January 2012 Archives
"It's none of your bloody business!" No - not you - didn't mean to offend. Just feeing mildly irritated by the tone of the new Start up Britain campaign. The strap line that runs 'There's a business in everyone. What's the business in you?' And (apart from sounding a little less than grammatical - should it be 'Which is the business in you ?' murmurs a passing pedant) it seems to beg for the surly reply I offered above, don't you think ?
Many readers will be aware of the oft-cited figure that over a million jobs were lost in manufacturing under the last Labour government. A number of factors came together to accelerate and extend a 'natural' process of deindustrialisation so that even 'healthy' manufacturing activities were lost.
I've been arguing for ages, for example, that the over-valuation of sterling over the late 1990s and early 2000s hammered our export sectors - and put a huge dent in our automotive and transport clusters here in the midlands. In so doing it seriously unbalanced our economy and contributed to the later problems experienced when financial services went belly up.
Last week was an exciting week for energy lawyers. It saw the Court of Appeal reject DECC's appeal against an earlier High Court ruling, which decided that quick and drastic cuts to solar feed-in tariffs (FiTs) proposed in a now infamous consultation late last year were illegal.
The recent brouhaha surrounding the bonus payment to Stephen Hester, the chief executive of RBS, raises many interesting questions; not the least of which is how much do you need to pay to secure the services of excellent leaders to run organisations both private and public?
That he hasn't actually taken his bonus should not detract us from asking how much employees - most especially at executive level - really need to be paid to achieve objectives?
In the case of Hester, the argument that was put forward to justify the almost £1million bonus was that this is what the previous government agreed with him in his contract after the departure of the infamous Fred 'the shred' Goodwin.
Given that the government was forced to save RBS by taking majority ownership following the global liquidity crisis of 2007 which, lest we forget, was caused by the hubris of 'spectacularly successful' business leaders like Goodwin, the objective was to ensure that stability returned as quickly as possible.
Hester took the job on the basis that he could do this in five years.
The argument that raged over Hester's bonus was whether in the current age of austerity it is right and proper to pay a bonus to a chief executive of what is effectively a state-owned bank, and who already receives a basic salary of £1.2million, for not achieving his target of achieving a return to success as was apparently promised on his appointment?
Sadly, it seems, the facts of what Hester has achieved (and not) have been lost in the 'wars of words' about what is acceptable within what David Cameron described recently as 'moral capitalism'.
There is no doubt that he has had some success. The bank is now profitable making pre-tax profits of £1.2billion for the first nine months of 2011 following losses of £3.6billion and £1.13billion in 2009 and 2010.
Hester's achievement in reducing RBS's balance sheet by £600billion must be balanced against the fact that its share prices is down by over 40% from a year ago.
We, the taxpayers who bailed RBS out when it could have gone bankrupt, now own 82% of an asset that is worth less than half of the £45.5billion injected to save it.
Hester's clear objective on his appointment was to ensure that RBS's equity value was such that it could be offered back to 'the market' at no loss within five years (and it was hoped a return on investment).
If RBS's share price is used to evaluate Hester's success, it is clear what the market thinks and hence the current controversy concerning his worth.
So how much do you need to pay to ensure success?
Ask any football fan and they will gripe about the greed of football players; particularly those who are regarded as 'world class'.
However, these fans recognise that there is a market for securing the services of the top players.
No-one who acknowledges the continued success of Barcelona Football Club can deny that its manager Josep 'Pep' Guardiola is one of the best. More importantly, it has some of the best players in the world such as the brilliant Lionel Messi.
People as good as Guardiola and Messi don't come cheap. Interestingly, at Barcelona FC the decisions about who to appoint and what pay is required to attract them is taken by the owners who, unlike most other football clubs, are the fans themselves.
Clearly consensus serves Barcelona well. But what does that tell us about running most other organisations which, to be fair, are a lot more complex than football?
Leadership is one of the most analysed and written about aspects of management. As the seminal writer Charles Handy argued in his book Understanding Organisations, the search for the secret of leadership is like the quest for the Holy Grail; an entirely honourable and understandable objective but ultimately fruitless.
Nonetheless, the search for what is really effective and successful leadership goes on regardless.
Offering simple answers about what effective leadership consists of is unhelpful and I am not intending to do so here.
However, in my own research into what creates successful (excellent) organisations, most particularly those regarded as 'world class', the issue of leadership is ever-present.
What is utterly obvious in analysing such organisations, and they exist in both the public and private sector, is that whilst the importance leadership is explicit, every person involved in every process is encouraged (and expected) to play their part. In effect, every person is a leader.
When Dr. Deming Dr. Juran, both of whom I have referred to in an earlier blog, travelled to Japan in the aftermath of its defeat by America, they emphasised the need for senior managers to be responsible for instituting leadership which ensured that improvement became the obsession of everyone.
Critically they both stressed to their audience that they should not follow the Western example of decisions being taken by managers in isolation to the workers who would carry them out.
Deming was especially adamant that the greatest responsibility of senior managers was to motivate by appreciating efforts of those working at operational level and that by working cooperatively the key objective was to understand the causes of problems (what he called 'variation').
Simply blaming people when things go wrong will not help. He advocated the use of simple statistical process control (SPC) to achieve improvement.
The fact that some of the very companies Deming advised in the early 1950s are still regarded as 'best in class' should tell its own story.
But whilst Deming believed that blame never motivates people, he was equally vociferous that linking performance to reward does no good either.
For him, performance-related pay was simply wrong. As he argued, given how little influence senior manager has upon the final results, what is the logic of linking their pay to outputs?
Rather, he advised, managers should, for whatever basic pay they are believed to be worth, take responsibility for developing a system of working (and a culture) in which every person seeks continuous improvement.
It is not hard to guess what the late Deming would have made of the debate surrounding Hester's bonus. He would probably have criticised those who agreed to this as fundamentally misunderstanding his philosophy.
Moreover, he would hardly have approved of a system of remuneration in which basic salaries of senior executives, such as Hester, are routinely paid more than 40 times as much as the median worker in the UK.
Interest in China among media and commentators accelerates rather than abating. There are those held in awe by the economic 'miracle' and others emphatic that the whole thing teters on the verge of collapse under its own Internal contradictions. And whether the truth lies at one end of this spectrum of opinion or the other - or somewhere in between - what is the real and lasting implication of it all for us
One of the joys of being involved in teaching and research into organisations and management is the ability to consider the application of concepts in practical situations.
The analysis of case studies can be especially illuminating and much can be gleaned from exploring the reasons why success or failure occurred.
As students discover, the corporate world is replete with examples of the latter.
The case of Kodak, which because of its market dominance until the 1990s was the one of the world's top five most valuable brands will probably become a classic case study in what can go wrong.
In defending his rush into a front-loaded austerity fix for the UK economy, Chancellor Osborne has repeatedly sought cover from international organisations for his actions.
His 2010 Tory Party conference speech set the tone:
"On one side there is the IMF, the OECD, the credit rating agencies, the bond markets, the European Commission, the Confederation of British Industry, the Institute of Directors, the British Chambers of Commerce, the Governor of the Bank of England, most of British business, two of our great historic political parties, one of the Miliband brothers, Tony Blair, and the British people.... On the other side is Ed Miliband and the trade union leaders who put him where he is".
Cue much conference laughter and clapping.
Of course, it was never really thus, and the Chancellor conveniently omitted to note many leading figures on that 'other side', including the US President Barack Obama, Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz, the leading columnists Martin Wolf and Samuel Brittan of the Financial Times, and Keynes' biographer Lord Skidelsky amongst many others.
Travel - we are regularly reminded - broadens the mind. Other parts may also be broadened. Notwithstanding the generosity of one's hosts a business trip abroad involves a certain amount of time in the hotel room and the impact of jet lag can mean sitting into the small hours seeking sleep with only the TV for company. In this way one's base may be broadened
Just before Christmas, I took part in a session at a local Academy working with 100 14 and 15 year olds. Our role during the session was to help them avoid setting limitations on their ambitions. We had an afternoon together and the spirit, energy and hunger to achieve was really evident - it just needed a spark.
To describe New Street Station as a blight on the face of Brum is probably being a bit unfair to the unpleasant things in the world that are merely blights. At best, you could describe it as a necessary evil - an awful lot of us use it (140,000 every day, double the capacity it was built to deal with) but I don't imagine anyone likes the experience much.
It will come as no surprise when I say that I can't wait until it looks like this (the first half of which will be open at the end of this year):
So, imagine how chuffed I was when, before Christmas, I was able to be shown around the construction site. I was particularly impressed to see all the work going on out of public view whilst keeping the station up and running with little (if any at all) disruption.
Had it not been a breach of healthy and safety, I would have taken my hard hat off to the team from Network Rail and Mace who are delivering the project. As of the time of my visit, most of the work had been in relation to the new atrium (roughly the size of two football pitches) in what was the second floor of the old NCP car park.
However, over Christmas, the project went into overdrive. Between Christmas Day and 27 December, engineers used a 700 tonne crane to lift out an old section of the Navigation Street footbridge and install the new parts which extend it all the way to Platform 12.
Christmas also saw a new tower crane at the front of the station, the removal of the old Pallasades link bridge and escalator above Station Street, preparatory work on platforms 1-7 to construct the foundations for new public space and construction of new train crew accommodation above Platform 1, all achieved whilst Brummies hit the sales or went to the panto at the Hippodrome (which, if you are reading this before 29 January, I would wholeheartedly recommend seeing).
In what are troubled times for the construction industry, the project is also keeping a lot of people gainfully employed between now and 2015. It will also provide 350,000 sq ft of new development to the south of the station and, once completed, is anticipated to deliver 3,200 new jobs (650 in the John Lewis store alone).
We are also going to get a transport hub fit for the 21st century; one which will not only help make the daily commute a lot more pleasant but will provide a far-more-welcoming first impression for visitors to the Second City. It's good to have some good news to look forward to.
But, every silver lining comes with a cloud and I must admit to one reservation about the project: that pesky John Lewis. My good lady has intimated that it is going to result in the hard-earned Pemble shekels being spent on never-knowingly-undersold household knick-knacks that I (no doubt foolishly and incorrectly) suspect we could do without. I suppose I shouldn't complain too hard: I have been given 3 years' advance notice.