Welcome

Posted on February 10, 2011 by admin

Sociologist and writer Malcolm Gladwell (apparently a favourite of the Tories, but also a favourite of mine!) wrote ‘Outliers’ in which he commented that to become an expert in your chosen field you have to put in 10,000 hours of practice.

This got me thinking that I shall soon have completed 50,000 hours of work, the majority of which has been with SMEs and professional service firms. So, even if a few thousand hours have been wasted, I must know something by now. More importantly I know when to ask and who to ask.

So, to the blog. My aspiration is to help SME owners and managers to achieve their ambitions more quickly and less painfully than might have been the case. By using some of my experience and your contributions I hope we can develop a stream of ideas from which you can pick out those that may help you. There are thousands of leadership, management, marketing and sales books written by well-intentioned gurus, leaders of large corporates and academics but most SME leaders don’t have the time to read them or the resources to translate the theory into actions.

We’ll aim to get easily digestible, practical recommendations from people who are doing these things in their own businesses. The Yorkshire Leadership Group provides a forum for peer group development and I hope the blog will provide a broader audience with access to peer group support and advice.

Denis Kaye

Multi-tools and one stop shops

Posted on March 27, 2012 by admin

Have you ever bought a multi-tool? You know the sort of thing – a hedger trimmer that becomes a strimmer that becomes a lawn edger, or a drill that becomes a saw, or a food mixer that becomes a liquidiser. If you have, you’ll know as well as I do that they don’t work! The best of them will be quite effective at their primary purpose and fairly useless at anything else. The worst of them will be equally useless for each of their claimed purposes. If you want a strimmer buy a strimmer and if you want a drill or a saw buy a drill or a saw.

If we understand this so well, why do we think that a one-stop shop is a good idea when it comes to professional services? I recall building societies buying chains of estate agencies in the late 1980s to acquire outlets in which to peddle their wares to housebuyers. An attractive idea in theory but it didn’t work out that way for either the building societies or the housebuyers. Why not? The metabolism, for want of a better word, of each business is different and the financial products offered by building societies involve a different metabolism from that of selling houses. From the customer viewpoint it meant a limited product range – they were only offered a single supplier’s products.

The attraction of the multitool and one-stop shop never diminishes to both buyer and seller yet so often it fails to satisfy either party. One example of both success and failure is retail banking and it is instructive to look at that to see if there are lessons for us all. Banking moved away from stone and marble clad buildings on every high street corner into the virtual world of the internet. Bank managers transformed from being pillars of local society (much like their branch architecture) into sellers of insurance services. At the same time we enjoyed competitive pricing so that most people pay little or nothing for their banking service (unless they have managed to borrow some money, but that’s a different story).

Who gets paid what they’re worth?

Posted on February 2, 2012 by admin

The endless press coverage of Stephen Hester’s £1m bonus isn’t over although he’s not taking the bonus. The reason the debate will run on is that £1m bonuses remind us of the range of earning power in our society – on an average weekly wage you’d work an entire working life to earn £1m!

I heard a commentator say it is wrong for a banker to earn more than the Prime Minister as the PM’s job is more onerous. Well what about a top class footballer, golfer, film star etc. Is it about the weight of responsibility or the rarity of the talent or something else?

The one thing that does not determine earning power is fairness. If it were that simple our nurses would be paid so much more and, maybe, our bankers would be paid so much less. Is it more to do with the wealth created in the workplace? Footballers only began to earn mega-bucks after TV rights filled the coffers of football clubs which then competed for the best players to be able to be televised and so on. Financial services has been an extremely profitable sector and as long as it can generate massive profits it will pay massive salaries and bonuses to its ‘players’. It will take more than a few football clubs or banks getting into financial difficulty to change the culture of high earnings. Look how quickly the banks have become profitable, although admittedly it does help if you get bailed out by the government!

Also in the news has been the £50k per annum London Underground drivers. Why do train drivers earn so much more than bus drivers? Excuse the pun but it is to do with the training! It takes so much longer to train a train driver that the investment requires a higher salary to retain the talent; a result of trade union power.

Is there a message or a lesson to be learned from this? Yes and it is obvious – choose your career carefully because the financial rewards will depend on what you do and where you do it more than by how good you are at it. Also remember that in the surveys of work satisfaction and happiness the top position is usually occupied by care-workers and hairdressers whilst accountants and lawyers come in nearer the bottom of the league table. Not a case of ‘you pays your money and makes your choice’ but ‘you make your choice and takes your money’.

My problem is not Stephen Hester, because he has a contract to do a particular job. I am more concerned by the legal action of the Commerzbank employees who are claiming that their bonuses had been earned and should have been paid. What planet do they inhabit? Anyone who runs an SME will know that if it ain’t there it can’t be paid. We’re back to the issue of fairness or lack of it. We all know of hardworking and talented employees who happen to be working in a company that is struggling and incurring losses for whatever reason. No matter how well the individuals have performed against their targets there cannot be bonuses if the overall business is running at a loss. Yes they can leave if they don’t believe in the values of the company and are motivated

How to have happy customers

Posted on January 18, 2012 by admin

I read in The Times recently about Daniel Kahneman, a Nobel prize-winning economist, who met an elderly man at a seminar on happiness. The man told Kahneman that he had once listened to a recording of a symphony in a state of bliss. But as it approached the climax a scratch on the disc produced a horrible sound. ‘It ruined the whole experience’, he said.

Kahneman was interested because the man had already enjoyed 40 minutes of blissful listening and that could not be undone. All that had changed was the man’s memory of those experiences. Kahneman had an epiphany. When we think about our experiences we are not concerned with sequential minute by minute happiness. Instead we think of them like a story and one thing we love when it comes to a story is a happy ending. We also like stories with a meaning.

We can understand the importance of this by thinking of our schooldays and we will remember them joyfully or unhappily, whereas the reality will be that there were some good times and some bad times

Whilst this has big implications for happiness, I think it also translates well into our businesses in terms of customer satisfaction. Customer satisfaction is a rather dreary phrase and now we are being encouraged to think in terms of the ‘customer experience’ as people tend to view many aspects of their lives in terms of experiences. So, let’s consider how happy our customers are. Those who have sequential memories may well be impressed by our wonderful start to finish service standards, but don’t forget the rest who will regard their experience as a story and that will be marred by ‘one scratch on the disc’. We want our customers to have a meaningful story with a happy ending to ensure they remain repeat customers and are advocates recommending us to their contacts.

Grumpy old man getting grumpier

Posted on October 30, 2011 by admin

I was just getting over my spats with Flybe and East Coast Mainline when I saw a full page advertisement by Barclays Bank in the Times. The combination proves to be too powerful to resist venting my anger on my keyboard, so here goes. The subject is customer service and the frustration is that none of these companies has a clue about its customers’ expectations.

An attempt to book online for a return rail ticket to Kings Cross and a bicycle space proved to be impossible. With no telephone support offered by East Coast I ended up with an e-mail dialogue that offered me apologies for being too stupid to use their website properly. All I needed to know was whether or not the bike spaces had been reserved! At no time did they address my specific query.

Then a short business trip with Flybe became stressful when the outbound aircraft was delayed due to technical reasons so, as they couldn’t promise any alternative, I abandoned the flight and took to a train. However when I tried to check-in online for the return journey it had been cancelled because the outward portion hadn’t been used. Their website told me to call their customer helpline (premium rate) which I abandoned after hanging on unanswered for 17 minutes (£5). So, how did they handle my complaints? Slowly and only by e-mail and strangely by sending me Word document letters attached to their e-mails; the Word documents were repetitive, un-grammatical and totally unhelpful.

So what did Barclays do? A shorter story, thankfully. They are crowing about the high standard of service offered to Barclays Premier customers – as service for which there is a monthly charge. A whole page advert to tell us that you can actually e-mail your Barclays Premier manager! Wow, only about 20 years after we started expecting to be able to e-mail all our suppliers. What incredible arrogance in the world of banking and no wonder that the reputation of the banking sector is as low as it is? Having replaced true managers with salesmen targeted to sell you products that you may not even need and stuff you don’t want they then condescend to allow you to contact them by e-mail! I certainly won’t be attracted to a potential supplier who thinks he is going that extra mile by giving me his e-mail address!

It is depressing to see businesses make such heavy weather out of customer service when all they need to do is listen and respond to the customers’ specific needs. Customer relations are not enhanced by standardised letters offering apologies like confetti whilst also managing to make the customer feel an idiot or nuisance.

When will the economy recover?

Posted on October 4, 2011 by admin

Listening to a guest on Evan Davies’s ‘Bottom Line’ radio show brought a jolt of surprise when he said that we are not in a recession but we are in a depression. All this talk about double dip or not (and, yes, about the Greeks banning sales of taramosalata and houmous to avoid a double dip recession) avoids the reality that this malaise has now existed for over 4 years and shows little sign of passing anytime soon; this is a depression.

Does that make a difference? For me, the difference is that we can’t expect an early return to the apparent buoyancy of the early 2000s. We now know that much of it was castles built on sand with short term views taken on long term issues. I recollect expressing concern to a senior Bank of England advisor that people were making more each year from the increase in their house value than from working and, furthermore, that unrealised gain was accessible through easily available equity release loans. Our man from the Bank dismissed my concerns telling me that due to low interest rates the cost of servicing mortgages was a lower than ever multiple of earnings; did that really make it alright?

Last week a young city trader told the media that the economic downturn is a great opportunity to make money. He was espousing the view of business that is exemplified by Lord Sugar’s apprentices; it is all about buying cheap and selling expensive. But that is trading and is but one aspect of business. Business is not a zero sum game where there needs to be a winner and a loser. In good business everyone can be a winner. The difference is value added and that is something that is often forgotten in a world where it has become so attractive to make money by gambling on asset price movements.

Do you know exactly how your business adds value? Often it is not quite the way you first think. It is only by gaining a deep understanding of our customers’ needs and wants that we begin to see how they perceive we add value and that should drive our business strategy. However our customers may need some educating. For example those sectors that have traditionally lived off commission income are beginning to be ‘found out’. The biggest culprits have been in the financial services sector where commission has been extraordinarily high but only really come to notice during the last decade when investment returns have been low thus exposing the scale of commissions.

Individual people have a tendency to be financially greedy and/or naïve. The challenge for society is to channel that greed into value-adding activity and remove the naivety through good education and information. One problem is that when we feel at risk we become more self-protective, more short term and less concerned with wider and longer term issues. That delays the changes that are required to move on from the depression.

Brand and reputation

Posted on August 2, 2011 by admin

Brand is one of the key business words of the 21st century; that intangible asset that can be worth so much and about which so much is written and so many consultants consult. Before its ascent in the business lexicon the word ‘brand’ was synonymous with the word ‘make’ and referred back to its origins as a mark (like branding cattle). So, why the increased reverence and interest in brands today?

We’re in uncertain times and to an extent uncharted waters and that gives us a greater propensity to mitigate as much risk as possible. A brand is shorthand for a number of characteristics that will relate to all products or services covered by that brand. If you know what you are looking for you will be able to locate suitable products or services by looking at the brands that embrace those features.

I’m not a branding expert but I do recognise that the theory works well in practice. My interest in motor cars is always met by BMW; the brand’s values mean that I know any BMW will be fun to drive and powered by a state of the art engine. I also know that it won’t be the most comfortable car on the road, nor will it be cheap and it probably won’t encourage other drivers to let me out of side roads! I am unlikely to even road test a Mercedes or Lexus. Is it sufficient to work on your brand in terms of the characteristics of your product or service?

Closely related to brand is ‘reputation’ and, I think, SMEs often fail to remember the importance of reputation when they are developing their brands. According to Dr Neville Bain, chairman of the Institute of Directors (IoD), business success hangs on reputation and for most people their reputation is the most important asset in their business life. It is the key factor that sets us apart from our peers – that unique selling point that we all seek. The IoD and CIPR (Chartered Institute of Public Relations) have published an excellent guidance document available at www.cipr.co.uk about reputation. It demonstrates how a great reputation can improve relationships with customers and suppliers and creates a virtuous circle of business efficiency. The guidance includes an excellent checklist for directors who want to minimise reputational risk.

Reputations take time to build and can be destroyed in seconds. Who can forget Gerald Ratner destroying his company’s reputation by a glib remark about the value of some of his products in a speech to the IoD? Or, more alarmingly, the damage to Toyota’s reputation from incidences of faulty brake pedals and the company’s tardy response to the problems.

Don’t confuse reputation with being liked. It has more to do with ‘trust’ than ‘like’. Ryanair is a good example of a company with a brand that is very clear and it is not particularly well liked but it is hugely successful. Ryanair actually enjoys a sound reputation; it has an exemplary safety record and delivers exactly what it sets out to deliver bringing low cost air travel to many who would not be able to travel otherwise and in turn boosting the economies around its destinations (albeit it often lands rather a long way from those destinations!).

You can’t develop a reputation overnight but like it or not you will develop one. Make sure it is the right reputation for your business and that it is managed as carefully as your other assets.

Forecasts – the spurious accuracy of numbers

Posted on July 5, 2011 by admin

Lenders and investors won’t lend or invest without seeing a well-structured and compelling business plan. This is sensible because without knowing where you are going how will you know when you get there, and, indeed, how will I know whether I want to come along for the ride?

A business plan comprises many sections yet the most scrutinised section is usually the financial forecasts which are usually three to five years of detailed monthly projections. If they have been reviewed by an external accountant you’ll normally find them accredited with being consistent with the assumptions under which they have been prepared – so, if the assumptions are rubbish, the forecasts are rubbish. You’ll rarely find an accountant commenting on the assumptions!

Excel is brilliant and has so many features that hugely complex models can be built relatively quickly and then there are the forecasting tools like Sage WinForecast that enable a very professional presentation of financial projections. Bankers are invariably drawn to these models and derive great comfort from them. Back in the real world they are soon overtaken by events and the forecasts become an historical document with little relevance to the business.

Need it be like this? Not at all, but you need to have a different approach to the forecasting exercise.

A forecast needs a starting point and a finishing point. Those fixed points need to be balance sheets showing the assets and liabilities at both ends of the forecast period. Without the balance sheets a forecast is like a bridge without piers
Don’t attempt to forecast five years ahead on a monthly basis. If you think you can, look back five years and compare what’s happening today with how you would have set it out in a forecast in 2006. Twelve to twenty-four months is about as far as you can go in monthly terms and after that you really can’t get more detailed than quarterly or even annually.
A single view of the future is unrealistic because no matter how large your organisation it operates in an uncertain world and cannot determine its own future. So, scenarios need to be constructed and modelled; what we accountants call sensitivity analysis. You can then choose the most likely scenario, but remain aware of the implications for your profit and cash flow of the other possibilities.
It’s easier to forecast costs than revenue, so it is tempting to create a complex model that estimates every ream of copier paper that you’ll buy but fails to get a realistic view of sales figures by failing to understand the key drivers for sales. Invest your time into understanding the drivers for revenue and cost flows.
The world does not end at the end of your financial year and neither should your forecasts. Ideally you will have a twelve month rolling forecast so that you can always see what you expect to encounter during the next year. You need to keep checking that light at the end of the tunnel isn’t a train coming the other way.
Re-forecast the remainder of the current year at the end of each month and look at the differences between your original forecast and your re-forecast. You may need or want to make some tweaks to your business model along the way.

The spurious accuracy of numbers often provides unwarranted confidence.

Too many blogs and tweets to read?

Posted on May 20, 2011 by admin

Towards the end of a week full of meetings, telephone calls, e-mails and trying to read all the stuff that seems to be important I am on the verge of worrying about the future. The positive part of me says it will be better than the past (if you hanker after the good old days, how would you like a 1911 medical treatment in place of a 2011 one?).

The challenge in our businesses is being able to keep up and make informed decisions when we have such a constant barrage of information. It is like skiing in a blizzard – there is so much snow around that you can’t see anything you recognise. Nowhere is this felt more acutely than in the SME world. It is all very well being told by Gerber in the E-Myth that you need to work on your business rather than in it, but the reality is that you probably need to do both, and how much time does that leave for reading management books?

Currently many SME owners and directors are overwhelmed by online social media. One group simply ignore LinkedIn, Twitter, Facebook et al and deride these media as timewasting whilst they continue to do as they have always done. An interesting approach because, had these people been around when the telephone was first invented they wouldn’t have used it and would have insisted on writing letters. They tend to adopt all technologies and media that were around when they entered the world of business but avoid anything more recent!

But what of the rest of us? Excluding the pioneers, the early adopters, most of us recognise the existence of the new media and struggle to cope with them. I think the solution lies in being selective. After all very few of us read all the newspapers each day but instead we find one that we trust (or at least like) and read it. We remain aware of things other newspapers are covering through other media, such as radio, but we don’t find it necessary to buy those newspapers. So, with online social media try to find something relevant to you and your business interests. LinkedIn is an obvious ‘must have’ these days and Twitter can have its uses if you are selective in whom you follow. There are no prizes for volume when it comes to contacts; it is all about quality and relevance.

Having thinned out my Twitter followings and focused my attention on LinkedIn rather than Plaxo, Naymz and all the others I have now found the Yorkshire Business World platform interesting (www.ybw.co) because it provides a local, Yorkshire, dimension and its twitter postings seem relevant to my interests.

We can all benefit from online social media to enhance our business connections but we need to be selective in the same way that we are selective in our use of all other media

Can we have lunch?

Posted on April 21, 2011 by admin

The latest scare-mongering from lawyers concerns the newly- introduced, and little known, UK Bribery Act that came into force this month. Apparently we could end up in jail, or at least in court, if we buy a drink or two for a customer or potential customer. Really!

Clearly there is right and wrong. We think of the alleged payments to third world potentates to secure arms deals, or the sleazy inducements to councillors and others to secure planning consents that occasionally hit the headlines as being wrong. But, what about good old-fashioned hospitality?

We know that a drink or a meal to help get to know someone a little better or to thank them for their custom cannot be wrong.

Then there is the grey area in which many operate, unless you are a supplier to the public sector or to Asda. Asda and the public sector don’t like subjectivity if they can avoid it ,so they simply forbid their people from accepting anything, even a coffee, from a supplier or potential supplier. Does it matter? I’d say yes if you believe that the best supplier/customer relationships involve a real understanding of each other and the ability to work in partnership for mutual benefit.

The grey area is cultural and varies with geography, industry economic climate etc. Was it wrong in the 1990s for insolvency practitioners to take their referral sources to Spain for a weekend to play golf? Why did my old accounting firm take a box at a leading football stadium and give each partner a budget for entertaining?

In these straitened times we are taking a hair-shirted approach to something that should self-regulate. However it will only self-regulate if high standards of business morality are maintained and that is back to culture. The public sector approach may avoid immorality but it doesn’t help people to understand the issue and make judgements. Each time we impose regulations we remove personal judgment and create a culture in which anything goes as long as it is not illegal – is that OK? Well it wasn’t illegal for bankers to continue to lend to customers whose gearing levels were excessive – 125% mortgages for example – but it was disastrous for society.

Back to the UK Bribery Act. Whilst it should not cause any difficulties for most of us it may increase the burden of compliance. Although most organisations should already have the data, the burden comes in having to collate and report it.

So, is it still Ok for you to buy me lunch? Thankfully the answer is yes but as in everything timing is critical. Don’t buy me lunch whilst I am in the process of reviewing tenders for a project for which you have applied. Common sense and personal pride should tell you that. But do invite me to the races or lunch or dinner to find out more about me and to let me know more about you and your wonderful business.

Lawyers have to work harder for their fees than ever before so they are looking for things to promote, and clearly new legislation needs to be understood. However there is an excess of shock tactics and a deficiency of pragmatic advice.

I picked up a pearl of wisdom with regard to bribery when I was a trainee accountant in the 1970s. My boss said there was a big difference between a bottle of whisky at Xmas and a case of whisky just before he signed the audit report, and that difference was more than eleven bottles!

It is as simple as that, or, at least it should be. The Serious Fraud Office position on hospitality is that if “hospitality is not lavish and people use their common sense then there should not be a problem under the Bribery Act”. Time for lunch?