Business, management and finance

Hello again

2011-10-05T08:56:00.002+01:00

I'm toying with a total revamp of my blogging output. Once a couple of big projects are out of the/proper under way, I'll think about how that'll work. But in the meantime, a rambling rant...

It looks like big chunks of the globe have a once-in-a-lifetime opportunity to remove a lot of the clutter from their economies - allowing their finest minds to focus on long-term planning, innovation and genuine wealth creation.
They can nationalise the financial services system.
Here's the problem. Financial services has grown up rapidly thanks to people's innate greed - not just that of bankers and City traders looking to boost activity in order to skim off fees and carry. No, I'm talking about *most* people.
We're sold the idea that we should look for above-average returns on our savings and below average rates for our mortgages. We spend time and money delegating that obsession - because we're scared of being the "dumb ones" but too lazy to do anything about it ourselves - to the financial services industry. It then spends massive amounts of money and layers in huge complexity to try to deliver those returns. And it mostly fails.
Some people will get lucky in their choice of unit trusts or mortgage. Some companies will benefits from that high-falutin' hedging strategy, or get a few extra points on their cash holdings using complex investment approaches.
But for every winner, there are losers. The only consistent winners are the very, very smart people - Soros, Buffett - and the very lucky. Oh, and the bookies (as Billy Ray Valentine so memorably put it) of course. Goldman Sachs partners tend to be very, very rich.
The irony is that the essence of the financial services industry's offer to individuals and companies isn't very complicated at all. A big group of people club together and share the risk of investing across a range of projects. Basic risk management allows you to charge those projects more or less for those projects on the basis of their chances of success or ability to repay. The returns are shared out among the investors with a mild weighting for the amount of money they put in.
It's that simple.
(The fly in the ointment is forex and commodities hedging. We'll ignore than for now - although really all we're talking about is smoothing...)
The way to make it happen is to have one big bank. Every depositor gets a risk weighted return, every borrower pays a risk weighted interest rate. We're all in it together. Suddenly, we can forget about asset allocation. We can forget about "beating the market" or "underperforming". We all pay less in fees, so we get better value for money.
(The Tea Party likes to talk about the taxes government levies - what about the taxes Wall Street levies, hmm?)
So seize the opportunity. Make us all average. Encourage companies to manage risk better, plan for the long term - and allow us all to do so, too.

FD culture strong at Tesco

2010-12-07T07:19:00.000Z

Andrew Higginson, the star FD at Tesco who was groomed for the highest levels of general management and currently serves as retail CEO, might be the most media friendly finance chief in the UK. But group FD Laurie McIlwee's appearance on Radio 4's Today programme - a slot Higginson was no stranger to - shows the supermarket giant has a strong culture of openness, communication skills and broad based experience in its finance function. Fair play for consistency - and a great attitude to finance folk.

Long time, no speak

2010-03-19T10:23:00.002Z

Just a quick one (because deadlines are horrific today - that's a reason for posting, not a reason for being brief). David Books at the New York Times highlights Philip Blond in his column today. It's well worth a read, even if you know about Blond, ResPublica and Red Toryism.

But it got me thinking about tax. I think the fundamental question is not whether lower taxes should happen - who thinks they shouldn't? It's when. On the left, you have people who acknowledge the need to revitalise communities and reduce the power of big government and corporations - but see tax revenues of providing the support systems to help that happen. On the right, people who think by lowering taxes, you weaken central government and allow communities to flourish.

That's why I'm not buying this as a Tory philosophy. We may well have built the nanny state - and we probably ought to be weaned off it. But this is no time for tough love. It's time for creative and well-directed leadership aimed at a controlled shift in the way we run things. Thatcher thought she could slash government spending on science and technology in the 1980s and the private sector would flood in to take up the slack. It didn't. And in the 2010s, we also must be skeptical about how quickly the people or the private sector will take up the reins responsibly.

(Labour, for what it's worth, look equally incapable of genuine and needed leadership. This election's going to be annoying.)

BBC attacks miss the point

2009-08-31T09:00:00.003+01:00

James Murdoch's attack on the BBC was stunningly unoriginal. I'm not talking about the substance of his fusillade. The traditional right-wing accusations include a socialist agenda and manic political correctness (this, from the broadcaster that brings you Jeremy Clarkson...). His entirely capitalistic rant was something relatively new.

No, the unoriginality stems from the style of his tirade. By using over-the-top language to describe the BBC - including its "chilling" ambitions to, er, inform, educate and entertain through various media - he was aping the tactics used so frequently on that other arm of the Murdoch empire, Fox News. It's all about strategic use of hyperbole to whip up the audience into a frenzy without actually delivering any answers. Once the mob is unleashed, the smart money can choose the solutions it wants without worrying that the mob has an agenda behind its destructive fury.

Or, as the Yorkshire Ranter puts it, you "provide a focus for indignation; something to get worked up about, or in other words, a piece of politics-without-thinking."

The other advantage of wild hyperbole is that it makes the merely stupid or self-interested views of those on your side of the argument seem more credible by comparison. So we now have Dawn Airey wading in with calls for the BBC to charge for services outside its main two TV stations and five radio channels.

It's stupid for a whole bunch of reasons, but mainly because Dawn seems to think that the web is a bit like TV only on a computer. I guess her thinking is that if you force people to pay for the BBC web site they'll stop going there and visit... the web sites of commercial TV stations where they can be fed contextual advertising? Huh?

If you shut down the BBC web site tomorrow, my guess is that the biggest beneficiary would be Google (although its servers would probably barely register the rise), followed by the national newspapers and then a slew of bigger-name bloggers. My guess is that Five's web site wouldn't see one iota of change.

What about a pay wall? Well, lots of people wouldn't bother any more, of course (in which case, see above). But those who did pay extra - who could afford to pay extra - would probably get their money's worth more by spending more time there than they do presently. Assuming there are a finite number of pay web sites these users are willing to subscribe to, such a policy would also rob a "commercial" web site of potential paying subscriber. And the BBC would generate revenue to invest in... even better commercial services!

In fact that's the last thing Dawn and her commercial TV buddies need. So what really ails them?

It's not the BBC. Well, not only the BBC. Beeb ratings are a fraction of what they were 25 years ago - and more people and watching more telly these days. The answer, of course, is multichannel television.

I have about 40 channels on Freeview. Eight are BBC channels - so its share of the bandwidth is 20%, against 50% 25 years ago. For homes with a satellite dish, it's a fraction of a percent now. It seems stunningly obvious to me that the real reason commercial TV is in trouble is that it's spread itself far too thin.

Sure, in the early days, stealing share from the BBC was an easy way to fund new channels. But there came a point of diminishing returns. Cannibalising their commercial brethren was inevitable. Advertisers still had a limited budget (have you any idea how cheap it is to put on a commercial at the moment?).

And when Sky spoiled (as in child; also, as in ruined) football in order to steal even more viewing hours, surely that was the end for the other commercial stations. Viewing figures are low, viewers have other pursuits (and much as Dawn might hate this fact, millions more hours are spent on Facebook and porn sites than on the BBC - check out the Alexa rankings...) and both the talent and the advertising budgets are spread too thin.

In fact, why isn't Dawn attacking Murdoch for failing to jack up Sky's subscription prices more? Why isn't she complaining about kids today not spending enough time glued to the gogglebox instead of interacting with their online communities? Why isn't she lambasting Sky for pumping so much money into the English Premier League that other football (her own UEFA Cup coverage, for example) looks shit by comparison?

The BBC is not perfect, by any means. But it's just like the NHS: I'm thankful every day that it's there. James Murdoch's ad hominem attack on Auntie Beeb is a carbon copy of Fox News's campaign against our health service. They must both lose.

PS. Just to be clear, I do think the BBC does need to change. I'd ditch BBC Three (the best bits could migrate happily to One or Two or be taken by their indie production companies to the commercial stations). I'd cap BBC bidding for recommissioning popular shows, allowing commercial stations to buy them up. (Why does Top Gear need to be on the BBC? I imagine it's very expensive; ITV would leap at the chance to show it; and I can't see someone like Clarkson curbing his style to satisfy car advertisers, can you?) And I'd shut down local radio. There would still be local reporting - via the web sites and local TV news. But local commercial radio is on its death-bed. (Actually, that last prescription might be too late...)

Bottom line? The licence fee is there to guarantee that we receive services that the commercial sector cannot or will not provide. That means outstanding and independent news and current affairs; in-depth investigations; solid gold documentaries; high art; science and religious broadcasting; drama and comedy from new writers; special interest coverage - particularly, for example, in music; and "crown jewel" programming - which would include even high profile sports where the governing bodies aren't too stupid to take cash over profile.

It does not mean Hollywood movies, lame sitcoms, celebrity lifestyle, property shows, most reality TV, most game shows, most US imports - anything, in short, that you can find on free-to-air commercial stations. Will that satisfy you, Dawn?

UPDATE: I've just read what the ever-excellent Felix Salmon has to say. Read the post: it kind of explains why he gets paid more for blogging than I do, although I think we come to fundamentally the same conclusions.

A quick one about iPhone 3.0

2009-06-18T16:26:00.003+01:00

A lot of people have been underwhelmed by the new iPhone firmware. Which is a bit odd. It's doing all the things they told us it would be doing, and pretty well for the most part. But the best things are the tweaks they didn't make a song and dance about. More on those in a minute.

Some of the new features we were told about are situation specific - I'm looking forward to my iPhone automatically logging on to BT Openzone hotspots, for example, which was always a pain under the old firmware. When we get to use those kinds of features, I suspect the upgrade will feel a whole lot more significant. Push, in-app purchasing, Safari autofill and the iTunes refinements also fall into those categories. (Also, proper satnav, when tomtom pulls its finger out and I decide it's worth the vast money they're sure to charge.)

Other developments are relatively simple tweaks or features that probably should have been in the original iPhone, so don't appear that amazing - I'm thinking MMS. But that's well implemented (once you've texted 1010 with the message "MMS" and been activated, of course) and looks like being really fun to use.

Cut and paste works well. I love the new Spotlight search. The landscape keyboard is much faster, even with fat thumbs. The new stocks app is lovely - I might even start putting individual companies in there now, not just indices.

Here are the things I'm loving that weren't flagged up. First, it feels faster. Maybe that's just the reboot effect, and of course some of the upgraded apps like Safari are designed to be faster. But it's still a plus. Second, when I added a couple of new apps, they didn't appear on my first menu screen - they went to screen two. That's important: most people designate the first screen with their most-used apps, so new purchases appearing there makes no sense. Third, I listen to a lot of podcasts - so the new controls on the iPod app are brilliant. I haven't tried out the mail button yet, but the "rewind 30 seconds" will be a boon to anyone who loses the thread during a podcast or radio show; and "play 1x, 2x 0.5x" option is perfect for fast forwarding through boring sections. Fourth, the camera is faster - and is it my imagination, or are the pictures slightly crisper? I'd need to take some shots in the same lighting conditions as some grainier photos from the old firmware, but they seem just a bit sharper. Also like the thumbnail view on the camera.

Overall, then, I can't exactly disagree with the people who say they're a bit deflated - this is not a brand new phone, it's true. But I still really like the refinements, and I'm guessing I'm going to keep on discovering new things to like about iPhone 3.0 for a while yet. And hey - perhaps I'm not the fanboy - perhaps the people who are disappointed are the real cult members. They're the ones who somehow thought this new, free software was going to Santa them up a magic new communications device.

UPDATE: Already, another nice hidden feature, courtesy of MacOSXhints: in Mail, if you select text in an email, then reply, only the selected text is quoted. Nice.

Apologies for the lack of updates

2009-04-01T10:56:00.002+01:00

I guess this is as good a time as any (i.e. the optimum time to deploy it as an excuse) to announce the birth of Heidi Angela Beryl Young on March 13th at 15:41. Although fatherhood is taxing, it's a very natural experience (so far) and I've been surprised at how much work I've been able to do. A big reason for that is my supremely capable wife, of course. More blogging this year, I promise. Despite the sleep deprivation.

All forecasts come right eventually

2009-03-04T08:10:00.000Z

Well, although I had some doubts about my predictive abilities, it turns out I am some kind of sage after all. The FTSE 1000 has hit 3,500 (near as dammit) and I'd say it's starting to look like "fill your boots" time. Almost.

The problem? Well, it's not downside risk - the headline index is unlikely to slide below that low of 3,300 plumbed six years ago. And it's not opportunity cost - where else are you going to invest right now?

It's liquidity and upside risk. First, only the very rich (and I don't know any of them) don't need access to a chunk of cash in case of emergencies right now. If household income degrades (a euphamism for redundancy) the mortgage still has to be paid and Sir Terry Leahy will want his cut. Second, things might not stabilise and move decisively to an up trend until the autumn. (Remember the old Market saying "sell in May and go away"?) By September, the market will have got its head around the recession and calmed down a bit. Low returns elsewhere will be making equities look much better again. And you'll have six months less of the recession to worry about when you're looking at your cash savings.

(Blast. That's another prediction - and another opportunity to be wrong!)

Want to see how we've all changed?

2009-02-24T10:33:00.008Z

Gmail is down. Wow. Looking at Twitterfall, it's a global phenomenon. And because Gmail is a) so widely used; and b) so fundamental an application, the outpouring of feeling is palpable.

Several emotions are evident. Surprise is common. Denial - which is usually associated with the early stages of grief, of course. There's some amazement. A fair smattering of disappointment. Anger isn't too strong a word for some users. Quite a bit of fear. And annoyance, of course.

Interestingly, many of the "annoyed" posts are directed at in-house IT departments (for supposedly limiting access to non-work email), ISPs (coz the problem couldn't be Gmail's) and at themselves - for relying on cloud computing.

The "fear" posts also tap into that nervousness about the cloud (what will do for SaaS sentiment, I wonder... guess it depends how long the outage lasts). But there are also lots of wry people - they seem amused that such an incredible thing could happen.

You know what I imagine this would be like? If aliens invaded Earth. I'd imagine the same set of emotions (for IT depts and ISPs, substitute governments, for example) afflicting us all - equally global, equally stunning.

UPDATE (10.54GMT): Interestingly, it appears I can still access Gmail via my iPhone's Mail application. Good news: both the Gmail back-end and my iPhone are robust and reliable. Bad news: I'd still love to have the Gmail front-end back! Also, IMAP synch from my desktop Mail.app is only partially working. Very odd...

UPDATE (10.59GMT): Mail.app now merrily synching with IMAP, although iPhone now also occasionally can't find the server. I wonder whether Gmail users all over the world are firing up and synching local mail applications, placing a heavy burden on the servers and bandwidth?

UPDATE (middayish): All good. And to all the Gmail haters out there, how fast did your tech support/ISP guys take to fix the last organisation-wide email failure at your domain? Longer than 90 mins, I'll wager...

Pop quiz: when did I write this editorial?

2009-02-19T11:14:00.001Z

A week before we went to press, National Express fired its finance director. As I’ve said before, it seems that a lot of FDs have left their jobs recently in “unfortunate” circumstances, seldom of their own doing.

In this case, FD William Rollason had been filling in as chief exec while CEO Phil White was on protracted sick leave. When White came back, Rollason left. “We need a more operational, hands-on, finance director rather than somebody who has a particular strength in the corporate finance area,” said the CEO.

Am I missing something? An FD who’s been with the company three years steps up to the top job. He sheds the old “bean-counter” image. And he does very well, thank-you very much, as chief executive for months. Then he’s dropped because he’s too versatile?!

I’ve really had it with defensive executives who can’t handle the modern financial manager. Don’t they get it? Once more, with feeling: the FD is one of the few people who can tell you hard facts about what is happening across every facet of the business. A good one, with strategic vision as well as the ability to report on the business and control costs, is worth their weight in gold. And they’re worth a lot more than White’s throwaway quip about his long-term illness: “The doctor said it was an aversion to finance directors.” Ha. Ha.

I’ll concede one point to White. We mustn’t forget to be prudent this year. That’s something the British population at large seems to have forgotten in [LAST YEAR]. Despite all the warnings, last year we borrowed £40bn against our homes and spent it on widescreen TVs and other luxury goods.

I’ve nothing against borrowing against your assets per se. Most FDs, even in this downturn, will be able to find projects that deliver returns above the cost of capital, especially with interest rates so low.

But how many of you would borrow to the extent that you were increasing profits to the tune of six per cent per year, then blow the dough on non-earning assets? That’s how much the national income increased last year thanks to home equity withdrawal, and much of it has gone to fuel the consumer boom.

While you and your fellow directors have been exhorted to apply the highest standards of corporate governance and look at the social and environmental aspects of your financial decisions, the masses are out their doing an Enron (well, almost). Even if house prices stabilise, the consumer boom is definitely over in [THIS YEAR]. There’s precious little equity left to borrow against; the credit cards are maxed out. It’s going to be a challenging year. So companies will need FDs with the *full* range of skills if they’re to exploit to the expected upturn in the last quarter.

"Twitter ye not"

2009-02-19T08:54:00.005Z

Just a maintenance post, and a chance to get something off my chest about twitter.

People seem to be using it all wrong.

OK, I know that's hardly fair: there's no "right" way to use something like a messaging service. And I'm following some very inventive feeds using it in clever, non-obvious ways. But it's medium that leads people to become egomaniacal and arrogant (especially as their follower numbers mount - which I think causes a form of Messiah Complex). Let me give an example.

A well-known specialist journalist of my acquaintance is a heavy twitter user. He likes it so much, he's said in the past that it might replace, for him, email and RSS feeds as a means of staying in touch with his interest groups. But subscribing to his twitter feed has been a painful experience. (He's not the only culprit - I've unfollowed lots of people for the same reasons I've ditched his twitter feed.)

There are three huge problems. First, as a twitter fan, he uses an awful lot of twitter shorthand. For those of us not au fait with the jargon, that makes them impenetrable. (New tweet conventions seem to spring up every day - some obvious, others positively runic.) I think that's unforgivable for a journalist. As professional communicators, what we write should be clear, direct and concise. The 140 character limit on twitter rewards directness and conciseness - but it torpedoes clarity in many tweets.

SOLUTION: tweet a lot less. Blog more - where you can write to the right length, then perhaps use clear, plain english tweets to flag up new posts. (Note: this journalist blogs plenty and does tweet new blogs... in between screeds of unintelligible tweets that make my head hurt.)

Second, twitter is a broadcast medium. But it encourages person-to-person communication. The number and proportion of this journalist's tweets directed with the "@" sign to specific individuals is huge - and most of them are utterly uninteresting to me as a result. Because I'm only seeing part of the conversation - and have no interest in following everyone my colleague follows - the signal-to-noise ratio gets even worse.

SOLUTION: tweet a lot less. If the conversation is one-to-one, for god's sake email. If it's a relatively narrow interest group, why not go to a group or chat-room - try using this for hot topics: http://www.tinychat.com/. If you tweet, you tweet to all your followers, and it seems rude not to address them all in that case.

Third, twitter is an over-public medium. Think of the internet cloud as a giant pub. If I want to talk to someone I know quietly in the corner over a beer, I use email or IM. If a small group want to chat about football or politics, hugger-mugger in a booth, it's a chat-room or perhaps a comment thread. If I have something I want people to read, I might leave a flyer on the tables or in the loo - put up blog post or a web page. Twitter, however, is the equivalent of the bloke in the pub who won't leave you alone. He has to tell everyone he's ever met there exactly what he's been up to - IN A RATHER LOUD VOICE. And he'll often bore you with stories about conversations he's had with other people (often people he barely knows). He's slightly shouty and a bit of a boor and he thinks everyone really likes him. (Let's just be clear: I'm not saying my journalist friend is like that - just that heavy twitterers can come across that way.)

SOLUTION: tweet a lot less. Why not do it only when you have a very open question that anyone in the pub might be able to answer? Perhaps use it as an online equivalent of shouting "there's a fight in the street!" - a public service to those in the pub: clear, unambiguous, concise and useful. Then if someone rushes out with you to take a look, you can discuss the brawl one-to-one without annoying anyone else.

In short... tweet a lot less. I'd like to follow more people - I like people, lots of people have interesting things to share - but there's a limit to how many tweets I can plough through in a day. If that limit is, say 200, and everyone puts up 5 tweets, that's 40 people I can keep track of. If two people stink up Tweetdeck with 50 a day each, then my twitter population halves.

I still follow my journalist's blog entries via RSS. He's interesting, well-connected and informed. Articulate, even. But his twitter feed is dead to me. My favourite US political journo, now a White House correspondent, is next... unless she calms the frick down. (Sadly, her blog is less frequently updated.) An expert in global accounting also need to re-learn the value of email, IM and texting (especially when she's being flirtatious) or she's on the block. (Her RSS feed is good, thankfully).

As the late great Frankie Howerd might have said: "Twitter ye not!"

Dead cat bounces

2008-09-15T12:33:00.000+01:00

While I'm far from being an expert, all this investment banking panic seems to present an market opportunity. I still think the FTSE100 will bottom out at 4,500 (give or take 10% - see, I told you I'm no expert...), but this Lehman nonsense will cause an overselling today and maybe tomorrow. That generally provokes a bounce. If I wasn't neck deep in National Savings, I'd be buying the FTSE at 5,000 and looking for 5,500 as a sell-out point before the bear run continues...

And so, a return

2008-09-14T21:21:00.003+01:00

Been a long time, but even now it's not business, management and finance I'm keen to commit to posterity. It's politics, and in particular the art of winning elections. This more than anything seems to be at the heart of the malaise that afflicts us - leaving us with lacklustre politicians and an intellectually crippled electorate.

Once politicians - actually, the political ecosystem - embraces "electoral strategy", it loses any need to deliver innovation or leadership. Skilled politicking becomes the chief decider of any election. It's easy to blame the media, and in particular press barons who fancy they wield true power by deciding who to back. In reality, I suspect politicians are only too ready to resort to crude electioneering as a substitute for winning over an electorate. The media are simply their means of expressing this baseness.

Was it ever so? I'm too poorly read in political history to judge. I'm sure Churchill was something of an expert in electioneering. But he had the fortune to practice politics at a time of polarisation - not least, of course, during the war. Radical polar opposites require politicians to take a line and stand by it, even if they sell their expertise with spin and polish.

Now, however, the famed "end of history" has left us with nothing but the spin. We're all agreed on liberal democracy, regulated capitalism and social equality. And politicians have seemingly stopped making judgments about genuine right and wrong; and/or they have decided that conventional wisdom is much more important than enquiry. Why bother investigating the drugs problem from the bottom up, say, when the top-down conventional wisdom is so well entrenched that nothing is likely to shift a majority from their ill-informed positions? After all, even if you accepted that a reformed drugs policy might deliver social, financial and personal improvements, such a policy would (at best) require a huge effort of leadership - and at worst, render the proposer electorally unviable for some time.

So we end up at the logical end-game: politics for its own sake. Professional campaigners defining not just the election itinerary or the billboards or the PPB - or even the manifesto (gahhhd - last time politics defined a mainstream manifesto, it sunk the party, Labour 1983). They define... everything. At all times.

We get David Cameron and George Osborne. (We should salute Tony at this point, a true pioneer being the first pure "electoral strategy" PM.) We get Sarah Palin. We get no idea of what we're voting for, because the electoral strategists know that standing for anything really definitive gives the opposition something to target. When politics is all about mud-slinging, why give the other side something to aim at?

Some people - Danny over at Times Comment Central sadly falls into this category - worship electoral strategy. They see it as the high art of politics, the definition of "clever". Purpose, vision, direction - they seem lost, or at least painfully naive in the face of clever politicking. And the solution? There is none. Oh, the Lib Dems can shout into the wilderness, but they exhibit plenty of the wrong attributes, too. And why wouldn't they? There's only so long you can fight the good fight before low blows and steroid abuse wear you down and you think the only way you can beat them is to join them.

I loathe it. And perhaps that's the only hope. If enough of us loathe it enough... perhaps things can change. But I fear catastrophic failure of our system and exposure of the pathetic games-players in the high offices of political parties will get us even close.

Blimey

2008-05-22T10:06:00.002+01:00

Has it really been six months? Well, if you're hungry for some Richard action, I'm back blogging at EquityFC.com (see link, right) and I'm also blogging for the ICAEW at their new online network ION - visit http://www.ion.icaew.com/itcounts/blog/ for more details.

You'll be able to tell that I'm on my uppers when I have the time to update this blog more frequently!

BPO - it's OK really

2007-11-01T09:28:00.000Z

I've been sceptical about finance function outsourcing (actually, BPO in general) since a FTSE 100 FD told me he'd love to bring his dull, process-driven teams back in house and re-locate that "feeling" about the business, its suppliers and customers he got from having on-floor feedback from the "drones". But I had breakfast this morning with a BPO expert who assured me that many of the biggest issues - contracts, service level agreements and pricing plans - are being addressed by great minds in the BPO and consulting arenas.

Hmm. Still sceptical. But one thing she said did ring true: the biggest BPO problem is clients. I agree 100% - if the client doesn't know what they want, how they want it to happen and where the trip-wires are, who can blame the BPO provider for locking them into an expensive screw-up? Which is why I always think that unless you've done two BPO deals before - and seen how they go wrong - you shouldn't try it (at least not for a company you love). Catch 22? Well, pick a couple of companies you don't like and do it there first...

Doomed, we're all doomed!

2007-10-15T09:25:00.000+01:00

I'm a bit of a doom monger. I've called the top of the property market at least three times (wrongly) since the mid-nineties, I'm sceptical about the stock market and really a bit of a neo-malthusian at heart. Worse, the current state of the economy - asset bubbles, financial market uncertainty, rampant consumerism, high levels of personal, corporate and government debt - means that this post about the parallels between the twenties and today is pushing at an open door marked "Richard's paranoia".

In short? Lack of regulation has encouraged the growth of an asset bubble and risky practices in financial markets that threaten to repeat the calamity of 1929. Add in social psychosis, environmental degradation, moral collapse and tribal conflict and... well, it ain't pretty. Run!

Not business, finance or management

2007-10-11T13:43:00.001+01:00

But pure genius, nonetheless:

Um

2007-08-29T09:34:00.000+01:00

What he said.

Well, up to a point. There are lots of private equity firms that invest in growing companies in need of capital, experience and contacts; and others that turnaround businesses that would otherwise fail - and they have my full respect. I know lots of guys in that line of business, and they work hard and get a buzz out of transforming businesses.

But these days "private equity" has become shorthand for the LBO merchants - who fall into three categories: merchant bankers (ugh), asset strippers (ugh) and megalomaniacs (ugh). Them, you can keep - read John Caddell at the above link for a fairly reasoned attack on them and their actions.

Facebook vs Linkedin

2007-08-01T14:25:00.000+01:00

I've just seen this blog posting about Facebook. Here's my reply about the relative merits of two social networking sites:

About a month after I joined Facebook - and found it great for both social and professional purposes - I got an invitation to Linkedin. I'd had them before, but I was now intrigued by my FB experience, so I joined and used the site to tell me who from my address book was also "Linkedin". I added them as connections, asking them to tell me whether they thought, as existing users, it was worth it. Everyone, out of about 40 users, said they'd joined but then found it passable at best. Most hadn't visited the site in the last year and couldn't see the purpose of it. They understood the idea - but in practical terms, it sucked.

Facebook scores because it fits my own personal maxim: "never do anything for only one reason". I'm not checking Facebook for professional connections, but my social network takes me back every day. Then when I need to find a contact for a feature (I'm a journalist) I can search groups, professions and companies and come up with people to get in touch with. and other people see more about me and my approach by understanding me socially.

My tiny poll also suggests that Linkedin (and the frankly scarily bad eCademy) fail because being on there just looks "pushy" and smacks of personal salesmanship. That's not as true on FB. Maybe the reticence to seem "proactive" is peculiarly British. But on FB, all my "friends" are Brits and they have no problem with "projecting"...

Not business, but...

2007-05-15T10:44:00.001+01:00

Colbert genius on Blair and Brown:

http://www.comedycentral.com/motherload/index.jhtml?ml_video=86802

Debs delight for the burger boys

2007-05-14T10:41:00.000+01:00

Apparently, Debenhams is looking for a fashion supremo. Well, no surprise there. Profits are down 40% and with PE gianr Texas Pacific Group still a major shareholder, you can bet that some feet are being held to the fire. Here's the thing, though. The PE investors have already cleared a huge return on their original investment. (Want to know how KKR might recover its $450m-odd commitment to Alliance Boots? Follows the Debs model and flog the property, natch...)

So if Debenhams folded tomorrow, there would be few tears shed. And that kind of burns me up. All of the other shareholders in Debs - many of whom will have bought in at the IPO for 195p a share - are looking at the current price of 148p-odd and wondering why they bought such a lame duck. After all, with no assets beyond a few leases and a brand, they'd get 87% of bugger all if things did take a turn for the worst, while TPG has already cleared its profit whatever happens to its 13% holding. As I say, I don't doubt they'll still push for their pound of flesh - and Debs is still profitable. But to say they have a long-term stake in the business in the same way as the other owners is... rubbish.

Oh, and TPG... that's the crowd who bought Burger King off Diageo - then flipped it like a Whopper with cheese kicking off the loudest howls of indignation around PE since RJR Nabisco.

And other sorts of accountants

2007-04-27T08:01:00.000+01:00

The Onion was one of the first things on the web for which I made a beeline every week - this would be about 1997, I guess. (For the record, Suck was the other piece of web brilliance I checked every morning... Ah, the days before blogs...)

Anyway, if you don't already know him, check out Herbert Kornfeld, the accounts receivable supervisor whose Onion column has been amusing me for many years. I'm not saying he's a role model, but he's doing his thing to shake off the dull accountant tag. WARNING: Herbert is pretty "street" with his language...

Communicatin' accountants

2007-04-26T18:51:00.000+01:00

For years now I've been banging on about how much more important communication skills have got for senior finance execs. Hey, the systems are doing all the number crunching and they're even moving into the analysis. So all you've got left is the strategy and the story-telling, right?

So it's a delight to find accountants who are truly brilliant communicators - especially when they appear on truly brilliant TV shows like the Colbert Report.

Sustainable business is good (in both senses of the word) capitalism

2006-11-27T09:18:00.000Z

Yep, all Dennis's shots about ethical businesses are hitting the target. But it feels odd to be having a discussion about sustainability here in 2006. I thought the dangers of the quarterly reporting cycle and the pressures on management to deliver for the short-term had been laid to rest when Enron and WorldCom showed their investors how dangerous it was to ignore long-term business objectives.

The problem, of course, is the free movement of capital. If shareholders had to hold equity for a minimum of, say, five years, they'd pressurise management to deliver sustainable growth; businesses that had true "density" - and that means great relations with staff and customers - would win out both in terms of market cap and revenues. That enforced holding is impossible to engineer, of course. But some investors do it voluntarily - Warren Buffett, for instance.

As an aside, I once had a chat with John Rishton when he was CFO at British Airways. Oil was heading north at a rapid pace at the time, and I asked how his financial planning was going. He said they had a few more months of their forward buying to unwind, so they were OK for the moment. But he also told me what a lousy investment airline shares were. I said I was amazed - surely he could explain why BA was a good buy. Not to hold, he argued. No airline has ever really made any money over the long term and the professionals simply watch the yo-yo of the share price and sell on the peaks to make their money.

In other words, there is no incentive for the airlines, individually or collectively, to operate sustainably. They see the long-term investors as fools and the ones who make money on their stock as bandits. We all know how they view a majority of their customers (cattle - and DVT, did you now, is largely down to poor air quality in the cabin so they can save money). And they're having a tough time with staff, too. Not, then, the model of the open, honest and fair organisation that can deliver for the long term.

China as a market

2006-11-27T08:49:00.000Z

Just heard Alan Wood CBE, chief exec of Siemens UK and speaker at the CBI conference, on the Today programme. He was being interviewed about the trend for foreign companies to buy UK businesses and argued that while this was not a positive movement, legal barriers to overseas acquirers were not appropriate. Instead, he said, British business needs to get more outward facing, seeing China and India not as sources of cheap labour but as huge potential markets - and the government should lobby to ensure they are as open to UK exports as we are to their imports.

All motherhood and apple pie (at least for a capitalist - he could hardly call or less free markets, although the leader of the capitalist world, the US, has plenty of funny quirks and folds in its free trade eiderdown). But then he said, (and I paraphrase) "We have to look at China as the single biggest market in the world."

Hmm. I wonder. Is China really the single biggest market? One might successfully argue that England and Scotland are different markets (especially for services - in goods, it's still probably advisable to operate off the logisticians' approach to geographic proximity when discussing "markets"), let alone Britain and Italy. Is Shanghai the same market as Zhuzhou or Chonqing or Xi'an or Urumqi? Is doing business in Delhi the same as in Cochin or Calcutta or Patna? You'd treat Lahore differently from Amritsar, but they're relatively close neighbours.

Perhaps that's the key: start thinking of true markets and not nation states. Yes, the legal and regulatory borders are still significant. But if we think of peoples by our own, rather crude and dare I say imperialist, categorisations, we'll never really be able to sell to them properly.

One day I'll round to publishing my thoughts on the death throes of the concept of the nation state...

Reporting: keep it simple, stupid

2006-11-14T09:19:00.000Z

A rather lengthy response to a post over at Dennis Howlett's place.

I, too, find it strange that we're having the debate on IFRS now - when the damage has already been done. I can understand why fair value accounting was seen as a viable way of taking company reporting forward, but the tools just ain't there. (And although I sympathise with Dennis's finance/HR alliance ideas, the fact is that in the vast majority of companies, HR is a substandard function that just isn't up to managing its people well, let alone coming up with viable ways of communicating their value.)

My view - based on nine years of watching what FDs actually do and hearing how they feel - is that we need to ditch the whole idea of comparability. So I guess I'm actually siding with the Big Four - although I agree with Dennis that they've been a bit disingenuous in how they've gone about this. Here's my thinking.

Most good managers don't run their companies to engineer reported results anyway. We've seen what happens when they do (Enron, WorldCom, iSoft etc etc) and those of you with an accountancy qualification know how much leeway there is in the standards even when (in theory) we can all agree on what they mean. Instead, they use a set of targets and metrics – many of which are shared, like ROCE – to monitor their performance and produce better results. Knowing what those targets are and how management is performing against them is surely more use to investors that how they’ve been filtered into a set of accounting standards. It also means companies can focus on the real drivers of their particular businesses, not some arcane way of segmenting their accounts that fits a theoretical notion of how you uncover value.

I was talking to an M&A adviser at KPMG the other day about the market research industry. He pointed out that it was almost impossible to compare any two businesses in the sector. "Evaluating MR companies is tricky because it’s hard to find true like-for-like comparisons," he told me. "Even with an Ipsos or a TNS, where you have a big group mostly involved with MR, they present their results differently and the only way to really compare them is net margins. But even then, with so many M&A deals going on, it’s hard to make real comparisons between them on like-for-like basis."

In fact, many professional investors already take a case-by-case approach. They get close to companies to understand them beyond the accounts – that’s what gives them an edge as professionals. Some like to focus on a couple of key metrics – Terry Smith once told me that all he was interested in was cash, and talking to management was just a distraction! I suspect many analysts and institutions already operate more like private equity managers now – they’re looking way beyond IFRS and into their own set of either unambiguous or tailored value drivers.

A majority of private investors don’t read the annual report and accounts anyway – or if they do, they’re more likely to be steered by the marketing bumpf at the front than the crowd of figures at the back. And a really smart investor looks at things they can see – joking aside, if you want to know which retail shares to buy, spend an afternoon in Bluewater or your High Street. If M&S is packed… well, you’re in possession of intelligence that won’t be in the accounts for another six months. Buy.

Bottom line: whatever happened to caveat emptor? By scaling back the accounting standards to a bare minimum that allows the banks, investors and the tax man to see a couple of key metrics presented objectively (cash! net margin!), you force companies to compete for finance on their own terms. And you force finance providers to take a much harder look at the companies they invest in. If that means some people get burned because they choose to believe outrageously optimistic statements or shonky metrics from management – well, that’s their look-out. Even my old mum knows that if something looks too good to be true, it probably is.

But the companies that do engage in transparency, the managements that have a track record of good risk management and delivering results – they’ll get the lower cost of capital that, it has been suggested, is the big benefit of these increasingly complex and prescriptive accounting standards. (Of course if FDs, analysts, investors and regulators all think accounts are more confusing under IFRS - and they are - then cost of capital will rise...) And if investors think management isn’t transparent? Big flashing warning signs should go off and that obfuscatory management should be removed.

The one glimmer of hope might be that the ASB and the IASB pursue the international FRSSE for all non-“public interest entities”. But they’d have to take some bold steps to simplify it still further. FDs and investors, I believe, would breath a sigh of relief.

Barclays: a step back in time

2006-10-20T09:01:00.000+01:00

Interesting that earlier this week Barclays appointed one of its former advisers as its new finance director. Naguib Kheraj is leaving in the spring - ostensibly to the timing is to allow the new chap, Chris Lucas, to be clear of regulatory handcuffs that prevent him taking a senior management role at the bank before the 2006 results are signed off. Why?

Well, Lucas is currently employed by PricewaterhouseCoopers where he is UK Head of Financial Services and Global Head of Banking and Capital Markets - and was Global Relationship Partner for Barclays from 1999 to 2004. That prevents him moving across until a decent interval is deemed to have passed.

Two things. First, what's up with Kheraj? A high-flyer, one can only assume he'll pop up in a CEO role in the not-to-distant. There's certainly no suggestion he was lame in the role (anything but), although he has suggested that he was fed up with the FD role and all the red tape that accompanies it in a large quoted bank like Barclays. In a year-old interview with AccyAge he said: "I wouldn’t rule it out [going for a chief executive role], but I think it’s unlikely. It’s more likely I would do something more akin to what I’ve done in the past, which has been to go back to advising on transactions or working in private equity. I don’t have any firm views at the moment." I guess his views have firmed up a little in the past 12 months...

Second, how long has it been since a major FD post was filled by someone directly from a professional services firm? Of course it happens, but I think the idea that a modern CFO could handle the job without some experience of business has faded somewhat. Time was when a highly technically skilled accountant could just step into the FD seat. But without that broader sense of strategy, of how operations work, about communication, about politics... well, it's just much tougher these days to be an effective FD. Lucas obviously knows Barclays well. But will he make a great CFO?

and interestingly, of course, they've gone from a CFO who wasn't an accountant to one who has no business experience. Feast or famine...

Ready for October 1?

2006-09-27T09:16:00.000+01:00

The new age discrimination laws are coming into effect on October 1 - that's next week. You don't even want to think about how easy it's going to be to fall foul of them, and there are sure to be a whole raft of test cases after companies leave subtle references to age in job ads, hand people a golden carriage clock on their 65th birthday (and then clear their desks), or tweak their benefits packages according to their decrepitude.

Ach, most of this kind of legislation is poorly drafted, over-fussy and fails to protect those most in need. But... smart companies do know that with age comes wisdom and experience, which are hugely valuable commodities. Just take a look at Anite Group, where FC Neil Bass is facing a taxing time in the absence of FD Christopher Humphrey, who's been out of action since earlier this month with health problems. He's set to be off for a few weeks yet, so Anite has brought in Geoff Bicknell, a seasoned FD with bags of experience in the IT services sector, to act as interim.

Geoff's seen it all - he was the FD who helped turned basket-case MDIS into rather more successful Northgate Information Solutions, for example. He's been around the block - and the world - a fair few times. Just the guy you need to mentor an FC in this situation - and proof that the senior memebers of the business community have a huge amount to offer, whether they're "protected" by legislation or not. More from Geoff on his interim experiences (and how his plural career is shaping up - "I started going into the non- exec arena, but a full time job, albeit for only a few weeks was an irresistible challenge," he tells me) when he's less busy!

Career watch

2006-09-26T09:17:00.000+01:00

Career Watch will pick up on moves news that includes a little background on the mover - to illustrate how FDs and other executives with a financial background are making their way to the top. We kick off with the new FD at Wells & Young's, the recently merger brewer. Justin Phillimore is a classic example of the modern FD. He's got sector experience (finance and business development director of wine and spirits company Seagrams - he'd been there since 1993) but took an important step out of the finance function as general manager of global business development at GE SeaCo - marine container leasing is about as far from beverages as you can imagine. That makes him a very smart hire by the boards of Wells and Young's - with that CV he's certainly a contender for the CEO job one day, and coming in only as the merged group takes shape, he won't be burdened with any historical baggage from either camp. Smart.

The perils of predictions

2006-09-22T10:04:00.000+01:00

Check this out: "Perhaps the most eagerly awaited accolade is the Personality of the Year Award. Among the candidates are Rona Fairhead, CEO of Financial Times Group, Alison Reed, group finance director at Standard Life, Jeremy Newman, managing partner of BDO Stoy Hayward, Dave Hartnett, director general of HM Revenue & Customs and Eric Anstee, chief executive of the ICAEW." That's a news item from the guys over at Accountancy Age announcing their awards shortlists. But I can't help feeling they're being a bit edgy with the names.

Alison Reed is just about to get dumped from Standard Life.
Eric Anstee has already departed the ICAEW.
Rona Fairhead seems to have grabbed the FT by the scruff of its neck, but her success at turning round a declining asset in a volatile market is far from assured.
And Dave Hartnett has got his hands full. "Months after the unexpected departure of HM Revenue and Customs (HMRC) chairman Sir David Varney, finance director Stephen Jones is jumping ship. The department is also trying to fill the vacant position of chief financial director." I wonder if he'll have time to attend the awards?

Perhaps "personality" actually means "newsworthy" and AccyAge is just looking for stories. Anyway, on that basis my money's on the accountant.

Bend like a Reed

2006-09-22T10:01:00.000+01:00

So, it's now pretty much official: FD Alison Reed is to leave Standard Life after less than two years in the job. There's still some speculation about exactly why, but her rumoured successor, Prudential's head of risk Andy Crossley, comes from a financial services background. So perhaps the thinking is that the retail experiment (Reed was FD at Marks & Sparks) has failed.

Except... There's a pretty solid precedent for a woman FD moving from retail to financial services very successfully. I'm talking about Helen Weir, of course, FD at Lloyds TSB which is a somewhat weightier beast than poor old Standard Life. Maybe it's something about those odd chaps in insurance... Anyway, as Weir once told me, one of the great things about being in the finance function is that you can see connections and learn lessons moving between sectors in a way that ops guys often can't.

Still, Reed won't be too upset. Her £900,000 pay-off is almost exactly what the average wage-earner could expect to receive in their whole working life.

Buy-out news

2006-09-21T09:34:00.000+01:00

I've got a passing personal interest in this story: "Incisive Media PLC, the specialist business information provider, has recommended a cash offer from Apax Summer worth 195 pence per share, valuing the group at £199m." I know FD Jamie Campbell-Harris a bit - he's been CEO Tim Weller's right-hand man for ome years and they're built the business up from virtually nothing. Now they, and COO James Hanbury, will have an 11.7 per cent stake in the busines as it goes private.

Weller started the original business, City Financial Communications, in 1994; Incisive was launched after CFC merged with Timothy Benn Publishing in 2000. But Campbell-Harris's story is our inspiration here. A CA who moved into treasury at Saatchi & Saatchi in 1994 after qualifying with PW, he became the ad giant's European financial controller in 1996 and then CFC's FC in 1998. The FD role came the following year. But that's a classic trajectory: accounting to a pure-play finance role (treasury), to a financial management role in a big company, then the same role in a smaller company in a related industry - proving his worth as a strategic partner to the entrepreneur to win the top job. Textbook.

(And well done to all on the deal!)

The odd couple: finance and IT

2006-09-21T09:17:00.000+01:00

In nearly nine years of reporting on finance directors and their teams, I've rarely come across an FD who doesn't have board-level responsibility for IT. (Many of them have have line management responsibility for it, too...) But I think we're starting to see sentiments shift.

I was chatting to Martin Craddock the other day - he's the former FD of Rank Hovis. "FDs are increasingly moving out of the IT role, simply because technology is no longer just about recording and ordering transactions in the finance function," he told me. "IT has become such a linchpin of so many activities in so many businesses that it’s becoming too important not to have its own voice on the board - although that remains a major debate in British business." That debate is happening: "What are the signs that IT is taken the right way?," asks Gary Flood in Computing Business. "‘When the IT director or CIO, being one of the highest-paid people, is sitting on the board,’ says Auridian’s McCormack. ‘Where he or she acts as the digital coach to the other people on that board – and where very definitely he does not report in to the finance director – that is never a good sign.’" [My emphasis]

Now we're talking mainly about larger businesses here, where there's scope for a seat on the board for, and a department beneath, an IT director. But this issue is equally important for growing businesses. How can you grow unless you have up-to-date technology to provide efficiencies and scalability in your operations? How can you put together a coherent business plan (for growth or for exit) without describing your IT strategy? But to my mind that means finance professionals - FCs carving this stuff out at the coal-face and FDs evaluating tech investments at the board - will always need those IT smarts. Perhaps we ought to accept that they also need someone alongside them - a true peer - to offer specialist support and strategic vision in IT.

UPDATE: And then I saw this feature from the same magazine. The case study is particularly interesting: "Unlike many CIOs, [Scottish Power's] Jim McEwan did not start his career in the IT industry. He was an accountant before moving into IT in the early 1980s." A-ha. Better yet: "To ensure the IT department’s plans match up to this [ROI] requirement, McEwan has his own dedicated financial controller, who ensures that all the numbers stack up before any business case is presented to the board. ‘It makes it much easier to have a good relationship with all the other finance directors,’ he says." That's what we like: finance integrated with operating and support departments - or even being the force for integration between all those silos in organisation. But the second article - by Sally Flood - does seem to contradict the first - by Gary - slightly...

It really is the best place to see how business works - and to make sure it works.

FC to FD - it's the operational skills!

2006-09-20T15:15:00.000+01:00

I'm going to be writing a lot about the move from financial controller to finance director here and elsewhere. This is a fantastic example: "Toby Mundy, founder of independent Atlantic Books UK, was among the publishers to look on enviously when Waterstone's overhauled its finances a few years ago. The country's largest high-street retailer squeezed its suppliers hard and ruthlessly streamlined its own stockholding, to the extent that it moved into 'negative working capital' - meaning that it generally sold books faster than it paid publishers for them. Now Mundy has decided he wants a little of that wizardry, and has poached Waterstone's financial controller, Tom Connor, to be Atlantic's first ever full-time financial director. It is not entirely a figures-driven appointment; Connor is known as an astute reader and observer of publishing." Brilliant: he's earned his spurs as a top-notch numbers man, clearly got a rep for some sweet financial strategy, made a visible difference to his organisation - and to top it off, he's known as someone who's in touch with the business. Ideal.

FCs at the IT coalface

2006-09-20T15:11:00.000+01:00

There's no room to be choosy about your roles at mid-sized companies, especially not if you're FD or even financial controller. So it's good to see an FC speaking out at the Best of British Manufacturing IT conference. "Nigel Nash, financial controller at vitamins and minerals supplier LycoRed, will describe how his company moved to an agile ERP environment consistent with food industry requirements, enabling it to compete with much larger rivals on flexibility, speed, lead times and quality of service." Getting stuck into this kind of project - which any ambitious FC probably will do if their business is even remotely up-to-date technologically - is an absolute must. Not only will it give you the technical smarts and project experience that look so good on the CV - getting a single view of the business you're already in can only make the job easier, more fun and free up time for more sophisticated (and interesting) analytical and strategic roles. Nice one.

UPDATE: Missed this story in a similar vein, quoting GNER financial controller Tim Kavanagh about the train operator's new EPOS system. Intimate knowledge of that kind of project is a major plus if you have ambitions outside the finance function, of course. But then, with the board clear-out at GNER last month - which saw rail division FC Tom Fielden promoted to FD - it's hardly surprising that there are opportunities there to get your fingers into different pies...

FD as a potential scapegoat (again)

2006-09-20T15:02:00.000+01:00

Big news over at Standard Life where it looks like FD Alison Reed could be on her way - as part of a wide-ranging management ouster. She's only been at the recently demutualised insurer for just over a year, and based on the press coverage, you have to wonder what she's been up to. "She was hired to help the insurer float on the stock market after unprecedented turmoil," argues the Guardian, "following rule changes by the Financial Services Authority two years ago, forced it to conclude it could no longer function as a mutual." But, er, surely former FD John Hylands was tasked specifically with the flotation project. Perhaps Reed has been characterised in this way to make a nice clean break for the business when she goes. If anyone argues about the way the demutualisation was handled, they can just point at her, Hylands (who was always going to leave after the float) and the other departing directors...

First post

2006-09-20T14:44:00.000+01:00

This blog will be my "dumping ground" - somewhere to post both personal and professional stuff that's awaiting some other kind of content management. More later...