Category: Uncategorized

That’s a Chinese proverb that you can apply to many aspects of your business.

It’s pretty obvious in its application to customer service. If you can’t make your existing customers happy, they are not going to refer new clients or customers to you – and a “satisfied” customer is only ever one step away from becoming a past customer.

You can equally apply it to the team in the business. If you can make them happy, there’s good chance they will make the extra effort to ensure the customer is happy.  That may sound a bit simplistic, but it is one of the foundations of success for SouthWest airlines in the USA.

It’s also the case that the team will help you with recruitment. They think they are working in a great place, so they will tell their friends and family. When you have a vacancy they will recommend someone. Suddenly you’ve not only saved a recruitment fee, you’ve got a new member of the team who is really delighted and enthusiastic to join and you’ve got an existing team member who is going to go all out to make sure the newbie succeeds.

If you wanted to raise more money for the business, just imagine how much harder that is if your existing investors (or your bank) have lost interest or been disappointed.  It will be a lot easier to get that overdraft extended or the credit arranged for that new piece of kit if the bank manager is on your side, but even more crucial if you wanted to raise additional equity one of the first questions from any new investor would concern what role your existing investors will play. If they are not risking their money (and they know you) why should I take that risk?

You can apply this to your supply chain. If you’ve looked after them and you have a problem, your suppliers will try to help you. If you’ve always been a pain to deal with that’s less likely to be true.

When you come to sell the business, good due diligence will uncover your reputation, not just with your customers.

 

Several of my clients are recruiting at the moment, and I’ve been helping frame their thinking as part of the process.

Sometimes, all you really need to do is to hire someone who can carry out the same duties as the person who has left, but actually that is fairly rare.

Think of recruitment as an opportunity for you and your business to learn.

Perhaps you can recruit someone from a larger company, who will bring with them years of learning and experience. There will be things that they are used to that don’t work for you and your business, but there may well be ways of working and procedures that they know and you can adopt or modify to improve your business.

A similar raft of knowledge can come from someone who has worked outside your industry. What they don’t know about your business is often made up for by the external view.

These are the people who are like an annoying toddler, they keep asking “Why?”

Why do you do that? Why this way? Why not the other way?

They will challenge your processes and procedures as part of their understanding, and they may just shed some light on things that have evolved but are no longer really fit for purpose.

The second part of successful recruitment is to think of the person you need for the future, not just for today. That’s especially true for businesses that are growing, but applies to all. The world is changing, business is changing and people need to adapt.

The final part of successful recruitment is the induction program. If you’ve chosen the right people and they have the knowledge and skills to challenge the established ways, will they have the opportunity to do so – will your culture permit it?

The first 100 minutes, the first hundred hours and the first 100 days are useful milestones to think about your induction program.

 

When you have a meeting, or you send an email, or perhaps you are having a telephone conversation it is helpful if there is a clearly defined purpose.

It is really easy to fall into the trap of re-running the same management meeting every week. Those meetings spend too much time looking at what happened last week and very little about what is going to happen / what will be different this week.

It’s easy to send an email that can best be summarised as “for information only – no action required.” You have spent time creating and crafting it, then the recipient has to take time to read it – and will probably respond, so that you know they have read it, and you have to read their response.

It is easy to pick up the phone and have a nice conversation with a prospect, but all too easy to finish the call without moving the prospect closer to becoming a client. Yes, you have to build a relationship, but that doesn’t mean that each and every conversation should not have a purpose above and beyond building the relationship.

With your regular meetings, make sure that you have a 30/70 split so that at least 70% of the meeting is spent focused on the things you can change, not the history you cannot change.

Before you send that email, think about what you want the recipient to do, what action you want them to take. If there is no action required, is the email necessary?

Find a reason to call, something that adds value to your prospect. They will welcome it and you build a stronger relationship. Have a plan for when your prospect falls of the prospect list or converts to a client. You can spend a lot of time talking to people who will never become clients or customers.

Act with purpose – you will get a whole lot more done!

 

Before you start on a task, ask yourself the question “Am I the only person who can do this?”

If you answer that question with a yes, you can then apply Eisenhower’s model to prioritise your workload. If you answer no, delegate the task to someone else.

“What is important is seldom urgent, and what is urgent is seldom important.” – Dwight Eisenhower

If you classify your workload into the boxes below:

Then you can apply this set of rules to manage your time.

Box C should be done immediately

Box A should be scheduled for a time that suits you. Friday afternoon is when I write my  newsletters, for example.

Box D If it is not important why are you doing it? Outsource it or delegate it.

Box B Don’t do it unless you really want to. That’s an indulgence, in the business world.

It’s worth considering these rules every six months or so. Tasks that are not important have a sneaky way of finding themselves back on your desk every few months.

Spend your time in boxes A and C to have the most impact on your business – and actually an easier life.

A few months ago the news was full of stories about the Co-Op bank. They acquired acquired Britannia building society, and trouble lay ahead. The newspapers love to report the negative news and the disasters –

There’s an old story about a foreign correspondent for the BBC who was on assignment in the heyday of telegraphy After long silence from the reporter, the BBC wired him to ask: NEWS? The reporter wired back: UNNEWS. The BBC, seeing no point in paying him if he wasn’t working, retorted: UNNEWS, UNJOB.

And this really was a disaster. The co-operative bank has being sold to its creditors in a rescue deal after the regulators insisted that fresh capital was required. The Co-Operative group has lost control of the bank.

So why did this deal go wrong?

Successful acquisitions are not easy to achieve but they all start with the planning & strategy phase, and I think you can point to a failure of strategy, which has led to a failure of execution.

In this case, I think it is clear that the Co-Op bank was just not big enough or strong enough to take on the Britannia. That meant that the leadership were out of their depth, did not have enough understanding of the potential pitfalls and that due diligence was not good enough.

Sweet Spot

In my experience there’s a sweet spot for the size of an acquisition. If your target is too small, it won’t make that much of an impact on your business, and if it’s too big the risk is too great. You need to be looking at businesses that are no more that 30% of your size, and probably more than 10% to make a significant impact.

As always, there are exceptions – if you are busying technology, for example – but in this case

Size does matter

This commentary seeks to provide guidance over a 3 -5 year timescale.

Europe

Taking the three big economies of the Eurozone in turn:

The German economy is moving forward quite well, with low inflation and some reasonable growth figures, but is ever more reliant upon non-Eurozone exports. Growth over the last couple of decades has been partly due to the removal of the premium exchange rate attached to the Deutschemark when selling into the Eurozone. There is no growth and little activity in the Eurozone, so Germany has to look elsewhere – most notably east.

Eastern Europe, Germany’s major recent growth opportunity, is still suffering from the disturbances in the Ukraine, and there are some signs of a slowdown in the most recent quarter’s data.  Growth rates for the rest of the year really do depend upon stabilisation of the Ukrainian situation, but are unlikely to top 1.5%. The future is pretty murky, with the Eurozone still in trouble and concerned about deflation it is very difficult to see real growth over the next 3 years.

France is in a poor way. Recent elections have shown just how isolated Hollande is, and the growth rates are minimal. The most recent forecasts I have seen suggest growth of below 1% for 2014, and I cannot see a significant recovery in the next three years.

Italy is also in trouble. The new broom has arrived, but significant political and economic reform is required for real growth. The economy will flat-line at best for 2014 and it is difficult to see where growth will come from. The instability and floods of refugees from North Africa are adding to the pressure. Growth will be minimal, if any.

Overall, there will be little growth in Europe. Political instability in North Africa and Eastern Europe will continue to be a distraction and drain on resources, but at least the worst of the Euro crisis seems to be over.  It’s a stable economic environment now, one of the keys to attracting inward investment, and still a large chunk of the world’s economy.

UK

The main story in the UK is centred on house prices and the fear of an asset price bubble, especially if it is driven by excessive debt. Expect to see significant controls on mortgage lending in the next few months.

Aside from house prices, the economy appears to be showing strength in most sectors. There a process of rebalancing the UK away from the financial services sector (which is considerably smaller than in the peak of 2008-9) which requires that other sectors take up the slack.

The services sector remains by far the largest part of our economy, but manufacturing is showing signs of growth.  Growth of 3.5% for 2014, with a fall of to 3% in 2015-6.

UK Base rates of 0.5% will not be with us in a year’s time, and may be increased as early as Q4 2014 but increases will be “gradual and limited” as the BofE are telling us. There are an lot of “Zombie” companies and households, who have barely survived the recession and would be killed off by any sudden  and large increases in interest rates.

USA

Political turmoil continues with the republican party splintering yet again, following the recent election of a tea party candidate to replace the House Majority leader, Eric Cantor. It seems unlikely that the republicans will mount a sensible challenge to Hillary Clinton at the next election in 2016. In the business world, the lack of political meddling is good news. The shale gas story is driving the US economy, with business “re-shoring” manufacturing on the back of cheaper energy. Unlike Europe, the US demographic profile is favourable with a younger, educated, upwardly mobile population, many of whom are of Latino origin. Growth rates of 3% in 2014 and possibly 3.5% from 2015-2016.

Brazil

The Wold Cup and the Olympics may give a temporary boost to the economy, but it will be minor.

This is very much a story of unfulfilled potential, but until the infrastructure is in place and the social divides are narrowed it seems very likely to remain unfulfilled. Growth rates seem likely to be in the 2-3% range.

Russia

Putin’s antics in the Ukraine have resulted in economic sanctions and made a recession in 2014 very likely. The last few years have seen Russia trading its vast supplies of oil and particularly gas for political and economic advantage, but European political leaders do not want to be beholden to Putin and will reduce their purchases whenever possible. It’s difficult to see an economic upside over the next 3 or more years.

India

Narendra Modi of the BJP party has been elected on a platform of economic reform, and has approved a numbers of defence related infrastructure projects. That’s a decent start but many problems remain in the civilian world.

Growth rates of 4-6% in the forecast period.

China

The big question over China remains the size of the shadow banking sector. Unregulated or lightly regulated lending has the potential to create instability in the mainstream financial services sector, with consequences that we in the western economies know only too well.

It’s my view that the Chinese authorities will manage the reduction in the shadow sector, and although there will be some casualties they will be relatively minor.

Overall, very positive with growth in the 7-9% ranges.

 “Greater China”

I’m loosely defining this area as the countries surrounding China & supplying Chinese demand, from Vietnam and Thailand /Malaysia /Singapore right though to South Korea. These countries have generally good prospects, decent infrastructure and well educated populations. They cannot but benefit from rising demand in China and most have the political stability to take advantage of it.

The big risk country is Thailand, following the army coup, but there is a history of the army taking power for a few years and then reverting to democracy. In the past, the king has proven to be a stabilising influence but on this occasion he has been very quiet – perhaps through old age and / or ill health.

Myanmar, the former Burma seems more stable in this quarter than last, but it remains only a few months ago that it was a state ruled by the army.

The political risk in this area is conflict with North Korea, which would heavily affect South Korea.

Growth rates could be exceptional at up to 10 – 12%

Japan

Some territorial disputes in the South China Sea have raised their heads again. China, Japan and Vietnam all lay claim to some islands, but of course it is the natural resources surrounding ( and beneath) the islands that is of interest. That’s most likely just a side show.

Sclerotic corporate structures continue to inhibit growth.  The worlds’ 3^rd largest economy will continue to grow slowly.

MENA

The main stories in this region remain political turmoil and civil insurrection in Syria, Iraq and Egypt.

The Gulf States have significant natural resources, but Middle East oil & gas is becoming less important to the world economy as Shale Gas, improved efficiency and new discoveries reduce the world’s reliance on the region.

It is difficult to be optimistic for prospects in this region.

Australasia

The Aussies had a good run up until the end of 2012, but I think they have more reasons to be optimistic about the cricket than about their economy for the next few years.

© Tim Luscombe June 2014