Monday, January 31, 2011

Is Corporate Governance taken seriously?

In many ways the UK is considered a beacon when it comes to Corporate Governance - principally as a result of the 2010 Corporate Governance Code - but is it any more than window dressing?

Too many organisations - private, public and third sector - pay lip service to this important aspect of running a Board and company. Usually it is "added in" to a minor sub committee to report on once a year; and yet corporate governance has the ability to enhance the prospects of any company.

It is all about driving an enterprise forward whilst at the same time exercising prudent control.This must be obvious to all directors? Not really and little is likely to change when directors are often chosen via a "closed shop". Until we open our minds to the recruitment of directors and apply much more imaginative ways of selection, induction, development and appraisal then corporate governance is unlikely to change very much.

We have some building blocks in place - a sound Companies Act (2006), a patchy Corporate Governance Code (2010, a weak regulatory framework and some appalling laws which cut across the afore mentioned. How we arrange these blocks will dictate if we are heading for another spectacular collapse along the lines of RBS or Enron or taking a world beating role as the beacon of good governance.

No-one wants burdensome regulation but putting good governance at the top of a directors list of responsibilities will result in healthy businesses which allow the executive to drive forward from a firm foundation.

It would take little to transform corporate governance in the UK - and surely this would set us apart from other countries as a place for the reputable to do business? As a Chartered Director (there are still less than 1000 in the country) as a start EVERY listed company should have a CDir on the Board as a minimum within 12 months - at least this would show more than lip service to good governance.

To borrow from a leading expert in this field - Prof Bob Garratt - "A fish rots from the head"!

Friday, January 28, 2011

The Demise of Enterprise…UK

Without apology I copy below a blog post from George Derbyshire of the NFEA - a thoughtful and questioning article on the demise of Enterprise UK.

I read about the forthcoming closure of Enterprise UK with some sadness. I, and NFEA, have been involved since its earliest days, when three or four people camped out in space borrowed from the CBI in Centrepoint. Indeed NFEA director Sally Agass acted as interim Chief Executive on one occasion.

The organisation has some energetic and creative people and they can be proud of their achievements. Enterprise Week has certainly been worthwhile, as has Enterprising Britain (in which Enterprise Furness and NWES distinguished themselves.) I wish them all well in the future.

But of course Enterprise UK fell into the trap we advise all our clients about - it was over dependent on one source of funding. It only had one client and once that tap was turned off, it had nowhere to go. And the business organisations who make up its Board can’t be expected to take up the slack.

Indeed it could be regarded simply as an outsourced part of the operations of BIS.

I simply don’t understand why the previous Government felt it right to set up new organisations to carry out its wishes everytime it had a bright idea. All it did was create new bodies which inevitably had their own overheads and administrative burdens to carry, had no long term sustainability and which ran the risk of getting in the way of existing and more established organisations.

It would have been better all round to tap into the expertise of those of us who were already active on the ground, who had the experience, stability and dare I say low overheads to deliver the goods. This way the Government would have achieved its objectives and even strengthened the existing infrastructure.

But there is a wider point to be made. This is simply one example of the way the enterprise structure is being dismantled. The RDAs and BusinessLink are in wind-down mode and every week we are hearing about more closed programmes and business advisers being declared redundant. Third sector, voluntary and social enterprise providers - and enterprise agencies are just one part of a wide and deep network of providers - are not immune from this. The shockwaves are spreading widely across the business support pond.

The irony is that these independent organisations make up the Big Society that Mr Cameron is urging upon us - dedicated people, mission-driven, locally-based, quick on their feet and committed to their local communities. At a time when the state of the economy is causing renewed concerns, when unemployment is trending upwards and public sector job losses are being declared daily the need for a vigorous enterprise sector is, I’d have thought, obvious. We can help start new businesses, we can keep people away from unemployment, we can help others to move away from benefits and we can help businesses grow. But that needs a effective and comprehensive business support strategy. Wasn’t it a famous Conservative prime minister who growled “Give us the tools and we will finish the job!”?

Wednesday, January 26, 2011

How to make a LEP work.

As we progress into 2011 more detail is leaking out as to how LEP's will be structured. There is an amazing amount of goodwill from the business community towards LEPs and it is vital that those who are responsible for the governance take advantage before the enthusiasm wanes.

I have attended a variety of events around LEPs over the last 3 months and I believe that it is critical that each LEP outlines its objectives very early on. Having sat on a variety of Boards and Quangos over the years the common problem which they all face is not living up to expectations. This results from a wide ranging set of objectives which are designed to pacify vocal opinion at the beginning but become a heavy weight around the neck as the reality of delivery differs from the grand ambitions.

A good example of this happened this week at a meeting in Norwich regarding the "New Anglia" LEP. The presentations were tight with the shadow board indicating a concentration on the tourism and energy industries. Now it is arguable if these are the correct priorities but I commend the principle of concentrating on areas where an effect can be seen and measured. The question and answer session however turned into a "What about..." inquisition. The competing demands of the cultural, creative etc industries were all raised and whilst they are important the LEP with limited resources cannot make a difference across the board.

To me it is vital that the LEP concentrates its activities in a few key areas where they can really make an immediate difference. If not they will fail and the business goodwill will evaporate very quickly. It will be interesting to see which argument wins out...a focused narrow approach or a wide "everything to all men" one.

As an aside it is clear that financial resources will be sparse so how about this for one way to make a real difference? All economic officers, departments and budgets in every local authority in the LEP area should be given to the LEP to administer. In Norfolk and Suffolk I would estimate that this would equate to 100 staff and over £5m. It would then be for the LEP to decide on how many staff are required and what they do with the budget. Radical but I would bet that it would make a real difference. Business could then be tasked to match this sum. Perhaps via 1% extra on rates or by a "tithe" on representative movements which want a place on the Board such as Chambers, FSB,IOD etc. Say 10% of membership fees? Match this with UK government or ERDF funds and the budget is transformational.

I would not bet on the above happening but if a LEP just replaces an RDA or LSP it will become a toothless talking shop. If it does business differently such as above it could really become a powerhouse for economic good.

Monday, January 10, 2011

Tell the truth or what people want to hear?

I have always struggled with the concept of telling people what they want to hear rather than what you perceive to be the truth. As a result I am sure that NWES has lost some business as I refuse to compromise just to gain a contract. Is this the right way to do business? Many will call me a fool however my personal beliefs are what drives the company and whilst I will never be highly popular by "telling it straight" I do hope that I am highly respected.

In business there are two ways to look at the gaining of customers - a short term, transactional approach or a long term relationship strategy. I prefer the latter which means having an honest and open relationship with the customer. Often this means telling them NOT to buy your product or service and sometimes even going to a competitor who may be better placed to deliver a solution to that particular need. In a percentage of cases you will lose the business completely - especially with those individuals who are uncomfortable with the bare honesty. However the majority will respect your candour and the relationship will be strengthened. If there is no trust then there is no long term relationship.

In working with new and existing businesses we strive to always be independant and impartial with our advice - our reputation is too important to us to compromise it with short term "quick fixes".

In my experience however in working with government and major corporates they often want to hear platitudes which reinforce their held view rather than alternative solutions. As I have said before process is more important that outcome in many such cases. This is why we have seen the amazing growth in some firms who win major government contracts and then underperform - usually without sanction. A good example is with New Deal where recent research has indicated that it cost over £30,000 for every new job created. Compare this to NWES where for 10% of that amount we set up new businesses which are proven to be more sustainable than average and who also employ others. Are we asked to the top table to explain how we can do this? No. The truth is someties unpalatable and uncomfortable when it does not sit within preconceived viewpoints.

I live in hope that one day honesty and values are as highly prized as profit.

Thursday, January 6, 2011

Fond farewell or good riddance to Business Link?

So at long last the worst guarded secret in Whitehall is out in the open - Business Links will cease to be in November this year. I will wait until nearer the time before I pass my judgement on the demise but it is appropriate to look at the policies and services which are likely to replace BL.

We will see a new website which is to be welcomed. The current site has a wealth of information available albeit that it is sometimes difficult to find and moves to improve the navigation are to be welcomed. A telephone contact centre to back up the website is interesting as it would appear to be (from the latest BIS paper) that the individuals will only be there to access the website for those not digitally connected. I have concerns that the helpline could have very low satisfaction levels if they cannot deal effectively with client queries. This is not a directory enquiries type of operation and I will bet that the majority of callers will be looking for bespoke answers to individual questions not some form of "information dump". No doubt we will learn more as time goes on but I am not inspired at the moment.

The Enterprise Allowance has been resurrected which I am very pleased about as I raised this in a meeting with Mark Prisk some 3 years ago. The radio debate on the Jeremy Vine show on Wednesday 5 January was very interesting with many examples of successful businesses who started out in the 1980's thanks to EA. However the overriding fact to emerge was that nearly every caller ranked the help and support that they received from Enterprise Agencies as just as important if not more so than the funding. This is the missing element in the new EA. Mr Prisk it is not too late to put a great value for money support package in place to complement this welcome initiative.

I am dismayed at the hype surrounding the "mentor" bank which claims to have 40,000 mentors available. Firstly are these new mentors or just a restating of what is already out there with respected organisations such as the Princes Trust? Secondly for a mentor relationship to work it needs to be "matched" so that the right person is linked with the correct business. Without this there will be hundreds of horror stories which will blow any credibility that this scheme has. Finally who is monitoring the quality of the mentors? Will they be qualified or is it a free for all with unscrupulous individuals looking at personal gain through the relationships? I totally support mentoring being a mentor myself but it is not as easy as some people in government seem to think. When I see 40,000 individuals and their details on a website then I will believe the numbers but until then I am very wary.

The future of this country is indeed in the hands of an enterprising minority. I would like all support aimed at starting up new businesses with a good foundation and then allowing the faster growth companies to buy in support as needed - no more picking winners please. Just look back to the 1980's with the greatest jump in entrepreneurship seen in any western country - learn and repeat and we can look forward to another era of great prosperity.

Tuesday, January 4, 2011

From Public to Private

The government has made it clear that it sees a reduction in the public sector payroll to be a priority as it seeks to balance the books. The jury is out as to the real impact which will be seen as anecdotal evidence is that whilst there will be some job losses cuts are being made in third party contracts first. In the short term this will work but as "easy" cuts become exhausted there will have to be some overdue hard but necessary decisions made in town halls and government departments the length and breadth of the country.

So what is to become of those individuals deemed surplus to the public purse? Some will take the opportunity to grasp the overly generous redundancy/early retirement payments available and leave the job market, others will be moved "lock, stock and barrel" into the private sector as an outsourced service and the remainder will be at the mercy of the private sector job market.

What are the prospects for these folks - many of whom have only known the protective arms of the public employer? I would argue that for many the prospects are very good - if they can change their mindset and embrace wholeheartedly the opportunities afforded by private sector employers. From observation the main difference between the private and public sectors is that the private sector is focused on the outcome whereas the public sector places a greater emphasis on the process.

Many public sector employees have good transferable skills which can be of benefit to the dynamic employer. The challenge is for those individuals to identify and convey those skills more effectively. Most employers do not see experience in the public sector as important so a reliance on a CV which fails to explain how this can benefit a company are destined to fail. A change of attitude and an understanding of what is important to the private sector is important. A repositioning, demonstrating commercial awareness and how they present themselves, will reap its rewards - however speed is of the essence as there is a limit to the capacity of the private sector to soak up the surplus workforce.

For some this is a gilt edged opportunity to start up in business for themselves. It may be in a related area such as property management or a completely new start in the hospitality industry for example. Either way this is a real win for the individual and the economy as these new businesses will go on to create new jobs themselves. For me the best way that the government can ease the transition for public sector employees who lose their jobs is by investing in a bespoke public sector targeted business start up programme. This is surely what the Regional Growth Fund is designed for and it will be interesting to see if our political leaders have the foresight to invest in a programme which will enhance the wider economy for years to come.