristics.  Here are seven.  (1) S/he has to be right always.  (2) S/he distorts reality.  Any error is someone else’s fault.  (3) The really ineffective manager raises the jumping to conclusions into an art form.  (4) S/he needs to stay in his/her comfort zone. Moves outside it are denounced. (5) These people are masters of the vicious circle.  Do not bother with diagnosis.  There are complaints and threats, which lead to paralysis.  (6) They hate uncertainty.  Most of us do.  But the incompetent manager denies the possibility.  Success demands that uncertainty is dealt with by the manager and those who report to her/him.  Denial/cover-up explodes.  (7) Outdated habits and assumptions are sustained by a lack of self-awareness.  Let someone you trust hold a ‘mirror’ to you.  Accept the discomfort.  The results can be transformational.

Failure in the marketplace.  The biggest cause of marketers’ disappointments is lack of information.  It is seldom that the facts are unavailable.  Rather, for whatever reason, managers do not wish to find them.  Indeed, missing facts not only contribute to a demise, they hide its imminence and sometimes its presence.  Some managers tend to defend the marketing status quo with might and main.  This is done even though the one unchanging factor with markets is that they change.  Suggest a little research might not come amiss and one can be met with irrelevant appeals to long and arduous years of experience in the sector.  These may be accompanied by grumpy observations about dubious assumptions being ‘obvious’.  In short, with refusals to contemplate the painful process of thinking and acting anew.

Third sector under fire.  Everyone knows that charities, especially the big ones, are having a hard time.  There has been a long list of accusations.  Several come to mind quickly. The crash of Kids Company.  Beat Bullying and the British Association of Adoption and Fostering. Chuggers – ‘charity muggers’ have had their activities cut back by more than a hundred local authorities. Merryn Somerset Webb has stressed how badly much of the £17 plus billion flows from HMRC (the taxpayer) to charities is used.  Over 1,000 senior managers are paid six figure salaries.  Eleven executives at a planned parenthood charity receive an average annual salary of £144,000. Of course, we can change rules and regulations and give sharper direction to the Charity Commission. But charities must remain independent from interference by government if they are to offer a proper alternative or addition to services provided by the public sector. They must also remain free to innovate. After all, charities gave us the first schools, libraries and hospitals.  This should not distract them from regaining the trust of the UK’s citizens. To think the sector’s problems can be solved by becoming simply more like orthodox businesses is misleading. A recent report from Sir Stuart Etherington’s review of self-regulation recommended essential moves.  Trustees are urged to take greater responsibility for their charities’ policies, actions and results.  They have legal duties and obligations.

A bit of wisdom.  “Behold’, the fool saith,  ‘Put not all your eggs in one basket’ – which is but a manner of saying, ‘Scatter your money and your attention’, but the wise man saith, ‘Put all your eggs in one basket – and watch that basket”. Mark Twain (1835-1910).  American novelist.

Keep looking.  ‘Visionary people are visionary partly because of the very great many things they don’t see.’  Berkeley Rice (1937-), in the New York Times Magazine (1968).

Monday, 14 March 2016


Things going on.  Trade figures of PR China in February showed the highest one-month decline since 2009.  This situation disturbed a rally in the prices of equities and commodities.  Brent crude oil was $40 a barrel. There are indications of a turning point. The Bank of England announced contingency plans to protect the UK’s banks from running out of funds if the forthcoming referendum on the European Union (EU) leads to a withdrawal. Commercial Banks will be able to borrow heavily in the days before and after the vote in June, to offset any threat of a run on them. Mark Carney, the B of E’s governor, had a bad tempered meeting with MPs.  He said the prime minister’s renegotiation with the EU had addressed the issues which will assure Britain’s monetary and fiscal stability. He added that leaving would heighten risks in the short-term. Mr Carney denied his opinions were influenced by Downing Street.  Microsoft has announced the first big step beyond its Windows operating system.  The Department for Transport told Volkswagen to compensate motorists in this country who were hit by the emissions scandal.

Government targets. The UK’s public sector net debt is 80% of national income. The Institute for Fiscal Studies (IFS) points out that this is high by recent standards and compared to most advanced economies. But it is not particularly excessive in a longer-term historical context. The chancellor of the exchequer has stated a requirement for a budget surplus in each year from 2019-20, unless growth drops below 1%. The first official figures showing whether Mr Osborne has met his target should be published days ahead of the general election in 2020. Britain has not had three consecutive years of surpluses since 1952.  The chancellor has also set an expectation for debt to fall as a percentage of national income through to 2019/20, but is meeting it by selling assets.  These actions might be sensible, but satisfying the rule in this way contradicts his underlying principle.  The cap on welfare expenditure was intended to constrain the bulk of outgoings on benefits and tax credits, but is being breached already. Therefore, there are legitimate doubts that there have been changes of policy.

Managers’ delivery van. The way we deliver strategies and plans has altered over seventy years, after sameness for a century. 1940s: run an organisation like an army. 1950s: meet the budget. 1960s: predict the future. 1970s: think strategically. 1980s: one best way. 2000 plus: no one best way. No strategy. The vision thing. Then ... There are two schools of thought. One sees strategy as a wish-list, rallying cry or stated mission. Strategy is a vision, not a plan. Luck, opportunism, intuition and inspiration are the essentials in commercial success.  The other group argues that strategy is not a vision, but about knowing how to exploit key sources of internal competitive advantage. It should be defined and applied by each business through an impartial logic and rigorous analysis.  The choice will determine success.

Inequality. Oxfam has calculated that the world’s wealthiest sixty-two people – who could just about fill a double-decker bus – are collectively richer than the poorest half of the population (3.5 billion). For some, being rich and conventionally successful keeps them in the headlines.  Others keep a lower profile.

Cheerio.  ‘Las Vegas is the only place I know where money really talks – it says ‘Goodbye’.’ Frank Sinatra (1915–98).  US singer and film actor, quoted in Moneyweek (4 March).

A pity.  ‘The tragedy of modern man is not that he knows less and less about the meaning of his own life, but that it bothers him less and less.’  Vaclav Havel, Czech dramatist and statesman.

Care.  A business must have a conscience, as well as a counting house’.  Sir Montague Burton, English tailor and manufacturer.

Monday, 29 February 2016


Volatility of banks.  The erratic prices of shares in major banks reminds us of the system’s fragility.  Sir John Vickers chaired the Independent Commission on Banking (ICB).  He says the crisis of 2008 taught us that banks were holding too little equity capital.  The Financial Times has pointed out that eight years have gone by and the issue has not been resolved by the myriad of interested institutions.  The Basel III regulatory framework obliges banks to have capital worth 8.5% of their risk-weighted assets (RWAs).  This is a measure used by regulators to determine capital requirements.  An additional buffer of 3%, applied to this country’s six biggest retail banks, would assist them to absorb major losses.  But the Bank of England’s latest proposal recommends an additional cushion at 0.5%.  This is a milder figure than suggested by the ICB in 2011 and less stringent than advice from some leading economists.  Will the Bank of England reconsider its conclusion?

Interview or pitch.  Did you think it went OK and then suffered rejection?  It is possible that you were let down by behaviour, rather than what you said.  A survey of 2,500 professional recruiters by CareerBuilder in 2015 highlighted failings of body language:
67% did not make eye contact
39% ‘forgot’ to smile
33% played with something on the table
30% had bad posture
30% fidgeted too much on their seats
29% crossed their arms over their chests
27% fingered their hair or touched their faces
21% had a weak handshake
11% used too many hand gestures.

Back to basics.  Many commentators say there is a trade-off between being a ‘good’ employer and running a profitable business.  However, there is a lot of evidence that the opposite is true.  ‘A great place to work’ is a concrete concept, but such a place is not the upshot of crèches, subsidised meals or other perks.  Instead, it stems from quality of relationships.  The foundation for consistent success is trusting the people with whom you work, having pride in what you do and enjoying being with your colleagues.

Teenagers are not like we used to be! The NextDraft emphasises this is correct. They smoke less than we did. They don’t get pregnant as often, and don’t do great quantities of meth.  They do not binge drink regularly. They do not watch television as much. Are they likely to be too distracted by their mobile phones? Or are an advanced breed? Is it possible they are devoting all their time to building a billion dollar startup? Maybe they are just boring? Whatever the explanation, today’s youngsters are not as bad as we were.

A thought.  ‘Poverty is the parent of revolution and crime’.  Aristotle (348 – 322 BC), Greek philosopher and scientist.

Care.  A business must have a conscience, as well as a counting house’.  Sir Montague Burton, English tailor and manufacturer.

Monday, 15 February 2016


The big divide.  The Centre for Cities is a respected think-tank.  It notes in a new report that 29 of Britain’s 63 largest cities are ‘low-wage, high-welfare economies’. They have average wages below the UK’s at £504 per week (2014), and expenditure on welfare at above the average of £3,368 per head (2014/15). Nine of the ten worst places on this measure is in northern England and the midlands. Hull has the lowest wages, £376.  Blackpool receives the highest welfare spending - £4,338 per head.  The fourteen cities with above average wages and below average spending on welfare are mainly in the southeast of England, plus Aberdeen and Edinburgh in Scotland. Wages in London are the highest at £629 a week. Cambridge has the lowest welfare spending at £2,121 per head.  The Northern Powerhouse will have an uphill struggle. We can expect determined political demands.

Stagnation. Heather Stewart and Ferguson Ryan (the Observer) say global trade is stagnating and this has difficult implications for those of us who try to build businesses. Many economists suggest that the sharp drop in trade, driven by PR China, is a signal of a worldwide recession. What is causing it? The OECD (rich countries) blames the slowdown in emergent markets, led by China. But Global Trade Alert, a think-tank, reckons ‘a creeping rise in protectionism’ is another problem. It observes ‘there has been a flurry of more subtle manoeuvres’ than earlier tit-for-tat regulations. These included restricting public procurement and tightening regulations to raise the bar against imports. If this is so, the results are ‘a measure of the fragility of globalisation’.

What is service? The constant increase in self-service for customers brings two worries. First, the personal touch has been removed from the majority of transactions in mass markets. Nonetheless, providers pursue the well-off with offerings at premium prices. Consumers are now either herded into speedy and basic standards or flattered with big lumps of fawning at a higher price. Does this intensify the resentment of the haves, a minority, by the have-nots, a large majority? The second, and bigger, concern is for businesses as operating units. If they never meet their customers, they will lose touch with them. This will lead to purchases on price alone. The Economist points out that if firms abandon a determination to differentiate themselves with good service, they will become vulnerable to the kind of assault suffered by the UK’s mainstream supermarkets.

Into the fracas.  The caucuses in Iowa were supposed to be between a Bush and a Clinton, both from the establishment. We were told to expect coronations, rather than elections. Instead, the rush for the world’s most powerful office has been interrupted by outsiders. One of them declares himself as a democratic socialist. So, the contenders for America’s next president have moved on to New Hampshire. The United States is not the only country where the political elite is on its back foot.  Britain’s Labour Party has a new leader who is to the left of predecessors since the ‘30s. In the first round of France’s regional elections, the far-right National Front won the largest vote.  Populists are leading the polls in Holland and heading the governments in Hungary and Poland.  In radical Sweden, the anti-immigrants are polling at 30%. Electors are angry. They have been saying for a long time that their countries are going in the wrong direction. Wages have stagnated even as incomes at the top have increased dramatically. Cultural fears add to economic ones. In recent months, dangers of terrorism have assisted the populist assertions. Conventional political parties have to reconsider their listening and consequential proposals.        `

Reality. ‘Life is full of misery, loneliness and suffering – and it’s all over much too soon.’ Woody Allen, American screenwriter, actor, director, short-storywriter and occasional jazz clarinetist.

Shush.  ‘To talk well and eloquently is a very great art, but an equally great one is to know the right moment to stop.’  Wolfgang Amadeus Mozart (1756-91), Austrian composer.

Monday, 1 February 2016


Osborne’s army.  Do you recall the Chancellor of the Exchequer’s ‘march of the makers’ in 2011?  Onwards to a ‘more balanced economy’.

But the manufacturing marchers have had a bad time.  The sector’s share of GDP has gone down from a disappointing 13% to 10%. Of course, factors such as a stronger pound, slowdown in PR China and emergent markets, crisis in the eurozone and general volatility are not George Osborne’s fault.  Nonetheless, he has some responsibility for the Government’s fuelling of uncertainty and causing doubts on investment because of the imminent referendum relating to the European Union.  Other major obstacles for manufacturing remain. These include skill shortages, access to finance and comparatively high costs of energy.  Our political masters must get off their hands. Last November, industrial production (manufacturing, mining and energy supply) in the UK had its worst monthly fall (0.7% for two years.

Politics, policies and imagination.  Markets and their forces attract analysts and commentators. Managers ought to take part in the arguments and defend the need for their contributions. Not so long ago, the New Yorker, hardly a manual for the Left, chose Karl Marx as major thinker of the next decade. A market’s morality has two pivotal components. The first is an obligation to deliver measureable outcomes, founded upon the premise that pursuit if enlightened self-interest leads to the betterment of society. There will be a backlash if the market is seen to fail on either results or restraint.

Anyway, what is the job of government? After all, there are not dynamic markets without a government to define rules and context. The state must accept the disciplines of markets and understand the impact of control and intervention. This leaves our politicians with a daunting challenge. They have to devise ways for reducing and redirecting intrusion whilst fulfilling their responsibilities and preserving the electorate’s trust. It means redesigning the welfare state and securing the competences to cope with global competition. Public policies and politics are one thing. But imagination will be tested to breaking point and is in short supply.

Big questions for businesses in 2016:

1   Will PR China continue to cause economic ructions throughout the
2  Are prices and margins across commodity markets likely to still feel the squeeze? Oil fell 35% to an 11-year low of below $40 a barrel in 2015.
3   What is the outlook for emerging countries?  Growth has halved since a peak in 2011.
4   Is it possible an ‘out’ vote in the forthcoming referendum on UK and the European Union would derail investment projects? In any event, will there be an urgent need to rebuild economic and trading bridges?    
5  Can we find greater clarity for the outlook between America and Europe?  Will elections in the US ‘cast a gloomy shadow'?, asks Allister Heath.
6   Will the Bank of England raise interest rates? Also, it is keen to use new powers to limit risky mortgages.

Too big to fail.  The Financial Stability Board advises the G20 group of countries and is chaired by Mark Carney, governor of the Bank of England. The Board says the world’s thirty biggest banks should raise up to $1.2 trillion in loss-bearing debt, in addition to their equity capital.  The purpose is to make creditors liable for a bank’s failure, rather than taxpayers.  Mr Carney said that the plan would ‘support the removal of the implicit public subsidy’ enjoyed by banks that are ‘too big to fail’.

Emails and pitfalls.  There are complaints of inefficient use of email. It is simple to send copies to many people who do not need them. Also, it is easy to forget that email is a permanent record, even if a document is in the electronic waste bin. Senders often say more flippant and incriminating things than they would in a letter. What about libel? Reconsider guidelines and disclaimers in conjunction with internal controls.

Use of power. ‘A government big enough to give us everything we want would be big enough to take from us everything we have.’ Gerald Ford, President of the Union States, 1974-76.

Through which end of the telescope.  ‘It’s more than magnificent – it’s mediocre.’  Sam Goldwyn, American film producer.

1 February 2016