What items are top of businesses’ post-election wish list?

post-election wish listInevitably many promises were made during pre-election campaigning but how many will be delivered and what items are top of businesses’ post-election wish list?

There is no question that there are many urgent domestic issues that need tackling and were “parked” during the on-going wrangling over Britain’s referendum to leave the EU.

However, now that the so-called “party of business” has been returned with a solid majority, perhaps businesses will see some action on the issues that have left them feeling that they were overburdened and struggling to carry a heavy weight with little support.

While many business groups have been calling for the closest possible trade alignment with the EU post-Brexit it will be a year – or more – before the shape of any deal is known.

In the meantime, there are plenty of items on the business post-election wish-list that can be progressed.

Perhaps the biggest and most pressing burden needing attention is a thorough reform of Business Rates.  Of course, the loudest cries for this have come from the retail sector, particularly from High Street retailers, but there is no question that the current levels, and the slow pace with which appeals are addressed, is a heavy burden for many SMEs.

However, the Federation for Small Businesses (FSB) leader Mike Cherry, has warned that it could take up to five years to complete a rates review and reform

Arguably of equal importance is the difficulty many businesses have in finding people with the appropriate skills and this has been impeding growth plans.

While the new Prime Minister has promised an overhaul of immigration policy, this will affect how and who firms can recruit. It remains to be seen how the proposed three-tier points-based system will work.

The idea is to fast track so-called Tier One entrants such as entrepreneurs, investors and people who have won awards in certain fields, and Tier Two people, skilled workers, such as doctors, nurses and other health professionals, who have a confirmed job offer leaving the need for less skilled, people such as for as agriculture and manufacturing as a problem. Essentially Tier Three employers will most likely have to show that they cannot recruit enough people from within the UK before other entrants are allowed into the country which may take some time and leave them with short and medium term staffing shortages.

Indeed business organisations such as the Confederation of British Industry (CBI) have said that the current immigration proposals are vague and impeding businesses’ ability to plan for growing staffing levels.

The final and most pressing issue, on which the Government has promised action and investment is the country’s neglected and in some cases crumbling infrastructure, particularly in areas like the North and Midlands.

Whether improving communications such as road and rail links, or broadband connectivity, it is going to require significant financial investment and given the lack of growth and current weak economy it remains to be seen how much money is in the Chancellor’s pot come the first budget in March.

 

If you want more effective meetings don’t use PowerPoint or bullet points

effective meetingsEffective meetings depend on discussion that is constructive and to the point, and on wasting as little time as possible.

It has been calculated that the average executive spends around 50 percent of his or her time in meetings of which at least a third are useless.

This was the finding of a 3M study carried out by Annenberg school of communications, University of Southern California, Los Angeles, in 1989.

Studying effective meetings has been ongoing for years and certainly since the 1960s and there has been a growing body of evidence to support the 1989 findings, which suggests that executive productivity could be much improved.

There is an assumption that using lists or PowerPoint presentations can result in more effective meetings, but in fact, this has proven to be incorrect, as Amazon CEO @Jeff Bezos and subsequently others have proved.

A couple of years ago Bezos banned the use of PowerPoint and bullet point slides in executive meetings requiring instead that everyone sits silently for about 30 minutes to read a six-page memo that’s narratively structured with real sentences, topic sentences, verbs, and nouns.

Once everyone has finished reading the meeting memo then the topic is discussed. It has proved to be so effective that is has since been adopted by other CEOs.

Why does a narrative structure produce more effective meetings that use of PowerPoint?

Storytelling has been a part of human culture since we first discovered the use of fire. Anthropologists and historians argue that fire encouraged people to congregate by sitting around the campfire swapping stories as a way of teaching, warning, and inspiring others in pre-literate societies.

But there is more to it than that.

To be persuasive, an argument has to appeal to logic and reason, and also to emotion, which neuroscientists have found is the fastest path to the brain.

Bezos is quoted as saying: “”I’m actually a big fan of anecdotes in business,” arguing that often there is greater insight to be gained from customer emails than from data.

Basically, the scientific evidence is that our brains do not respond well to, or retain, lists. Our brains respond much better to text and even more so when the text is accompanied by pictures.

So, it should be no surprise that effective meetings are more likely to result from getting everyone to read a well-constructed narrative memo at the start, which gives everyone attending the same, essential information before any discussion begins.

The result is a much more informed discussion in which more people feel able to participate, rather than those “usual suspects” with the loudest voices.

Not only this, but the narrative memo provides an essential historical record of background and context for those who are not attending the meeting.

Ultimately using narrative rather than bullet point lists and PowerPoint slides will cut down on the time it takes to reach collective decisions, thus saving executive time and improving efficiency.

We should restrict PowerPoint for use as a tool for making a sales pitch and recognise those who use it in a meeting as trying to sell an outcome rather than seek to discuss the topic.

Sector blog – The north of England and the future of the construction industry

construction industryThere is no doubt that the construction industry has been having a torrid time in the last couple of years, especially since the collapse of the contractor Carillion with debts of £1.5bn at the start of 2018.

The most recently published insolvency statistics, for the third quarter of 2019, showed a 55% increase in the number of companies falling into administration, continuing an upward trend that had been going on all year.

There is little doubt that the political uncertainty since the UK voted in June 2016 to leave the EU has been a contributory factor to the industry’s woes, which are compounded by a shortage of people with appropriate skills. The skills shortage in the construction industry and its reliance on labour, often as subcontractors, has for several years been mitigated by the use of EU labour, particularly from Poland, but this, too, has been disrupted in the aftermath of Brexit as attitudes to migrants have become less welcoming.

But there have also been knock-on effects from the collapse of Carillion, which are being attributed to the structure of the industry, where major contractors like Carillion were focused on winning projects and managing them, relying on subcontractors to carry not only the responsibility for doing the work but also for taking the financial risk based on exposure to fixed price contracts and poor payment terms.

Indeed, when they go bust there is little left for creditors which highlights the level of credit risk.

Is the situation for the construction industry about to change?

Now that the Election is over and that the Government has a solid majority, hopefully, it will focus on the many pressing domestic issues that had been overshadowed by Brexit, not least the economic imbalance between various UK regions and London.

Indeed, the Prime Minister has already been warned that unless more attention is paid to the North of England particularly, those voters who lent him their vote, they may well withdraw their support equally quickly if they don’t see tangible investment.

In late December and again this week there were some signs that the message had been received and understood.

The Prime Minister had already promised that their trust in his government would be repaid and both The Times and the BBC were reporting that there was the prospect of changes to Treasury rules coming that would allow more cash to be allocated to projects outside of London and the South East, notably on infrastructure, business development projects and schemes like free ports.

Then, on Tuesday, when March 11th was announced as the date for the Chancellor’s first budget, the predictions of Treasury changes were again emphasised:

“In the intervening two months, the Treasury will have to work up a new National Infrastructure strategy that delivers on the plan to rebalance regional inequalities, some of which stem from decisions made nationally on, for example, transport spending.”

While doubts have been raised about the viability of the proposed HS2 rail project to connect London to the North, said to be likely to cost almost three times more than predicted, should this radical rethinking of Treasury rules come to pass, hopefully it could open up opportunities for the construction industry to work on plenty of other big projects in the North and possibly also the Midlands.

The other area that is likely to benefit the industry is a massive house building initiative. While no policies have been announced, Dominic Cummings’ Alternative Civil Service may light a bonfire under planning restrictions that are often blamed as the impediment to achieving previous governments’ targets. I am also sure we shall see more financial stimulus aimed at new owners, again all initiatives that will benefit the industry irrespective of what happens to the economy.

Starting the day right helps effective leaders to stand out

starting the day Starting the day right can take as little as two minutes and will make a difference to the rest of your day.

Thought leader @Guy Kawasaki recently highlighted one approach on Facebook, the two-minute routine, based on writing down just three simple statements with which you identify:

 

  1. I will let go of ….
  2. I am grateful for ….
  3. I will focus on ….

The idea is that we all wake up with thoughts swimming round in our heads that crop up to distract us, even if they are only in the background, as the day progresses and that to function at our most effective we need to settle and let go of these thoughts.

There are always massive demands on the time of busy executives and so starting the day with a clear mind and focus is important as is scheduling the day and being able to stick to tasks without distraction.

This simple technique also allows you to acknowledge concerns that are on your mind by considering them and then put them in a box so you don’t obsess over them and they don’t intrude when dealing with other matters. This is also a great tactic for dealing with anxiety albeit the subject of previous blogs.

There is no one way to set up your day, it is simply a matter of finding a routine that prepares you for being productive. Indeed writer John Rampton advocates using productivity tips and creating and sticking to an efficient daily schedule. He says, it is more than just simply making lists. It starts with understanding your “Why”, setting priorities and estimating how long the tasks will take.

The result will be that you work smarter, not harder and ultimately accomplish much more.

Rampton quotes the example of Hal Elrod, author of The Miracle Morning, who argues ““How you wake up each day and your morning routine (or lack thereof) dramatically affects your levels of success in every single area of your life. Focused, productive, successful mornings generate focused, productive, successful days.”

For Elrod starting the day right meant waking at 5am each morning to spend time in silence, meditating, reading and exercising.

For others, as in the two-minute example above, the routine for starting the day may be different, but what they all have in common is that they are quiet times alone to focus and help to declutter the mind before the demands of the day begin.

When I was in the army we had something similar referred to as the 6Ps: Prior Preparation and Planning Prevents Piss Poor Performance. Yes it was still called the 6Ps.

 

Key Indicator – Stock Market behaviour predictable or not?

stock market predictionsAt the start of the new decade predicting stock market behaviour is anything but an easy task.

A year ago, the pundits variously predicted that the year-end valuation of the FTSE 100 would be anywhere between 7200 and 8400 points. In the end, at close of business on 31st December it was in the mid-7000s at 7542 below most predictions but it was still a stonking year.

Over the last year, stock market values, including the UK’s FTSE 100 and 250, have risen an astonishing amount to make 2019 one of the strongest years ever, despite a sluggish global and EU economy, US and China trade wars and Brexit uncertainty.

According to the business news two days ago the Dow Jones industrial average has seen  a rise of almost 25% having reached record highs day after day, the broader S&P500 is up 30% and the tech-heavy Nasdaq has grown 40% in value. The FTSE100 in London is also close to its record high, as is the Dax30 in Germany.

In so-called “normal” times the stock markets traditionally go down when the interest rates go up which may explain the stock market values given the unprecedented period of low interest rates set by Central Banks that have done everything they could to support their countries’ weakening economies in their attempt at stimulating growth or more accurately avoiding recession.

But what is “normal” given that some Central Banks including European Central Bank, Japan, Sweden, Denmark and Switzerland have set negative interest rates?

To make predictions more difficult, this has been going on now for more than 10 years, since the 2008 Financial Crisis, and growth/recovery is still pretty sluggish despite the stimulus.

Usually, over a 10-year period there is a natural economic cycle from “boom” to “bust”, but the “bust” has yet to come, and nor is it being predicted. More of the same seems to be the view of most economists.

However a few pundits, notably the economist Nouriel Roubini, Professor of Economics at New York University’s Stern School of Business, argue that the stock markets are far too optimistic, while the business writer Rana Foroohar, author of Don’t Be Evil: The Case Against Big Tech and associate editor at the Financial Times, predicts that the next crash will be brought about by the concentration of power in the hands of big tech companies like Apple, which have built up huge amounts of debt in their quest for power. She says: “Rapid growth in debt levels is historically the best predictor of a crisis.”

So, why have stock market valuations continued to climb?

In my view, two things have driven the value of companies listed on the stock market.

Firstly, businesses have broadly maintained their profitability by reducing overheads through slimming down management and not reinvesting. This has hidden their decline in productivity because profitability has been maintained. I believe that the cutting out of swathes of management has made many businesses extremely lean but left them without scope for responding to growth, with little experience for investing in new technology and for implementing the changes necessary to remain competitive.

Secondly, the numbers of listed companies have declined leaving fewer in which to invest money. Given that investors want to invest in profitable businesses this has meant that the pool of investable companies has also shrunk driving up the value of those that should be part of an investment portfolio. This distortion is likely to encourage a shift from the growth investment strategy preferred by long-term investors to one of value investment preferred by those with a higher appetite for risk. Indeed, picking winners is difficult as those who backed Neil Woodford will attest.

You could argue that UK based companies exporting abroad with foreign investors have benefited from exchange rates problems due to Brexit to make more locally focussed companies more attractive but this should only be part of a value investment strategy and still leaves the long-term investors looking for fundamentally sound businesses.

It’s possible that once Brexit is under way after January 31, there will be a re-rating because the companies that import from abroad have suffered disproportionately.

It will only take the Central Banks raising interest rates to more normal levels for a major stock market crash to become inevitable.

 

The Good Business Charter may be the dawn of a new era

Good Business Charter for new decadeA new form of accreditation launched at the CBI conference in November, the Good Business Charter aims to promote a more responsible way forward for capitalism, business and the economy as the new decade begins.

Businesses can sign up to the new voluntary code, but they will have to provide evidence that they are following the ten principles enshrined in the Good Business Charter.

The Good Business Charter, which is supported by the Confederation of British Industry (CBI), the Trades Union Congress (TUC) and managed by an independent not for profit organisation, has been funded by Julian Richer, the founder of retail chain Richer Sounds.

Early last year Mr Richer handed over control of his company, Richer Sounds, to his employees, transferring 60% of his shares into a trust.

Launching the initiative at the CBI conference, the current Director General, Carolyn Fairbairn, said: “Without successful, responsible, passionate business, creating wealth and opportunity across the country and working in close partnership with government.

“… Business has always been about profit but it’s also been about so much more. It’s about making a difference. Creating jobs, services, products, ideas, opportunities.

“This is a time to talk about and even more importantly — demonstrate – that profit comes with purpose.”

To become accredited, participants in the Good Business Charter Scheme will have to undertake to pay employees the real living wage, give workers a voice in the boardroom, commit to prompt payment of suppliers, treat their customers fairly, agree not to engage in tax avoidance and show efforts to reduce their environmental impact including sourcing materials ethically.

The full list of ten principles can be found on the organisation’s website.

There has been mounting evidence for some time that both customers and investors, not to mention employees, want to see businesses behaving more ethically and in particular paying far greater attention to their environmental impact.

There is no better time for businesses to change their practices than the start of a new decade.

The Good Business Charter offers businesses a way of demonstrating their social responsibility and may be the dawn of a new era.

I wish you a happy new year and good fortune for the coming decade.

Addressing the UK skills shortage must be high on the new Government’s to do list

skills shortageBusinesses’ difficulties due to the UK’s skills shortage were high on their list for prompt Government action in the run-up to last week’s General Election.

The skills shortage was said to be inhibiting SMEs’ efforts to compete in global markets, particularly in areas related to digital and new technology.

A quarterly study by the BCC (British Chambers of Commerce) published in November found that 73% of firms that attempted to take on extra workers faced recruitment difficulties in Q3, up from the 64% recorded in Q2.

The skills shortage was compounded, according to Grant Thornton, by a low take-up of the cash available to businesses from the apprenticeship levy with almost half of eligible businesses having not yet spent the money available to them for workplace training.

This week, the Evening Standard carried a letter from Andrew Harding, chief executive – management accounting, at the Chartered Institute of Management Accountants, urging the new Government to review national education and skills policies, in particular the apprenticeships programme in order to address the skills shortage.

Added to all this is the rate at which EU workers have been leaving the UK, with Labour Market figures published in early November revealing that there had been a 132,000 drop in the number of citizens from other European Union countries working in Britain. Later in the month, the BBC reported that EU net migration to the UK had fallen to its lowest level for 16 years.

Yesterday, the latest ONS (Office for National Statistics) report revealed that in the three months to October UK unemployment fell to its lowest level since January 1975.

So, the numbers of people available for work are rapidly shrinking due to a combination of factors, including the uncertainties over immigration policy following the UK departure from the EU, the much-publicised failure of the apprenticeship scheme and the shrinking pool of available UK citizens with the right skills available for employment.

Yesterday’s employment statistics prompted Tej Parikh, chief economist at the Institute of Directors, to argue “”With some strains now appearing in the labour market, the new Government must push ahead with its plans to revamp the UK’s skills system, while initiatives to drive up business productivity should also support stronger wage growth.

“Businesses are eager for the details behind flagship policies like the National Skills Fund and reform to the Apprenticeship Levy.”

For almost three years the Government has been so wholly focused on the Brexit issue, while pressing domestic concerns have been ignored.

Now that the General Election is over with a resulting clear Government majority, it is urgent that the skills shortage is given a high priority among the many pressing concerns of businesses.

Purpose oriented leadership gives employees a reason to be engaged

purpose oriented leadershipPerforming tasks to order is not enough to motivate 21st Century employees and instead they need purpose oriented leadership to understand the “why” of their organisation.

The purpose needs to be defined and made meaningful in a way that simply stating “making a profit” or “increasing sales” do not.

Generally, workers will perform more effectively if they believe in what their company is doing and how it is contributing to the common social good. This has been described as having a higher-oriented purpose. 

But this means that the most successful leaders need to be able to communicate their vision and to have good narrative skills in order to do so.

Amazon founder and CEO Jeff Bezos, for example, has banned PowerPoint in executive meetings. Instead, he believes that “narrative structure” is more effective because human brains are wired to respond to storytelling.

good example of effective purpose oriented leadership is Gerry Anderson the president of Detroit-based DTE Energy, which supplies electricity and gas to South Michigan customers.

An article in the Harvard Business Review describes how, after the 2008 Financial Meltdown, Anderson realised that DTE employees were not very engaged and could not seem to break away from tired, old behaviours.

He commissioned a video that “showed DTE’s truck drivers, plant operators, corporate leaders, and many others doing their job and described the impact of their work on the well-being of the community — such as on factory workers, teachers, and doctors who needed the energy DTE generated”.

These stories effectively demonstrated DTE’s statement of purpose: “We serve with our energy, the lifeblood of communities and the engine of progress.”

Purpose oriented leadership is becoming ever more crucial for engaging employees in 21st Century business.

A PwC study reported in Forbes magazine in 2018 revealed that millennials who have a strong connection to the purpose of their organization are 5.3 times more likely to stay but only 33% of employees drew real meaning from their employer’s purpose.

Similarly, new data collected by PR Week shows that customers view purpose-driven brands as being more caring and, as a result, are more loyal to them. It reported that 67% of respondents said they feel companies with a purpose care more about them and their families and ~80% of respondents said they’re more loyal to purpose brands, while 73% said they would defend them.

I have mentioned in previous blogs that there is a growing shift, among investors, consumers and employees, towards more ethical businesses, partly, but not only, down to the rising concern about climate change.

Clearly, business leaders are going to have to think more deeply about the purpose and goals of their organisations and to define them more specifically. They also need to communicate the purpose and goals if they are to survive since this involves nurturing loyal employees and customers.

 

VUCA – protecting your business when nothing is predictable

VUCA uncertaintyVUCA is an acronym devised by the US military to describe an environment of Volatility, Uncertainty, Complexity, and Ambiguity.

But it doesn’t only apply to conflict zones. At the moment, and for the foreseeable future, it could equally well describe the climate in which business is operating.

For UK businesses the predominant uncertainty has been the situation, arguably since June 2016, when the country voted by a narrow margin to leave the EU. Since then, there have been three years of VUCA which won’t end tomorrow when we know the outcome of today’s General Election.

In the meantime, the UK economy has been sluggish, with the latest data from the ONS this week indicating that there had been almost no growth, a derisory 0.7%, in the third quarter of the year.

However, there are other influences that have combined to make uncertainty the new business norm, including a rise in nationalistic sentiment and population, trade wars between the US and China and also those between Japan and S Korea, all of which have led to a slowdown in the global economy.

Longer-term influences are the rapid pace of automation and AI development and, increasingly, worries about the future of the environment, which are influencing both consumer and investors in the direction of more ethical and responsible behaviour and decision-making.

Given the headwinds, VUCA is likely to get worse and will affect businesses for a long time to come.

Can businesses turn VUCA into a positive?

Despite its reference, VUCA offers terrific opportunities to entrepreneurs and adaptable businesses although exploiting them tends to be at the expense of those businesses, normally large ones, that rely on stability and predictability.

The website  vuca-world.org re-imagines the acronym as Vision, Understanding, Clarity and Adaptability and several business writers, among them Karen Martin and Sunnie Giles, both writing for Forbes, make the point that ultimately dealing with uncertainty is down to the creativity, agility and skill of people in an organisation.

Giles suggests that businesses need a change of mindset, so that they can react to fast-moving changes.

These include “moving from hierarchy to self-organisation”, “democratising information”, “speeding up interactions” and using “simple rules to make quick decisions, rather than perfect analyses.”

Of course, there will need to be effective and flexible leadership and a sound knowledge of the business situation at any point in time, which makes such things as management accounts and cash flow monitoring, as well as sound knowledge of customers’ changing behaviour and requirements even more crucial.

I would argue that it is often SMEs that are in the best position to deal with a VUCA climate as very often they are flatter organisations where there has to be a good deal of multi-tasking when the numbers of key employees are fewer than in larger, more hierarchical organisations.