Lessons in Staying Positive – #2

Words: 276. Reading time: 1 minute 4 seconds.

If you think businesses are struggling, take a look at Tesco: Group sales grew by 11.7% in the 13 weeks to 22nd November.

If you think Tesco’s is alone take a look at Primark: total sales grew by 21% in the year to Sept 13 and profits grew by 17%.

Not bad for an economy that is supposedly suffering badly and a sector that is said to be suffering more than most.

The argument that they have prospered because they are both at the ‘economy’ end of the spectrum is belied by the demise of Woolworth’s. Clearly, piling it high and selling it cheap is no guarantee of survival.

In a similar vein the media, even Governments, would have you believe that banks all over the world are in dire straits and that none of it is due to a gross neglect of duty by the regulators.

Take a look at the Lebanese banks. They are stronger than ever. That’s partly due to the way they conduct business, partly due to strict regulation. Well now, if they can do it, where were the UK Treasury and the US Securities Commission?

And that’s the second lesson: particularise rather than generalise. Generalising is marked by sweeping expressions that allow for no exceptions, such as:

· Everyone & No one
· Everywhere & Nowhere
· Everything & Nothing
· Always & Never
· Best & Worst

Who thinks they have heard reports recently that the FTSE 100 had its worst day ever? And who is aware that the FTSE 100 only started in 1984? Less than 25 years of comparatives doesn’t tell you very much, does it?

Even the FT30 index, which is the oldest continuous index in the UK and one of the oldest in the world, only began on July 1 1935.

Life survived and flourished even though a cataclysmic event wiped out the dinosaurs. The same is true today. Events that are wholly positive or wholly negative are rare events indeed.

Being First

Words: 467. Reading time: 1 min 34 secs.

The story is a familiar one. Some lost and weary traveller asks a friendly yokel the way to some distant location and is advised that it would be better if he did not start from here.

As we weigh up what resolutions we could make for 2009 I would offer the same wise counsel as that helpful country bumpkin – don’t start from here.

Typically, when we imagine doing something different, we start with some preconditions. We say, “When I have the resources, then I could do X and be Y”. For example, we say “If I had a diet that worked, then I could slim down and be a size 10”, or “If I had the time, then I could start writing and be a poet.”

These preconditions not only provide us with a handy excuse if we fail, they also start us off in exactly the wrong place – where we are now.

By following the ‘have – do – be’ route they focus on what we lack; the hard bit.

Only when that’s in place is there implied permission to look at behaviour [do].

Only when behaviour has changed can we tackle beliefs [be].

While this approach can and does work for some people, it is the more difficult approach to change. It looks to sheer willpower to put the first two elements in place before tackling the major roadblock to such actions – our beliefs.

Willpower has its uses, but it is a product of the conscious mind. It calls for considerable effort and is essentially a short-lived, power surge. If the conscious mind does not find resonance in the subconscious mind, then it’s no contest. The subconscious prevails every time.

Therefore, to put long-term changes in place, be they minor or major, we would be better advised to start with our beliefs about what we are being. If your desire is to be a poet then take on the mantle of a poet, think and act like a poet, live as if you are a poet.

In being a poet you will do those things that poets do.

In being a size 10 you will do those things that size 10 people do.

And in the being and the doing you will create those things you have to have.

The poet will stop watching TV, get up earlier and work throughout the weekends on producing verse.

The size 10 will experiment with the food and exercise combinations needed to fit into that dress size.

Use the power surge of your willpower to modify the environment in which your changed persona will operate – the food in the cupboards, the social calendar for the size 10, the alarm clock and the study layout for the poet.

From there the change, driven from the inside, will naturally feel at home.

Lessons in Staying Positive – #1

I was recently asked to deliver a talk entitled “Staying Positive In Difficult Times”. I accepted the invitation, but I changed the title.

The words we use are important. They reflect our thinking just as much as our thinking reflects our words. If times were difficult I would not want to stay in them, positive or otherwise. Nor would I want to stay positive under them, about them or while they last, although I might choose to stay positive through them.

I am equally twitchy at airports and railway stations where I am invited get on the train, or on the plane. No thanks! I’d much rather get in than get on!

And why would I wish to stay positive only in difficult times? Wouldn’t staying positive serve me just as well, whatever way “so-called” times turn out? If your outlook truly serves you well, it should do so whatever the circumstances. And if times were difficult would I want to stay?

The fact is the phrase “staying positive in difficult times” is a complete oxymoron and that’s lesson one: watch your language and do away with labels.

For someone who is positive times are neither difficult nor easy; times are neither happy nor sad; times are neither good nor bad. Times just are; they have no innate character that is true for everybody, everywhere, every when.

Times are what you make of them. It is quite possible for times to be both good and bad at the same time. Don’t take my word for it. Dickens said it most famously in the very first sentence of A Tale of Two Cities:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

Isn’t that just like now?

10.5 Routes to Innovation

I listened recently to an interesting presentation with the title: "Soft Landings: Don't hunker down in a recession - differentiate yourself". It was delivered by someone with the title ‘Innovation Director’ and the basic message was to set your business apart from the crowd by coming up with an innovative product or service.

While I gained the distinct impression of good management skills in relation to the processes that follow the original idea, there was little on offer about how to come up with the original idea in the first place. The two main suggestions were

a) brainstorming among fellow workers and colleagues, and
b) talking to people outside the business, e.g. customers, suppliers, universities.

Both sound perfectly valid options for a business already of some size, but small and micro businesses are rarely able to make available either the time, or the resources needed.

The sole entrepreneur, faced with a blank sheet of paper and a demand to “be innovative”, does not know how. In such circumstances “new” and “original” seem beyond them. The path of least resistance is to work harder, faster, cheaper and do more of what they already know.

However, all is not lost. There are ways that a small business can begin to stimulate thought and a fresh approach without spending quantities of time and money they don’t have. And your new ideas will be yours for free until you act on them.

It is very possible that this could be the time you make some kind of shift in a way that enables you to make a massive leap forward starting right now, all dependent on your willingness to look.

It can be much easier than you think to throw all the known rules out of the window for a while. You can get them back later if you choose and when and how you wish. For the time being explore the endless possibilities on many different levels.

Most people get hampered by thinking about what can't be done and who they are not. Rather, as you relax, think of what you could do and what you could become. There are always far more options that you could allow for as you begin to feel good about the future.

Here are some quick and easy ways passed those roadblocks of the conscious mind:

1) Start with what you do – what the client buys – not the label you apply to your job.

2) Without constraints or limitations, suggest other ways it could be done – when, where, how, who and why.

3) Whatever you do – what’s like it a) in the same sector, b) in adjacent sectors c) in unrelated sectors?

4) How could you deliver the same product, or service you do now into different sectors?

5) Go dictionary dipping: close your eyes, open a dictionary, place your finger on the page, take a look. What word did you point to? Pretend it has something to do with your business. How would you apply it?

6) Go Yellow Pages dipping using a similar technique. Whatever trade or service it comes up with – could you do that? How would you diversify into that sector? And how would you integrate your current business?

7) What hobbies do you, your family and friends enjoy. How do they apply to your business? In what ways could you use them to provide something that would differentiate you?

8) How is X like Y? How is accounting like a tree? How are electrical services like the moon? Find as many similarities as you can. Start with ten.

9) Benchmark the competition. What are they already doing that you could copy easily? And think as widely as possible. When it is a question of discretionary spending a package holiday could find itself in competition with a new car for the money.

10) Look at other diversified businesses. What strange combinations are there and in what ways do they work to support each other? Retailers offering insurance is one. Electrical retailers, e.g. Dixons, have offered product insurance on the goods they sell and made huge margins doing so. Tesco offers car insurance and sells it on the strength of its own brand name. What could you do?

10.5) Finally and perhaps most telling, true innovation may not be necessary. In any field of endeavour 80% of the money is earned by 20% of the players. What they do differently is but a tiny improvement on the competition, but the competition is generally so poor anyway that a small difference is all they need.

To help you stay where you are and to mine the “acres of diamonds” that are already there see David Winch’s article ‘Succeeding in spite of yourself’.

Change and Uncertainty

It is a common misconception that people fear change. On the contrary, people are change.

People change all the time – from the colour of their hair to the clothes they wear; from the book they are reading to the job they are doing. Even the cells in our bodies change – our blood is completely changed every 30 days.

It is not change that people fear, it is the uncertainty associated with change.

Faced with uncertainty your possible responses go beyond the simple alternatives of flight or fight. Psychologists now also recognise freeze (extreme vigilance while immobile), fright (“playing dead”) and faint. I have observed there’s a fifth – flap – and a sixth – flatulence.

Flap is extremely common in the business world and just as evident in Government. Earlier writers characterised it as “seagull management” based on the tendency of senior personnel to fly in, foul everything up and fly off again – leaving the troops on the ground to clear up the resultant mess as best they can.

Flatulence refers to the long-winded, bombastic, pompous and pretentious displays evinced most often by Ministers in reaction to a crisis. This adds greatly to the public spectacle, but does little to seriously address the root of any problem.

Think of Gordon Brown’s ‘saving the world’ as being equivalent to a local moggie making itself more impressive and threatening by raising its fur and arching its back, thus increasing its apparent size and power.

Mistakenly assigning your feelings of concern or resistance about change to simple fear could cause you to miss more meaningful information – like:
i) your unhappiness with the way the change is happening;
ii) your lack of concrete information about the way the change will affect you; or
iii) your dissatisfaction with a lack of genuine opportunities for your voice to be heard in the change process.

When contemplating the changes you face it’s worth recalling that:

* Change is part of everyday life; it’s part of the endless cycle of birth, growth and demise. You are part of that process, so make the most of it.

* You are not alone. Others will have been in the same boat in the past, some will be in the self-same boat you are and others will join the boat later. Share the problems and form a crew.

* When you know what piece of meaningful information is missing, you’ll know what to do.

* One person’s threat is another person’s opportunity. To quote an old adage – when life serves you lemons, make lemonade.

* The inspiration to live a life you’ll love will carry you long after the adrenaline burst from fearing a life you’ll hate has burned out.

We are often admonished not to be fearful; we should “pull ourselves together” we shouldn’t “be so negative” even though worry, fear, concern and trepidation are really useful signals that something may be happening and we need to pay attention.

If we harbour genuine fears then that is how we feel and that is what we have to work with. “Shoulds” and “shouldn’ts” are simply distractions. Going past the fear itself to the situation that evokes that feeling and finding which elements are important to us there is the best way to capture the value in fear’s early warning system.

That’s putting fear to its best possible use. To do the opposite – becoming exclusively focused on our own preservation, rather than notice what is going on – is to devalue the message.

By way of illustration, there’s a simple story to remind us about the value of focus.

A small plane is flying high over the Scottish mountains, when it develops engine trouble. There are five people on board: the pilot, Steve Redgrave, Gordon Brown, the Dali Lama, and a new-age hippie. The cockpit door opens, and the pilot bursts into the compartment.

"People," he begins, "I have good news and bad news. The bad news is that we're about to crash. The good news is that there are four parachutes, and I have one of them!" With that, the pilot throws open the door and jumps from the plane.

Steve Redgrave is on his feet as quick as flash. "People," he says, "I am the world's greatest athlete. The world needs great athletes. I think the world's greatest athlete should have a parachute!" With these words, he grabs one of the remaining parachutes, and hurtles through the door and into the night.

Gordon Brown rises and says, "People, I am the world's smartest and most serious politician. This is a serious situation and the world needs a smart politician like me. I think the world's smartest politician should have a parachute, too." He grabs a pack, and out he jumps.

The Dali Lama and the hippie look at one another. Finally, the Dali Lama speaks.

"Young lady," he says, "I have lived a satisfying life and have known the bliss of True Enlightenment. You have your life ahead of you; you take a parachute, and I will go down with the plane."

As cool as a cucumber, the hippie smiles slowly and says, "Hey, don't worry, dude. The world's smartest politician just jumped out wearing my rucksack."

The magic is not in the mushrooms, it’s in paying attention to what is going on around you.

"Fears are educated into us and can, if we wish, be educated out." – Karl A. Menninger.

All Change

You may have come across the phrase “if you always do what you have always done, you’ll always get what you have always got.” Notable speakers who have used it in the past include Penny Phang, Anthony Robbins, Jim Rohn, Chris Widener and Zig Ziglar.

I have even used it myself.

Newsflash from my banking clients: that’s (another) coaching myth.

In the past this little mantra has been used to challenge those clients who were stuck in a rut of working hard in a particular way with little success, but unable to come up with another approach.

In those circumstances pointing out the illogicality of continuing in a fruitless pursuit made sense.

But what of those whose strategy has a history of success, but who face more recent set-backs? Wouldn’t they want to keep doing what they have been doing in order to duplicate previous favourable results?

Certainly they will. However, circumstances have changed. Now they need to change too, in order to match the changed situation.

Once the environment shifts, then so must the approach you use. Doing what you once did will not give the previous outcome.

That much is obvious, so what’s the problem?

Every moment of every day every one of us has to make three choices, whether we are aware of it, or not:

1. We have to choose where to direct our attention;
2. We have to choose how to interpret the event or object that has our attention, and
3. We have to choose what action to take as a result of choices 1 and 2.

The peculiar thing is that many people (not you, of course) do not consciously make those choices, because they do not even realise there is a choice to be made.

The consequence is that such people, instead of consciously selecting an action, merely react instead.

They take no responsibility for what goes on in their heads and the subsequent outcomes. “Other people” are being difficult and “the world” is against them. Their behaviour is entirely derived from habit, conditioning and untested suppositions.

Increasingly, as the world moves on, those habits, that conditioning and their suppositions are no longer appropriate. It follows that the results such people achieve become less and less satisfactory.

The results we get depend on the choices we make we make, either consciously from applied thought, or unthinkingly from the subconscious.

It pays to remain aware of our choices; it maximises our chances of selecting an appropriate action that matches the present circumstances.

At the height of the banking boom a highly successful broker drove his brand new, top the range Ferrari down Wall Street and pulled into the kerb to show it off to his friends. As he opened the door to get out the door was suddenly and completely ripped off by a passing truck.

The broker was outraged. He cursed the trucker. He screamed about the cost of the car. He yelled that the body repairers would never get it to look as good as it did new. He wailed about all the expensive extras that he had had fitted.

A New York cop pulled in behind the Ferrari with his strobe lights flashing. He told the broker to calm down. The car was no more than an expensive toy. And did the broker even realise that the truck had torn off half his arm when it passed? At that moment he was bleeding profusely over the sidewalk.

“My God!” the broker shrieked, “My Rolex!”

Sitting Pretty

Additional long-term capital would be welcome. It would surely act as a ready buffer against future shocks and yet more trying times.

But some clients are beginning to feel left out of the party as the rate of economic growth slows. As the total of taxpayers’ money being gifted to banks and financial institutions grows day by day they are tempted to cast an envious eye in that direction.

While I can appreciate the sentiment I regard the prospect as a siren song leading to potential tragedy.

Once such a comfortable cushion is in place it is all too easy to regard that as the solution: nothing more need be done. The company can now sit safely on the, albeit diminishing, cushion and watch as events pass by.

Nothing could be further from the truth.

Either the cushion will continue to diminish until it disappears completely, leaving the company worse off than before.

Or the crisis will end and your competitors will be stronger and better prepared than you, having benefited from the hard lessons imbibed while weathering the storm.

Liners may carry lifeboats, but your chances are improved by learning to swim.

Depending on the benevolence of others for your own survival is never a good idea. Those that ride to the rescue today will, unlike the good Samaritan, impose their own conditions tomorrow – as the bankers will shortly learn.

Any coaching I give is directed towards each client learning the rules of the changing markets conditions, as they apply to him or her, and then working out his or her own solution, whatever that may be.

That may not sound easy, but this is not economic Armageddon, despite what the newshounds will tell you.

There is still plenty of business out there – at least as much as there was 2-3 years ago.

If you were in business then, you were probably doing nicely.

You still can be.

Once upon a time a wise King, concerned about the unrest and discontent among his people, invited them all to bring their burdens to him. He promised to listen and to help, if he could.

They came from near and far, each carrying his own burden, which they laid at the feet of the King. Then one after the other, each rose and told his story.

When the tales of woe were finished, the King spoke: “You have heard your neighbour’s story. If anyone wishes he may now exchange his burden for another’s.”

Silently his subjects looked around, then silently picked up his own particular burden and quietly walked away.

Everyone nods

Everybody nods.

In the years leading up to the collapse of the South Sea Company in 1720 there was an increased potential for foreign trade. Consumerism was on the rise. Wealth and luxury were no longer reserved exclusively for the aristocracy.

The company was promised a monopoly of all trade to the South American Spanish colonies.

Everyone agreed that the future was set fair. Everyone nodded.

But through a web of deceit, corruption, and bribery that included both company and government officials it was grossly oversold. The trading concessions barely materialized; the company had a very shaky commercial basis.

The company’s share price fell from a peak of £1050 at the end of June to £175 by September 1720, devastating institutions and individuals alike.

The bursting of the bubble, which coincided with the similar collapse of the Mississippi Scheme in France, ended – temporarily – the prevalent belief that prosperity could be achieved through unlimited expansion of credit.

In the later 1990s the new internet sector and related fields were the place to make your fortune. Everyone nodded.

A combination of rapidly increasing share prices, individual stock market speculation and widely available venture capital created an environment in which many of the internet based companies dismissed standard business models. They focused on increasing market share without regard to the bottom line. That would take care of itself.

These companies expected that they could build enough brand awareness to charge profitable rates for their services later. The motto "get big fast" reflected this strategy.

But the bottom line didn’t and the companies couldn’t. The dot-com model was inherently flawed.

Even if the plan was sound, there could only be, at most, one network-effects winner in each sector. Yet there were a vast number of companies all with the same business plan for the same respective sector. Therefore most companies with this business plan faced inevitable failure. In fact, many sectors could not support even one company powered entirely by network effects.

The dot-com bubble crash wiped out $5 trillion in market value of technology companies from March 2000 to October 2002. Add to this the write-downs by the venture capital community which, to name but three, include at least $280 million for kozmo.com, $160 million for boo.com and $65 million for MVP.com.

And so we come to recent times. The bankers announce they have found a way of lending the same money many times over and, even if it is lent where there is a high risk of default, it’s still safe. And everyone nodded.

However, these events and those like them down the years are merely the tip of the iceberg. These are just instances of high–profile, bizarre and reckless conduct. There is just as much perverse, incomprehensible and destructive business behaviour to be found in everyday dealings.

For example, a recent, cash-strapped client who offered 90-day credit to his customers because, “that’s what this industry does.” Everyone nods.

For example, a business acquaintance who cut back on his sales and marketing expenditure in anticipation of a fall in customer volumes (everyone nods) happily reporting that’s what actually happened.

For example, a company, anxious to have its employees engaged with the business (everyone nods), commissions a consultant to conduct a survey in order to discover what its people think.

For example, the business that is doing things in the same way as its competitors (everyone nods), yet expects a result that will show them as being exceptional.

The human animal is tribal. That is not the same as having a herd instinct. We can think independently if we chose; we are more likely to succeed if we do.

In 1841 Charles Mackay published his book "Extraordinary Popular Delusions and the Madness of Crowds", often cited as the best book ever written about market psychology.

In May 2004 James Surowiecki published The Wisdom of Crowds.

In the light of subsequent events, perhaps Mackay had it right after all.

Coach or Consultant?

I was asked recently about the difference between an adviser/consultant and a coach.

It’s a valid question and, while I answered it after a fashion, I have been mildly annoyed ever since that my response was not better.

This is my second try.

Someone who is looking for a consultant or an adviser is a person who expects to be told the answer. It is a childlike, submissive approach; one where the power has been passed to another by someone who believes they lack sufficient resource themselves.

Someone who seeks a coach is a person who wants to find the answer and do the work themselves. They accept the responsibility, assume control and are determined to shape their own destiny. However, they are adult enough to recognise that sometimes they need the independence and questioning skills of an outsider to help them make the best of themselves.

To adapt from The Prophet by Kahlill Gibran:

Advisers/consultants bid you enter the house of their wisdom;

Coaches lead you to the threshold of your own mind.

Believing Is Seeing

We are so lucky. As consumers we are blessed with so many offers of help and assistance – so many that it’s difficult to choose between them.

· You can’t get better than a Kwik Fit fitter – they’re the ones to trust.

· Halifax will pay you 60 times more than the others could.

· L'Oreal – because you’re worth it.

…and, if all else fails, there’s always the DFS sale.

Aren’t these companies good to us?

In business we are equally fortunate. Wherever you turn there is someone offering to do it cheaper…or faster…or bigger…or easier. Just about anything you might – just possibly – regard as a problem can be instantly fixed by picking up the phone and inviting the Merlins of the market into your business.

Whether it’s finding more clients, getting your invoices paid, dealing with your staff, or optimising the internet there are a plethora of individuals, partnerships and companies ready and waiting with sure-fire panaceas.

How could you go wrong?

Likewise, if it’s your business itself that’s the problem, then never fear. There are any number of know-it-alls prepared to tell you how you should run it. Hell, for the right amount of money paid in advance, they’ll even do it for you.

In the quiet of the wee, small hours I sometimes wonder how we mortals so often get it wrong when gold-plated success is so easy to come by. Were we out of the room when they handed out all of the answers?

I doubt it.

Before those outside our business can even hope to make a contribution two things have to happen:

We have to believe that the suggestion they have to offer will actually work for us, and

We have to believe that particular firm or individual is the right one to work with us.

Whatever the ‘fix’ is, we have to buy into it ourselves, mentally and financially, before opening the door. Unless we first experience that mind-shift the ‘fix’ is likely to be doomed before the project even begins. Hesitancy in accepting the proposed solution is probably behind most of the failed consultancy projects. And most consultancy projects fail.

There is a threat to any business from someone who thinks they know better than you how to run it. Maybe they do know better, but it is still your business. However good their ‘fix’ is on paper, you will modify, undermine, sabotage and destroy it – perhaps subconsciously – if your pattern of beliefs do not shift accordingly.

So crucial are your beliefs and associated values that it would make most sense to start with those first, before you call the Merlins. At the end of the day you will probably find you can do without the outsiders, because you will have much better ideas yourself.

Migrating Your Business

Faced with the plans, goals, targets and objectives necessary to migrate our business, from where it is to where we want it to be, it is easy to become overwhelmed. Indeed, it is so easy to become overwhelmed that some people actually end up doing nothing at all, paralysed by those daunting challenges.

Of course, such people are not totally inactive, far from it. They give the appearance of being the busiest people in the office as they collect mounds of data and reams of analysis about all the challenges they face.

However, there is no outcome, for they never reach a conclusion. All that activity is merely a smokescreen, a security blanket, a substitute for the action they should be taking, but never get round to.

When faced with overwhelm one remedy is to take a lesson from the animal kingdom. Since autumn is approaching the goose sense used during their annual migrations is a lesson as powerful as horse sense.

When you see a flock of geese heading south for the winter, you will notice they fly in a characteristic "V" formation. That way, as each bird flaps its wings, it creates uplift for the bird immediately following. The "V" formation adds at least 71 percent greater flying range, for the flock as a whole, than if each bird flew alone.

Who else do you know that is heading in the same general direction as you? What opportunities exist to draw on their experience and leadership? How can you and your firm use their “slipstream” to help ease the hard work sometimes needed in order to make any headway? Would you really like at least 71 percent greater flying range?

However, do not expect such assistance to be entirely altruistic.

When the lead goose gets tired you can expect it to rotate back into the following flock while another goose flies point. Depending on circumstances, resources and the skills required sometimes that goose will be you. That’s because it makes sense to take turns doing demanding jobs.

You will also hear the geese behind honking to encourage those up front. Note that the honking is there for encouragement, not criticism. When you honk from behind – figuratively speaking – what is your intent? And is that intention realised?

Finally, when a goose gets sick or is wounded by gunshot, and falls out of the formation, two other geese fall out with the injured bird and follow it down to lend help and protection. They stay with the fallen goose until it is able to fly again, or until it dies; and only then do they launch out on their own, or with another formation to catch up with their own group.

How many businesses have the corporate sense to offer mutual support in the face of economic ills, market malaise and the continual sniping from Government and financial institutions? And is yours one of them?

Perhaps the humble goose is not quite so silly after all.

Business in Progress

Recently a leading think-tank, the Ernst & Young Item Club, said that the economic outlook for Britain is like a "horror movie".

In my opinion that is a contrived exaggeration designed to catch the attention of the media.

One wonders what metaphor they would possibly have substituted if they had been commenting in 1926. However, there are so many doom merchants plying their trade at the moment that trying to go one better might be expected.

So, just how bad is the economic outlook as seen by the Item Club? What constitutes a “horror movie” these days?

Growth in UK GDP during 2007 was 3.1%. The Item Club expects growth of 1.5% in 2008 and growth of 1.0% in 2009 before it returns to 2.5% in 2010.

Growth????

Oh, yes! Ernst & Young are not forecasting a recession … far from it. They are expecting that the UK economy will continue to grow.

This is about as close to a horror movie as Willy Wonka and the Chocolate Factory.

Even if things turn out worse than Ernst & Young’s choice of prose, professional firms need to get a sense of proportion. In the US Great Depression 1930-33 the reduction in the level of GDP from peak to trough was a fall of some 30 per cent.

That means that some 70% of output was maintained, although the exact figures will have varied from sector to sector and firm to firm. Nevertheless the point is well made that business continued to happen. Some people even did remarkably well out of it.

Therefore, what you can be sure of is that, no matter how poor the economy gets, substantial amounts of business will still get done.

The only question you need to answer is whether you will be among those doing that business.

There is a recognised 3-step process that will help you towards a positive answer:

1. Raise your standards. Increase the levels of service that you provide and the attention that clients receive. Satisfactory is not good enough, either to win new business, or retain existing accounts.

2. Change your beliefs. Who your prospects are, where they can be found, what they want and your capacity to meet those expectations all need rewriting. The world has moved on; you need to keep pace or you will be left behind.

3. Revise your strategies. Whatever game plan you have been following is now familiar to all your staff and most of your competitors. It’s predictable. “A skilled commander seeks victory from the situation and does not demand it of his subordinates” ~ Sun Tzu.

For the outlook to be perceived as bad is nothing new.

Recently, Sam meets his friend Joe in the Arndale Centre and greeted him warmly.

"Hi Joe, I haven’t seen you for some months. So how is the company doing that you set up with Maurice last year?"

"Well,” said Joe, “As I told you then, I put in all the money and Maurice put in all his business experience. But things have changed a bit since then."

"What do you mean?" Sam asks.

"Now Maurice has all the money and I have all the business experience."

The wisdom of making mistakes

We all make mistakes. And fear of making mistakes too often keeps us frozen in indecision and inaction. However, it is rarely the mistake itself that is the real problem. More often it is the consequence we expect, the outcome from the mistake that blocks our moving forward.

That fear is misplaced for four main reasons:

Our fears may be groundless or, at least, exaggerated. Fear is only felt in relation to potential future events. Nobody fears the past since it is already known and experienced. However, potential events are not real events. They may never happen as we anticipate and we cannot know how they will happen until we take action. How often has some dreaded eventuality turned out to be not so bad after all?

Mistakes may be more apparent than real. What we judge to be a mistake in the short term can eventually emerge as a breakthrough. History is replete with such events. Artificial sweeteners, X-rays, microwave ovens and vulcanized rubber are just a few of the inventions that owe their existence to chance.

We learn from our mistakes. It has been said that success teaches us very little, whereas failure carries valuable lessons. Our failures cause us to pause, take stock, work out what went awry and then modify our approach. Success is often taken for granted. We pat ourselves on the back, congratulate ourselves for being so smart and move on. We rarely stop to work out what elements came together to deliver such a great result.

Indecision and inaction is itself a decision – hence the expression ‘damned if you do, and damned if you don’t’. With a decision made and action take you have intention and a degree of control. With indecision and inaction one is subject to the variable winds of fate and fortune, and the decisions and actions of others, never know where one is likely to end up.

Then there are those mistakes that only appear to be foolish, but conceal a deeper wisdom:

One day a beggar appeared in the marketplace. Whenever people showed him both a large note and a smaller note he always chose the small one.

Eventually, a generous man who was tired of seeing everyone laugh at the beggar quietly went over to him and explained that when people offered him two notes, he should choose the larger one. Then he would have more money, and people would not think him a fool.

"You are surely right", replied the beggar. "But if I always choose the larger note, people would stop offering me money, in order to prove that I am a greater fool than they are. And then I would no longer receive enough for my food. There is nothing wrong with appearing to be a fool, if what you are doing is in fact intelligent."

Take a Reality Check

I don’t know exactly how your business is going, but there is one thing of which I can be certain: it could do be doing a whole lot better. And, when you finally pause for a moment of quiet reflection, you will realise the same thing. It should come as no surprise. It applies to all of us.

What stops us improving our performance? Quite simply, we know too much.

We are the experts in our business. We spend most of our waking hours either working in it, working on it, or thinking about it.

We may even spend our sleeping hours dreaming about it.

The consequence is that when we need to get unstuck; when we need more options to choose from; when we need to stay on track, knowing so much means we either recite all the reasons why not, or we end up being overly complex and abstract.

When we want to clarify our thinking, identify the real issues and reach a better solution an external reality check is always useful. Working on the immediate issues with someone who is not so closely involve, who can take a more utilitarian approach, can do wonders.

They can usefully cut through all the moonshine and ask the sort of intensely rational, down-to-earth questions that clears the fog of self-obsession, like: “Yes, but what are you actually going to do and when?

A young engineering graduate fresh out of Cambridge was being interviewed recently. As the end of the job interview approached, the HR Director asked, "And what starting salary were you looking for?"

The engineer said, "In the neighbourhood of £140,000 a year - but depending on the benefits package."

The HR Director said, "Well, what would you say to a package of 6 weeks paid holidays, full medical and dental cover, a two-thirds final salary pension scheme and a FX company car renewed every 2 years starting with…say…a red sports Mercedes?"

The Engineer sat up straight and said, "Wow! Are you kidding?"

And the Director replied, "Yeah, but you started it."

Make Room for Change

Change is both needed and constant. Our bodies undergo change as cells are renewed. The composition of society changes as births and deaths occur. The weather changes and so do the seasons. People, businesses and economies change.

Change permeates the entire universe in one form or another.

If you are going to change something, do something new, it will have to displace something old. Any new initiative, habit or practice, any new article, structure or possession will displace some custom or thing that went before.

It is impossible for it to be “as well as”. Nature abhors vacuum.

If you are about to adopt a new behaviour it may replace a rest period, or mere idleness rather than a present activity or routine.

If you are about to acquire either an object or a building it may occupy a previously uncluttered space or an unused field rather than be a substitute for a current possession or an existing edifice.

Either way, something has to go. You have no empty corners, although there may be some non-productive ones.

This means you have to make room for change. That’s true whether the change is one you make on your own initiative, or one that stems from actions by some third party.

However, even when the trigger event is not of your making, the decision to make the resulting change is still yours. None of us can escape that responsibility, even though we may wish so at times.

Whatever the circumstances and whatever our wishes other people may not welcome the change. As Joni Mitchell wrote in her song Both Sides Now: “now old friends are acting strange, they shake their heads, they say I’ve changed”.

Also, it may not be possible, or advisable, to put boundaries around change. Change in area 1 may knock on to area 2. Sometimes this gets labelled as ‘unintended consequences’ or, more prosaically, as ‘collateral damage.’

Just as the responsibility for making the change is ours, so how others view the change is theirs. We cannot make that choice for them, nor accept either praise or blame for their feelings. For some people change is always a pig with a straw in his mouth.

It is a fact that we cannot ‘make’ people happy or sad, angry or unruffled. Each of us is accountable for how we decide to represent particular events to ourselves. “It is neither good nor bad, but thinking makes it so.” ~ Shakespeare.

And as Joni Mitchell also recognises in her song it’s not necessarily all bad: “something’s lost, but something’s gained in living every day”.

On occasion resistance to change may be the right thing to do. Only you can judge, but if you call it wrong it may mean you get run over in the headlong flight to the future.

If you see the change in question as beneficial, or inevitable, then welcome it rather than joining the carpers and cavillers. Don’t live a midget existence. Helping to steer an otherwise wayward vessel may mean the eventual landfall will be a harbour more to your liking.

Preparation

"It is better to be prepared for an opportunity and not have one than to have an opportunity and not be prepared" (Whitney Moore Young Jr.). As the economy shifts under us, moving from one phase to the next, some preparation for what might be ahead will promote our chances of capturing the opportunities that will be there for the taking.

We may be sure that opportunities will exist, whatever the circumstances.

If house prices continue to fall there will be bargains available to those willing and able to take advantage of them.

If oil prices continue to rise then oil reserves, previously uneconomic, will become worth drilling and refining.

If food shortages spread, then more land will be brought into cultivation, farmers will prosper and agricultural land values will increase.

It’s an open secret: in good time and in bad opportunity consists of looking at the same thing as everyone else and thinking something different. Preparation consists of dreaming what might be and devising contingencies to deal with that situation should it arise.

Most situations will not actually occur. Those that do will not be exactly as we planned. Nevertheless, the fact that we have been thinking ahead makes us better prepared, sooner than those that have just waited to see what turns up before they react, if they ever do.

In business we often find ourselves wrestling with current demands and misadventures. Our days are spent fire fighting, leaving no time to worry about tomorrow. However, this approach, while apparently sensible and seductive, will mean we continue to fight those fires day after day. Being busy will be no protection when the roof caves in.

With the future in mind it is often easier to spot opportunities as they arise. Without that mental preparation the chance goes unremarked. We are familiar with this phenomenon from our own experience. Having bought a new car we immediately notice how many other similar cars there are on the road. Before making the purchase we were totally unaware.

By way of illustration:

Sarah has just left the house after a blazing row with her husband. She was taking a quiet walk to calm down when she notices an unusual funeral procession coming along the road towards her. At the front is a large black hearse and 20 yards behind this is a second black hearse. A solitary woman is walking behind the second hearse with a large, well-groomed Rottweiler dog on a lead. Behind the woman are 50 other women walking single file.

Sarah is very curious and goes over to the woman with the dog and says, “I’m sorry about your loss.”

“Thank you,” says the woman, “you’re very kind.”

“I know it’s a bad time to ask,” says Sarah, “but whose funeral is this?”

“It’s my husband's funeral,” replies the woman.

“So what happened to him?” asks Sarah.

The woman replies, “My dog attacked and killed him.”

“And who is in the second hearse?” asks Sarah.

The woman answers, “My mother-in-law. She was trying to help my husband when the dog turned on her.”

A poignant and thoughtful moment of silence passes between the two women.

“Can I borrow the dog?” asks Sarah.

“Go to the back of the line,” replies the woman.

Creative Marketing

As professionals we know we need to market ourselves and our businesses. However, for some of us marketing is, like Churchill’s Russia: a riddle, wrapped in a mystery, inside an enigma.

One simple definition of marketing might be “the techniques used to attract and persuade prospective clients”.

A more far reaching definition might be “the management process that anticipates and identifies customer requirements and devises an appropriate offering efficiently and profitably”.

Yet, whatever way one defines it, the whole process seems fraught with uncertainty while taking the spectral form of a bottomless pit for money and resources.

But, on second thoughts, does the gloom in this picture owe a large measure of its murkiness to the artificial separation of marketing’s black art from everything else we do?

Is marketing truly some arcane, ritualistic necromancy wholly divorced from the daily round?

Do its witches and warlocks have to conduct their cabalistic practices in dank and dingy corners for it to be fully effective?

Or can we bring some of its brighter, more benevolent aspects to our every day dealings?

In delivering services to our clients it is obviously impossible to separate us as a person from the product we provide. Thus the way that we interact with prospects, patrons and the public at large carries a marketing message.

Either we are smart and courteous, or shabby and slipshod.

Either we are calm and concerned, or we are distracted and dismissive.

Whatever our attitude it conveys a clear message, whether we wish it to, or not.

Since we are unavoidably committed, cross-examined and condemned to some form of marketing then it can only be beneficial to pay attention to the messages we send, lest by inattention we send the wrong ones.

It also gives us scope for inventiveness and having harmless fun while doing so. And, as Peter Drucker pointed out: "Because its purpose is to create a customer, the business has two basic functions: marketing and innovation” so we can legitimately and judiciously combine them.

Here is a simple story illustrating one woman’s lateral thinking when marketing her business:

Bernie was in New York on business. On his 3rd night, he went back to his hotel room feeling quite miserable. Although the trip was going well, business-wise, he was feeling very lonely and missing his wife Sarah.

He casually picked up the Gideon bible from his bedside table and opened it. On the first page, he read: -

"If you’re sick, read Psalm 18."

"If you’re troubled, read Psalm 45."

"If you’re lonely, read Psalm 92."

That’s it! He stopped there, immediately turned to Psalm 92 and started to read. How surprised he was, then, when he got to the end of the Psalm, to see someone has written: -

"If you’re still lonely, why don’t you call Fifi on 202-123-7659."

Well…"if you're not in business for fun or profit, what the hell are you doing here?" (Robert Townsend).

Mining Facts and Missing the Point

Despite appearances bad decisions are rarely made because people don’t have all the facts. In the political sphere the Treasury will have been fully aware of the impact on taxpayers of abandoning the 10% tax band. The Treasury may even have alerted Ministers. Nevertheless, although the facts were noted, plainly they were not given sufficient weight.

In the run-up to the present ‘Credit Crunch’ the financial institutions were fully aware of what they were doing and, one hopes, so were the regulators. But merely knowing the facts proved insufficient. Clearly, they did not understand the facts and the whole unstable structure was allowed to plough on into the crash barriers.

The Burmese Government will be well informed about the consequences of Cyclone Nargis and how badly their population has been affected. However, here facts are equally useless because they are being ignored.

Business is subject to the same purblindness when it comes to facts. Too often when plans go awry Governments call for Royal Commissions or Parliamentary Committees; business calls for internal audits or additional research. More facts will not help them regain the perspective they have lost.

When facts have failed to register, the continued pursuit of yet more facts painfully echoes Dickens’ Thomas Gradgrind in ‘Hard Times’. Gradgrind worships facts and figures. He puts his faith in abstract theories rather than direct observation of real people and real needs. The asymmetrical approach to human life of early industrial England, the denial of some of the basic needs of human beings, is being repeated in what some are pleased to call our post-industrial age. The structure of the economy may have changed. Too many of the attitudes live on. The cost in human happiness is great.

In Dickens’ Coketown, the needs of the factories dominate everything else. The factory hands work long hours in oppressive conditions, and they live in cramped houses. Their lives are monotonous; every day is exactly like every other day, just as all the houses and streets look alike. In Coketown, there is a strict uniformity in everything. The workers have little time off to relax and enjoy themselves. Does that sound familiar?

Employees and those running their own businesses will recognise the close parallels. Today we still struggle with long hours, astronomic housing costs, poor diets and an existence where evenings and weekends are nothing more than the exercise yard of our own imprisonment.

Each business, each day, has the opportunity to step back and take a clear-eyed view of the workplace we have built for ourselves. If it is not as we would wish it, then we can change. If you think it isn’t as easy as that then you will be setting yourself up to fail as a self-fulfilling outcome. Give real change a try. Take action. You may surprise yourself.

Why Me?

Once upon a distant time in the here and now a seeker journeyed through the furthest regions of the earth to find a teacher rumoured to know the secrets to happiness, success, and well-being. When the seeker arrived at the teacher's mountain-top retreat, he eagerly awaited his audience with the reclusive teacher. Finally, his moment came.

"Why have you come?" the teacher asked.

The seeker proceeded to list problem after problem he was facing in his life. After listening patiently, the teacher sighed.

"I am afraid I cannot help you with your problems."

"Why not?" asked the puzzled and disappointed seeker.

"Because the gods have decreed that we all carry fifty-one problems with us at all times. Even if I could help you solve the problems you tell me of, they would only be replaced with fifty-one more."

The teacher paused to allow the full significance of the idea to sink in.

"I may, however," the teacher continued, "be able to help you with your 52nd problem."

"What's that?" asked the seeker.

"Your 52nd problem," replied the teacher, "Is that you think you should not have the first 51 problems."

The 52nd problem is not confined to our fabled seeker. I think most people in business would welcome fewer problems. Many would go further and wish there were no problems. Wouldn’t that be beautiful?

Probably not: man is a solution seeking animal and when problems become too few, or of insufficient size, then he (or she) will manufacture some challenge to fill the vacuum. If not, then the market will do it for him. If your sector was problem-free and life truly was a cushy number, then other firms would push their way in seeking this Sylvania for themselves. The problems would multiply and the natural balance would be restored.

Problems are essentially opportunities in disguise. How well you cope with them will determine how well you do in business and in life. Problems are not something from which we should flee. Rather they are things we should embrace.

A leader faced with an almighty challenge is afforded reward and recognition when that challenge is eventually overcome. A leader handed an easy life reaps no honour; success is expected. For him there is only the yawning chasm represented by muffing an easy shot and failing to capture what everyone else saw as a gift.

It is an entirely different proposition to have a sufficiency of problems, yet be tempted into making even more for yourself. This is particularly attractive when the problems you do have are chronic and familiar. In such circumstances either the problem fades into the background and is hardly noticed, or there is seen to be little kudos in dealing it. If collecting cash has always taken 90 days at your firm there may be little enthusiasm for reducing it to 30 days. There may even be some opposition to disturbing the status quo and ‘upsetting’ certain clients.

Whatever you circumstances where problems are concerned – too few, enough, or too many – the basic approach is the same: rather than engaging in the self-pity of “Why me?” pick the one problem whose solution, or easement, would have the biggest impact on your business. When that one is solved, or temporarily stalled, work on the problem with the next biggest impact. Have no more than six problems, ranked in order of impact, on your list at any one time.

This is not a new idea. It was first put into practice by Charles Schwab, President of Bethlehem Steel in the 1900’s. The idea is simple, but don’t let that deceive you. There are still plenty of opportunities for distractions. The real achievement is in recognising the potential diversions and resolutely refusing to get sidetracked.

It Takes Two to Tango

Employee engagement, in various guises, is among the new buzzwords of recent years. To be more accurate, it’s a repackaging of old ideas by the consulting industry. Under a shiny “NEW” label the consultants have found yet another way of exploiting corporate insecurity and thereby picking its pockets.

There appears to be only circular definitions of what constitutes an engaged employee. The CIPD defines employee engagement as “a combination of commitment to the organisation and its values plus a willingness to help out colleagues (organisational citizenship). It goes beyond job satisfaction and is not simply motivation. Engagement is something the employee has to offer: it cannot be ‘required’ as part of the employment contract.”

In short, an engaged employee is any employee who is engaged. It’s a matter of attitude.

Today’s employers are encouraged to recruit for attitude; train for skill when searching for new employees. That approach saves the job of instilling an attitude seen as ‘right’ by the employer in question, but it only goes so far. Whatever attitude is exhibited during the recruitment process it will only be retain if the employee’s circumstances are conducive.

To a large extent that depends on the employer, but it can equally be affected either by changes in the employee’s private life, or by shifts in their personal beliefs and values. Over the employee’s private life and over beliefs and values the employer has little or no control. And rightly so. An employment contract is an exchange of time and skills for money and associated benefits. It is not entry into a closed religious order.

Most of the literature on this subject talks about measuring employee attitudes and conducting regular employee attitude surveys. Any organisation that needs to do that has to raise an immediate red flag in its own mind. If concern for the attitude and mindset of employees is not part of the daily interaction in the company, if senior management has actually lost touch with how employees think and feel, then there is an immediate problem.

Organisations that have a high proportion of employees who are unengaged or disengaged are offered various approaches to reverse that situation. These include:
• giving the opportunity to feed views and opinions upwards
• keeping employees informed about what is going on
• seeing that managers are committed
• having fair and just management processes for dealing with problems.

Perhaps more telling – and rarely mentioned – is the sobering process of the organisation examining its own value as expressed in its formal and informal manner of doing things. What message is the organisation really giving to its employees (and its customers)? Can people be reasonably expected to sign up enthusiastically to such a message?

This search for paragons of virtue among employees has an interesting parallel in the education sector. In England, when a pupil truants from school, we ask what is wrong with the child. In France, they ask what is wrong with the school. If you are an employer looking for greater engagement then be prepared. If it is absent then the cause may lay uncomfortably close to home.

Clinging to the Wreckage

UBS, Switzerland's largest banking group, has just written off $37bn (£18.7bn) of its sub-prime investments.

Following an internal investigation demanded by the Swiss Federal Banking Commission, the Swiss version of our own dear FSA, it admitted a series of mistakes including inadequate supervision, poor risk management and a failure to react quickly enough when the sub-prime market started crumbling.

UBS was so focused on racking up ever larger profits that it “forgot” every silver lining has a cloud.

This is its first full-year loss (Sfr4.38bn for 2007) since its came into being 10 years ago following the merger of Swiss Banking Corporation and Union Bank of Switzerland. Planned job cuts are rumoured to run to more than 3,000 people.

As one might expect of the Swiss, those in charge have shouldered their full share of the responsibility and suffered the inevitable consequences. The Chief Executive, Peter Wuffli, was ousted in July last year, followed by the CFO, Clive Standish and the Head of Investment Banking Huw Jenkins. This month it was announced that the Chairman, Marcel Ospel, would not seek re-election.

Meanwhile, here in the UK, RBS came up with a further £5.9bn of write-offs on bad debts yesterday having already declared a £1.7bn write-down of sub-prime investments in December. However, you would search in vain for any admissions of abject personal failure by top management, let alone a principled resignation. In any industrial company the chairman and chief executive would both have been fired and forgotten by now. Not so with RBS.

Apparently RBS's has two excuses: (1) things have changed, and (2) it didn't foresee quite how bad things would become. Well, isn’t that what leaders are paid to do? Doesn’t leadership imply vision – the ability to see and foresee, rather than stumbling over the truth, picking themselves up and hurrying off as if nothing had happened (Churchill). And if they fail to uphold their end of the contract should that contract not be properly terminated?

According to Sir Tom McKillop, the RBS chairman, the board is unanimous: the current team is the one to take the bank forward. On what logical basis should that be the case? Those that have engineered dramatic expansion are rarely adept at managing either a holding operation, or retrenchment. Those call for very different skills. Endangering the ship when it’s in stormy seas, based solely on your capacity in calm waters, constitutes reckless conduct in anybody’s book.

Marianne Jennings, Professor of Legal & Ethical Studies at Arizona State University has identified the belief by management that they are so brilliant and innovative that the mundane rules of accounting, corporate governance and even basic economics do not apply to them as one of the seven signs of ethical collapse. RBS fits the bill.

Of the five leadership traits identified by Kouzes and Posner’s research that was done for the book ‘The Leadership Challenge’ namely:

~ Honesty
~ Forward-Looking
~ Competency
~ Inspirational
~ Intelligence

RBS seems to fall short on the first three.

If the Swiss banking fraternity have the principled leadership qualities needed to do the right thing then those privileged individuals on this side of the Channel should exhibit the same qualities.

The Crunch Goes Wider Than Credit

The downward pressure on house prices is a simple market reaction to fewer buyers who are willing to pay the asking price and have enough funds to do so. The National Association of Estate Agents reports that the number of house buyers on agents’ books dropped in February to the lowest yet recorded, from an average of 276 per agent in January to 243. The number of properties for sale fell from 83 to 74 per agent over the same period.

There are three main groups who cannot wait out the present situation:

• Borrowers who have used the previous market value of the house to secure debts and where the lender is now calling either for repayment or further security;
• First time buyers now denied sufficient mortgage finance to purchase and unable to find suitable alternative rented accommodation;
• Sellers already in the process of moving home where the gap between the sale price and the buying price has widened due to different market conditions in each case.

For other groups, while present circumstances surrounding mortgages are an inconvenience, the delay and frustration involved are relatively small consequences.

Some characterise the credit crunch as the result of a series of market failures. On the contrary, the markets have worked as markets do. Through a combination of greed and incompetence some banks fell down on the job. The crunch occurred as a result of the parcelling up of mortgages into tradable securities. Now nobody wants to buy something that has little worth and banks are increasingly reluctant to lend to each other. It sounds like a typical market to me.

More serious is the indirect outfall. This takes the form of lost jobs and, in some cases, the wholesale closure of firms. Jobs and firms affected include planners, surveyors, gravel and cement works, brick makers, the transport industry, builders and the building trade, estate agents, solicitors, removers, domestic furnishers and appliance makers – even the Post Office, the Land Registry and the local Councils that need less people to deal with change of addresses.

As workers fall out of employment the tax-take drops and the social security bill grows. As firms go out of business the bad debts of their supplies and lenders increase. It takes very little to trigger a domino effect throughout the sector and associated providers.

Signs that this process may have already started are coming from the USA. 153,000 redundancies were declared across the US financial services industry in 2007, more than half of them relating to mortgages. In the next 12 to 18 months American commercial banks are expected to cut a further 200,000 US jobs to reduce costs. Those job cuts will be in operational and support departments among modestly paid people.

Meanwhile, those heading the institutions are out of their depth. The US banking industry has not experienced a reduction in revenue for 40 years. In 2008, it looks like it will decrease for the first time in the working lives of those in charge. They have no practical hands-on knowledge of how to handle it. We can expect more costly mistakes as they learn at everyone else’s expense.

The call now is for governments to “fix” the problem. In an interim report in February to the G7 the Financial Stability Forum said, “Events have shown that the quality of risk management varied significantly among the largest and apparently most sophisticated market participants.” What comfort can we take as governments now begin to meddle – the self-same governments that failed to notice and regulate the dangerous free-for-all in the first place? It is not sophistication we seek; it is plain commonsense.

The last Conservative government was rightly excoriated for devastating the manufacturing base of this country. We have yet to see the worst that this Labour government can do to rival that. When help and hemlock are offered by the same hand any hesitation is wholly understandable.

First Cloud Cuckoo of Spring?

Andrew Oswald proposes that to cope with possible bank collapses we should devise an effective insurance solution in which governments are only minimally involved (Independent on Sunday, 30 March 2008). He sees this as a cast-iron guarantee. I beg to differ.

Mr Oswald’s idea is that when depositors open an account they should be offered insurance deals that, for different levels of premium, would guarantee different amounts of their funds. Those customers who wish for complete security will have that option, but only at the cost of a substantial premium.

Those slightly less worried will be able to opt for a smaller premium and a larger "excess" where, in the event of a bank collapse, they will forgo the first X hundred pounds of their savings.

This wheeze seems to overlook the existence of The Financial Services Compensation Scheme. The FSCS is the UK's statutory fund of last resort for customers of authorised financial services firms. It pays compensation if a firm is unable, or likely to be unable, to pay claims against it. In general this is when a firm has stopped trading, and has insufficient assets to meet claims, or is in insolvency. The service is free to consumers.

The FSCS protects deposits, insurance policies, insurance broking (for business on or after 14 January 2005), investment business, and mortgage advice and arranging (for business on or after 31 October 2004).

As a statutory fund of last resort there are limits to the protection FSCS can provide. The maximum levels of compensation are:
· deposits: 100% of the first £35,000.
· investments: £48,000 per person (100% of the first £30,000 and 90% of the next £20,000).

Other levels govern insurance and mortgage provision.

The point being that 100% cover was in place for most small depositors of Northern Rock. It made no difference. People wanted their money out. Demonstrably, offering guarantees is wholly ineffective in such circumstances. People want to avoid the turmoil ahead of a collapse and the interregnum following a collapse when everything is sorted out at some other institutions’ leisure. Substituting commercial insurance cover for the Government-backed provision offered by the FSCS is unlikely to work.

Andrew Oswald also holds a somewhat rose-tinted view of the insurance industry. He believes that the large institutions who might offer this kind of saver insurance have assets spread widely enough, across many nations, to survive even major financial shocks within a single country. And, moreover, insurance companies are better placed than government inspectors to keep an expert eye on any profligate lending practices inside banks.

This is serious cloud cuckoo land. Maybe Mr Oswald is too young to remember the collapse of Lloyds. Let me remind him.

Between 1940 and 1970 many Lloyds syndicates took on enormous amounts of excess insurance business for leading asbestos companies. Underwriters ignored the medical evidence of the risks they were running, even though insurance companies had been refusing to sell life insurance to asbestos workers since 1918. The syndicates were enticed by the lucrative stream of premium and investment income which such business produced.

In 1992 the Yale School of Organisation and Management predicted 200,000 asbestos-related deaths over the next quarter of a century at a cost to asbestos manufacturers and their insurers of $50 billion. The combined book value of their 45 primary and excess insurers was estimated at only $50 billion, before allowance for all other types of claim likely to arise and make a call on those assets.

Many Lloyds Names were ruined financially. Some went bankrupt. Some committed suicide.

It doesn’t end there. On January 10, 2001 Chester Street Insurance Holdings Ltd., formerly Iron Trades Holdings Ltd was declared insolvent. Financial uncertainty over the escalation in asbestos liabilities led Chester Street’s directors to propose a run-off of the company’s business. The High Court approved the Scheme on February 28. Within ten days, the Scheme Administrators, in consultation with the Creditors’ Committee, set an initial payment percentage of just 5%. The likelihood of obtaining insurance-backed compensation for many UK victims of asbestos-related diseases evaporated.

The woeful record of the insurance industry is not confined to asbestos. In August 2001 the business of the Frontier Insurance Company was seized by officials of the New York State Insurance Department in a move designed to avoid insolvency. Harry W. Rhulen, the group's president and chief executive, said that the company's collapse had been caused by unsound underwriting and pricing of medical malpractice policies in the early and mid-1990's. “We did a poor job of determining which were the good doctors and which were the bad”.

In the same year the HIH Insurance Group collapsed and the NSW Supreme Court placed it into provisional liquidation. HIH insurance is now in run–off, which means it is managing its outstanding claims and not writing any new business. This could take several years to complete; some have suggested as long as 10 years.

Also in 2001 Independent Insurance, based in the UK, collapsed. The business consisted mainly of home contents insurance for council tenants, which involves the regular payment of small premiums. An initial valuation of the company's assets ran into "tens of millions", while estimates of its liabilities ranged as high as £1bn. The liquidators described the disaster as the worst “since Maxwell”.

Saver insurance is not the answer. It merely hands the hot potato to an industry no better placed to moderate risk and mitigate disaster than the banks themselves.

Time to Get Real

In a recent post Damian Wild recalls Sir John Harvey-Jones’ optimistic expectation that “at the present rate of progress, everyone will know the financial position of the company at every level in real time”. However, Sir John was sufficiently realistic to note, “FDs could be the key gatekeepers making that happen or they could be the abominable snowman preventing that from happening.”

Unfortunately, casting around in the snows of corporate reporting for recent signs of Bigfoot there is plenty of evidence that FDs, and the accounting profession in general, are leading the corporate world deeper and deeper into the trackless wastelands. Financial reporting has now become so esoteric that fewer and fewer people understand the figures that are put in front of them. We are light years away from the stewards of the business (directors) accounting to owners (shareholders) for their conduct and we seems to be accelerating.

City figures have asked questions about the reliability and relevance of fair value accounting when mark-to-market valuations are based on an insignificant number of related market trades. Many have been even more sceptical about mark-to-model assumptions used to value illiquid assets. If Sir John’s Yeti is a mythical creature of folklore and legend, perhaps it is only fitting that FDs are now accounting in make-believe money.

The Association of British Insurers has claimed recently that investors feel audit committees don’t know enough about what is going on. According to Peter Montagnon, director of investment affairs, “This relates to the committees’ knowledge and also to the accounting standards and what has to be reported.” Where does this leave the average shareholder? The ceaseless change, standardisation and internationalisation of accounting rules when combined with the increasing complexity of financial instruments has succeed in generating an impenetrable fog around the conduct and condition of our major institutions.

Grant Thornton claims that “audit committees, are having to place increasing reliance on financial directors and auditors to explain the IFRS accounts and to obtain appropriate assurance” as they attempt to find their way through the traps and tripwires set by standards on financial reporting. If this level of support is required by highly paid and experienced businessmen at the head of our major quoted companies, how is the man in the street expected to cope? In trying to understand the labyrinthine logic of their own conduct do our public companies now face the centipede’s dilemma?

Last week’s Accountancy Age editorial wonders whether the current confusion and uncertainty being experienced by audit committees would be most easily resolved by regulation, such that those that serve on them meet some minimum level of financial acumen. This proposal only serves to distance the shareholders even further from the core issues. If only those who are specially trained can hope to understand what is happening where does that leave the underlying fundamental associated with accounting – giving a convincing explanation of what is going on?

Sir David Tweedie, head of the International Accounting Standards Board has suggested a form of parallel balance sheet on which entities such as SIVs could be explained in greater detail. Sir David must accept a large measure of blame for the sorry mess that corporate reporting now finds itself in. Floating the idea that companies ought to keep two sets of books would appear to be the final scene in an increasingly farcical drama.

Sir David claims, “What we’re trying to do is simplify the accounting”. Wonderful! Then let’s do just that. Let us make everything as simple as possible, but not simpler and introduce what I shall dub “The Alf Garnett Test”:

1. Take your next financial instrument, accounting standard or set of Statutory Accounts into a randomly selected local boozer (wine bars, tapis parlours and cocktail lounges excluded) .
2. Approach the nearest person at the bar.
3. Ask him or her to explain what they understand your document to mean.
4. If they can give a cogent explanation in ten minutes or less, then you may publish.
5. If not, scrape it, buy a round of drinks and get back to reality.

The Source of Stress

A recent Whitehall report on stress claimed that high-pressure jobs which cause chronic stress can dramatically increase the risk of a heart attack (Independent, 23 January). Unfortunately, the report would appear to have the causation hopelessly muddled. The possibility that its findings could lead to tougher guidelines for employers on reducing stress just perpetuates the confused thinking.

The inference is that the jobs in question are inherently stressful. Thus, only by changing either the job, or the way that it’s managed, can the level of associated stress be reduced. A little reflection shows that this is not the case. Stress is an emotional state experienced by a particular individual.

Imagine there’s a woman called Mary who has just taken on a task that’s entirely new to her. She is keen to perform the task well not only for her own satisfaction, but also to impress her boss, to obtain a much needed increase in pay that will help her stave off mounting debt and, finally, to get noticed by that dishy man in the Purchasing Dept. Her first few tries are a disaster. Her workmates laugh at her. She believes she will never perform the task well. Her stress level is rising.

At a different time and place a man called Philip also takes on an entirely new task. Philip considers the task trivial and it is really of no interest to him. He attaches no importance to anyone else’s opinion, he is already wealthy and there is no significant other on whom he wishes to make an impact. His first few tries are also a disaster; he fares no better than Mary. His workmates also laugh at him and, although he believes he will never perform the task well, he is totally unconcerned. Philip is not stressed.

In each case the task in question was identical. The reaction to it and its associated outcomes were entirely different. The task is neutral. The stress experienced only rises when the person concerned attaches particular significance to what they are doing. Someone who is largely indifferent to what happens in any particular set of circumstances is not going to get stressed.

The association between the stress people report and their biological responses found by the Department of Epidemiology at University College London is to be entirely expected. A person’s emotional state feeds through to their physiology and their behaviour. They are inextricably linked. Such a finding merely confirms an interaction that is already recognised and well known.

Earlier results from the studies, led by Professor Sir Michael Marmot and published in the European Heart Journal, showed that those in low-status jobs who were required to follow the orders of their bosses were more stressed, and died sooner, than the hot-shot executives handing out the orders. Again, this is to be expected. Those hot-shot executives are a self-selecting sample.

If you have the ability to become a hot-shot executive, but do not relish the stress you associate with that position, then you unlikely to either put yourself forward for promotion, or accept it should it be offered. Those lower down the hierarchy will include a higher proportion of those already approaching the limits of their abilities, those less mobile in the job market for want of talent and those essaying new tasks and fresh assignments with which they have yet to become comfortable. Professor Marmot’s findings are a glimpse of the blindingly obvious.

Given this set of facts it would be perverse to place the onus on employers to mitigate the stress experienced by each individual in their workforce. Even among those engaged on exactly the same work, in the same location for the same boss stress will vary from individual to individual. Those that care most will be stressed most, other things being equal.

But other things rarely are equal, so is the employer entirely culpable in respect of Mary where the money element of her emotive reaction is self-imposed and outside the employer’s control? Or is the expectation now that employers should hire only those that couldn’t-care-less on the grounds that people with that attitude are less likely to experience stress?

Full and appropriate consideration and nurture of the workforce is in the interest of every employer. Some legislation in some areas is necessary to direct the unenlightened, but the nanny tendency of the British state can go too far, especially when it is guided by questionable science.

10 Top Networking Tips

What makes a successful business? 99% of the time it is not a killer business idea. Those are as rare as hen’s teeth. 99% of the time it is determination, passion and commitment. These qualities work in any business and are quickly and easily communicated during networking.

Networking brings people together. And since people buy from people it is one of the most effective and direct ways of communicating your message.

Here are some additional tips to help you through the process:

1. 80% of life is showing up.
Woody Allen’s well-known quotation applies to networking just as much as it applies in the rest of life. Some of us find crowds oppressive and strangers intimidating so, for us, actually showing up at a network event is a real achievement. For others the network event comes at the beginning of a very full day or after hours of frustrating and exhausting toil. Do we really want extend our work-life any more?

Yes, we do, if we want to continue to build our business and ensure future orders arrive when needed. Showing up at a network event is a critical step in that process.

2. Being self-conscious is normal.
Having made the effort, now what do you say? Even if you have prepared and rehearsed that ‘elevator pitch’ (you did do that, didn’t you?) when you are face-to-face with a stranger, somehow it does not sound quite as good. This feeling gets worse as the noise levels in the room rise and your voice gets louder and louder. Fear not. Feeling awkward is normal. We’ve all been there. It’s even a place that some of us revisit from time to time as we experiment with different approaches. Remember two things:
a. Your companion has no idea what you were supposed to say, so they won’t know if you get it wrong;
b. Be yourself. If you are feeling nervous, lost for words or out of your depth – then say so. The person you are talking to will already have experienced the same thing. The only reactions you are likely to get are sympathy and support.

3. Now you’re here, you may as well have fun.
Networking is about business and it does form part of your marketing, but that is no reason to treat it as a sombre and solemn subject. You are among people with the same aims and aspirations as you have. You could learn something from them. They could even learn something from you.

It may be business, but it’s in a social setting so relax and enjoy it. Take a few deep, calming breathes and jump right in. You will come across more naturally and you will notice a lot more about other people once you overcome the initial jitters.

Forget about yourself, nobody cares anyway. They are all fully absorbed with their own worries – oh, yes they are. And you can help both of you by talking about them (it’s everyone’s favourite subject). Once you start to concentrate on what they are saying you will soon forget about yourself.

4. Be among the first to get here and the last to depart.
Networking events only last so long – usually around 2 hours. Together in one room, for just a short period of time, you have a group of people who are there with the specific intent of meeting you. Make the most of it. Speak to as many of them as possible and allow yourself the time to find out a little about them. Who are they? What do they do? What are their plans? What issues are they grappling with? Where could you help? If you spend as little as 10 minutes talking with each one, just 12 people will fill those two hours easily.

Where possible, position yourself to watch the door out of the corner of your eye. Is a previous contact arriving that you want to touch base with again? Or is an interesting prospect about to leave before you have had a chance to exchange a few words? If you arrive late or leave early you will miss those opportunities and others may then get in the queue ahead of you.

5. Telling isn’t selling.
If your conversations at a networking event consist mainly of you telling the other person what you do, how you do it, the prices you charge and the guarantees you give then you will part company knowing very little about them and nothing about how you might be able to help them. Working out how your business can best meet their needs is your responsibility, not theirs.

Selling consists of learning as much as possible about the other party and finding a way of being of service to them. Initially that may not equate to a sale. It may be a piece of information, a telephone number or a contact of yours capable of meeting their current need. That’s good. That gives you a common point of reference and the opportunity to follow up later to see how things have progressed.

Taking a (genuine) interest in your prospects will rank you ahead of most of the competition and keep you ‘on the radar’. Acquiring good customers takes time; be prepared to invest it.

6. Make friends when you don’t need them.
If you wait until you need someone’s help and then befriend them in order to obtain it you are likely to be found out. Out of desperation you are also likely to find yourself in a worse bargaining position and give away more than is necessary in order to relieve an emergency. Following this approach you will be entirely dependent on goodwill, rather than fair and equal reciprocity (a favour asked for a favour done).

Making genuine friendships, built on mutual interest and warm companionship with nothing at stake, is a much better reflection of the generous person that you are. Approaching another person in an open and honest manner gives you the freedom to be yourself. You carry no hidden agenda and are less likely to provoke the instinctive, defensive reaction: “What’s this person after?”

7. It is not about the business cards you give out.
If you attend a network meeting with the sole intention of giving out as many of your business cards as possible, even to people who do not request one, you may very well succeed. Then what?
a. Those that did not request your card are likely to file it or throw it, which will amount to much the same thing.
b. Those that did ask for your card without you taking any interest in them are probably being polite. The result will be the same.
c. Those in whom you did show some interest and who asked for a card will put it down meaning to call you; lose it under a pile of paper; find it three weeks later; spill tea on it and then sweep it into the rubbish by mistake.

Relying solely on the business cards you give out cedes control to the people who have them. They have busy lives too. It is more in your interest than theirs that they use the card – after all, you are not the only fish in the sea. That leads on to…

8. It is not about the business cards you collect.
Merely scooping up business cards from everyone else in the room will just add to your large and growing collection. I am sure it is a fascinating hobby, but is it taking your own business forward? Once you have someone’s business card…you have to put it to work. Now YOU are in control, so make good use of it.

Add the contact to your database (you do have…?) and programme in a series of appropriate follow-ups. The first need be little more than a ‘nice to meet you’ and a reference to something that came up in conversation between you. Subsequent ones at decently spaced intervals need to offer slightly more, or it just becomes spam. It’s your business, I will leave you to work out what you can offer.

9. Don’t end the evening wishing you had…
…done something, or said something, or met someone that was there. Opportunities in life can be fleeting. If you have spent the money to be here and taken the time and trouble to turn up, then you owe it to yourself and your business to make the most of it.

At a networking event that usually means taking ‘people risks’. It means stepping forward and introducing yourself to total strangers. But the magical thing about that is you need only do it once. After the first time the person concerned is no longer a stranger!

The other bonus is that people who attend networking events do so with the explicit intention of meeting strangers such as you. By stepping forward with a welcome of your own you are already helping them fulfil the purpose they had in coming here. How cool is that as an opening gambit with a potential customer?
10. What would you do next, if you knew you could not fail?

Life is full of surprises. The biggest surprise to me is the limits people impose on themselves. Too often the hobgoblins inside their heads whisper, “Who do you think you are?” and “You couldn’t possibly!” At that point self-doubt creeps in and many a wonderful adventure is stillborn before it begins.We all have wild and wacky ideas, many more than we ever feel happy disclosing. If networking is about getting noticed, if your future means being memorable, then a networking meeting is just the place to spread your wings and be eager to fly!