Renew your Subscription
One thing I’ve noticed over the last few years is that more of the “apps” that we use on our devices now charge a subscription fee to use them. In the past you just paid a one-off price.
Whilst we’re used to annual subscriptions for newspapers, journals, professional bodies, subscriptions for “apps” are still relatively new.
If anyone provides a business or service, they need cashflow to sustain and improve that business. App developers are discovering this and need to show investors that they have “sustainable income” to bring them on board.
This episode doesn’t concern an app, but a yearly subscription for a newspaper that my company recently renewed. We’d been subscribing for some five years and in the past, the newspaper used to remind us when our subscription was due for renewal.
This time, nothing happened.
We renewed anyway but it made me think: how often are we all guilty of forgetting to send reminders about renewing subscriptions, paying fees, paying a bill that’s overdue, meetings and appointments (the list goes on)?
Assuming we weren’t the only ones who didn’t receive a subscription renewal reminder, other subscribers were in the same boat. They might have renewed, forgotten or decided not to renew as a deliberate act.
When our revenues depend on regular payments or subscriptions, we need to make absolutely sure that we have the processes in place to remind people when they need to pay. Businesses often fail because they run out of cash not because of poor management (although that’s another good reason). For a small business, this generally means a diary system of some sort, although off-the-shelf systems now exist that can often generate reminders for us (and no doubt our subject to subscription charges!)
Business conditions change all the time. If we forget to send timely reminders, we lose money – and it’s our own fault.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email.
Labels: Financial, Productivity, Strategy
Cash - “So Last Century”?
With the proliferation of non-cash payment services, should we be surprised if we start hearing that cash is “so last century”?
Before COVID, we were accustomed to using credit cards for in-store shopping and to pay for goods and services purchased online. COVID accelerated significantly the speed of non-cash service development as people did their best to avoid contact with any surface that might carry germs. I remember vividly the first time I travelled back to the UK as the COVID crisis drew to a close and, on landing, when I offered cash in payment for something, was asked if I had a debit card. Of course, I did and was able to use this, but the surprise was still there.
Not only can we make payments by simply swiping a card close to a card reader, but we can also make them direct from our smart phone or even our watch!
The humble cheque, so beloved of our parents and the “check guarantee card” that went with it (at least in the UK) has completely disappeared with the advent of direct online transfers. It won’t be long before cash becomes a thing of the past in some markets.
For cash to disappear entirely, every store and online merchant will need appropriate systems in place. Inevitably, these cost money. For the small corner store in a remote village in the Himalayas, cash will remain king. If non-cash payments are to truly become the norm, then the cost of processing them for merchants must decline to almost zer0 or at least to the level where it becomes more profitable for them to use cashless payments than cash.
The flipside of this is that, in the same remote village, people paying for goods and services will also need the tools to do so, that is, a debit card (or smartwatch!)
Interestingly, one bank in the UK at least has stopped issuing debit cards on its customers’ accounts. Why they’ve done this, I can only guess, but it appears to be because they don’t wish their accounts to be used for “small” purchases (and, perhaps, because the cost of producing the cards for their target customers compared with the number of times they’re used simply isn’t justified). Their risk is that customers will simply transfer balances kept with that bank to one that still does offer a card.
Added to this, the likes of Apple Pay require users to have at least one credit (if not debit) card to use their service. Whilst cash may disappear or become a rare commodity (no doubt to the delight of central banks and governments worldwide!), cards will now be the rule.
Cards themselves bring other risks. We hear countless anecdotes of cards being “scammed” or “cloned”. There are now scanners that can read the information on one’s credit card from distances under one metre. Cash at least provided some security against this, although not against muggings.
Our payments horizon is changing. Cheques have disappeared, cards are the norm, cash is common still. Frankly, I didn’t see it becoming “last century” any time soon, at least not until the global payments system becomes sufficiently cost effective for even small kiosk-type traders to use.
Our business still doesn’t take payments by debit or credit card - yet, but I suspect it’ll be only a matter of time before we bow to the inevitable.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.
Labels: Customer Care, Financial, Strategy
What’s It Worth?
Many will have heard of the “80/20 Rule”.
This states that 20% of something does, yields or influences 80% of something else. The original theory was propounded by Italian Vilfredo Pareto at the University of Lausanne in 1896 who postulated that 80% of the land in Italy was owned by 20% of the population. This rule has now been incorporated into any number of concepts and guidelines. One of my favourites is that 20% of my efforts achieve 80% of my results. Another is that you will get it 80% right first time but risk spending disproportionate additional time in attempting to achieve that final 20% and perfection.
I’ve actually encountered a number of business owners and others who are exactly like that. To be honest, I admire that tenacity in looking for that degree of perfection and going beyond that threshold which, for most of us, is “good enough”.
The problem for these people is that they spend far too much time “sweating the small stuff”. In certain instances this is justified. For example: ensuring that every part of a jet engine will function as it is meant to at altitude. “There are,” as the Head of Aeronautical Engineering at one UK university has put it “no lay-bys at 35,000 feet”. In such cases, if that jet engine is the difference between life and death, it had better function perfectly!
Jetliners however are multi-engined. They can suffer the loss of one engine and make an emergency landing on the other. Extreme cases like the one above apart, we have to decide in our own minds when something’s got to be perfect and when “good enough” will do. Take another example: software releases these days are usually 80% or more “good enough”. The remaining 20% is achieved over the following weeks or months as the “bugs” are identified and resolved by the software programmer. In most cases the “bug” shouldn’t be a fatal coding flaw but rather an omission or a bug that couldn’t have been identified except in the crucible of real-life use. The latter is something many of us find very difficult to emulate to any degree of thoroughness.
My personal view is that, in most cases, “good enough” will do. The additional 20% rarely has to be worth it to spend time that could otherwise be dedicated to launching new projects, motivating one’s team or spending quality time with one’s family or improving oneself.
Of course, the more experienced we become at delivering a product or service, the more “perfect” we should be able to make it!
Every individual needs to decide for themselves based on their circumstances when “good enough” really is “good enough”.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.
Labels: Career, Financial, Leadership, Productivity, Strategy, Teamwork
Banking Blunders?
Some readers may be aware of the travails of a certain UK politician, Nigel Farage, one of the principal architects of Brexit.
Mr Farage’s account with a UK bank was closed for reasons unknown. When Mr Farage applied to other banks to open accounts, he was turned down.
This left Mr Farage without access to banking services, meaning he couldn’t:
- Receive payments.
- Get cash.
- Pay bills.
- Transfer funds to other people.
In short, he became a “non-person”.
Many of us take access to banking services for granted. They’re an essential part of daily life. Mr Farage’s case received considerable publicity, both thanks tohis “celebrity” status and others coming forward with similar stories. Speculation has been rife; facts precious few. Mr Farage has apparently shared documents that evidence that his political views were discussed in the bank (along with his financial situation) before the bank decided to close his accounts. One is left to judge for oneself, whether it was the political views or the financial situation that was the ultimate decider, or whether both played a part.
The BBC News reported that his account had been closed as it failed to meet the criteria for that particular type of account with the bank based on a comment by the bank’s parent’s Chief Executive, who has since resigned, as did the CEO of the subsidiary that closed the account.
Others, however, suggest that the real reason the account was closed and that no other bank would touch Mr Farage was because of his political views, and the fact that he was one of the driving forces behind Brexit. The latter resulted in considerable losses for the UK financial services industry and some banks may have considered this a chance to “get back” at one of the architects of their misery.
Coincidentally, it appears that others had had their accounts closed. One was a Christian vicar who objected to and wrote to his bank branch about their support of Gay Pride month. As a Christian, he has what are known as “protected beliefs”, meaning that he’s entitled to oppose homosexuality as a Christian and particularly as a Christian vicar. Whether the bank agrees with his views or not is immaterial. If this were the case, other accounts should be closed as well, resulting in considerable loss of business (and reputation!) for banks. The problem is whilst banks can close accounts, there is usually little one can do if this happens.
Fast forward to the present and the UK government have intervened and read banks the “riot act” to prevent closures of accounts without “just cause”. The Treasury is said to be proposing new rules, with emphasis on the fact that banks’ role is to “serve customers well and fairly – not to tell them how or what to think”.
There can be good reasons for banks to close someone’s account:
- Assaulting a member of the bank’s staff.
- Poor account conduct (i.e. constantly going “into the red”).
- Being convicted of criminal activities.
In certain cases, banks won’t be allowed to explain to customers why their account has been closed, particularly if they suspect that the customer has been engaged in criminal activities, then telling them why the account was closed would “tip off” potential accomplices. However, simply closing an account because you don’t agree with the customer’s political or other views smacks more of George Orwell’s 1984, than of professional banking practice.
It would surprise me if I agreed with the views of every one of my bankers, or indeed if they agreed with mine! There are certain views I hold which other people don’t and with which they may disagree. That’s our right as free people. For one section of society to take summary action against somebody because they don’t agree with them is not to be tolerated in a free society.
Ironically, something not dissimilar happened to Barclays Bank, when it was finally forced to divest its stake in banking operations in apartheid South Africa, as people were refusing to do business with it. Popular pressure from “little people” acting in unity against a “corporate bully” taking advantage of its position won the day.
The UK government is, rightly, holding the banks to account and will be discussing with them ways for customers to obtain redress if they feel their accounts have been closed for no valid reason.
There has also been speculation that banks have been over-zealous in enforcing EU law regarding what are known as Politically Exposed Persons (PEPs) such as Mr Farage. Indeed, the granddaughter of a former UK chancellor was refused an account because she was his granddaughter!
The purpose of the PEP law is to penalise corrupt politicians engaging in corrupt practices in corrupt (perhaps) countries, not ordinary politicians going about their day-to-day business. Whatever the banks’ views on Mr Farage and his encouragement and support of Brexit, he was going about his lawful business and was entitled to his opinion. As it turned out, just over 50% of those who voted in the Brexit referendum agreed with him!
Was this the proverbial social media “storm in a teacup” whipped up by a master at manipulating social media, or a genuine case of an account being closed because it didn’t meet the minimum criteria? The UK banking industry has once again distinguished itself by its complete lack of touch with the real world. It is doubtless time that it was reminded of its place…
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.
Labels: Customer Care, Financial
Be “Up Front”
I’ve talked before about clear communication. More recently, I’ve heard people complain about how they aren’t given complete information when making a decision to purchase.
Recently, a friend decided to download an app recommended on a YouTube video. He went to the App Store found the app and downloaded it. However, when he had gone through the process of setting up an account, the app informed him that its first use was free, but that subsequent uses would incur a charge.
I understand: app developers need to finance their business and pay developers for any updates that they implement. If you don’t pay your developers, nothing gets developed (and they’ll go to an employer who doespay them)! What my friend objected to was that he wasn’t unaware that there would be a cost and the extent of that cost before he downloaded the app.
There are plenty of other stories, in which consumers complain about failure to disclose material facts that might impact their decision on whether to buy a product or service. Some end well with refunds being paid and an apology. In other cases, things get more heated and the merchant or store starts to bring out all kinds of excuses as to why they were justified in doing what they did.
Not only can this impact perception of a vendor’s brand, products and services (let alone their ethics!) it can also put them out of business. Such is the power of social media…
The worst scenario is going out of business following an unfavourable review, followed by others, followed by investigations by the relevant industry regulator. Whilst it may be “painful” for vendors to disclose “bad news” (like pricing), it’s nonetheless a vital part of doing business in an ethical manner.
In my friend’s case, the app vendors had stated that first use of their product was free that subsequent uses would be subject to a charge but hadn’t disclosed what those charges might be. However, their disclosure came towards the end of their product description. Again, this might be tricky: people download the same app from different app stores which are priced in different currencies. It would be unreasonable to expect any vendor to disclose all possible prices in all possible currencies.
In short, we need to be as “up front” (transparent) as possible. This means delivering “bad news” in a factual manner and advising any alternatives that may make a difference to buying decisions. People who develop apps or deliver products or services deserve to be paid for their labour. Very few of us work for free.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.
Labels: Customer Care, Financial, Selling, Strategy
Imperfect Incentives
In a recent article, I wrote about the inherent problems with incentive schemes. The simple matter is they involve human beings.
I concluded that it was well-nigh, impossible to design the “perfect” incentive scheme as those incentivised will usually find shortcuts around the system.
On reflection, I realised that this was a cynical and (dare I say) destructive view. Whilst it highlighted problems of which I am sure we’re all aware or have at least experienced in our day-to-day lives, it didn’t offer any guidance as to how to improve the situation.
So, what can we do? The first area of focus, I feel, should be the values of the organisation: what does it stand for? How does it want to be seen? What does it want its customers to say about it? How does it want its employees to treat customers? How does it want its employees to feel about working for it?
Next, consider the behaviours and results that would provide the answers to these sorts of questions. There will be a mix but try to have as many objective measures as possible.
From there, move onto questions like “if we want to see this sort of behaviour, how can we encourage it?” The answer, you will say, is to reward such behaviour.
Remember the caveat though: make sure that it is difficult to shortcut this behaviour and incentive. If you ever want to know how employees game your system, ask them!
We now have the results and behaviours we want and the rewards to encourage them. How do we measurethem? In some cases, it might be easy: there are figures available in the company’s “systems”. Other methods are trickier and involve “customer feedback” - itself inherently flawed, as we’re asking strangers to evaluate behaviours, activities, and products based on their own subjective expectations. For example, what may be “excellent” for one person may be “average” for another. Where possible, a properly briefed “Mystery Shopper” may be the answer.
One thing we can say for certain is that absent incentives, either nothing or the wrong things are likely to happen.
Another point is that, if the incentives are insufficient for “good” behaviour or there is insufficient/no disincentive for “bad” behaviour, again nothing will happen. I have personal experience of this with one job I did where people actually said that the incremental difference between the salary raise they got for a “Very Good” performance rating was barely sufficient to justify the effort required over that which resulted in a “Good” rating.
On top of all this, employers only have a certain amount of money to play with when it comes to rewarding employees (assuming that money is what they value). Yes, “other things” such as praise, time off, or other non-financial rewards can incentivise people, but money remains the key in an age of rising prices. A nice, modern, well, equipped office, free coffee (and even meals), ping-pong, tables, beanbags, gym, memberships, childcare, facilities, medical and dental care, all help but I’ve worked for organisations that have compensated people both with just salary (and a high one), allowing employees to decide what they spent it on as well as for employers who paid lower salaries, but then gave the benefits-in-kind above as part of the “deal”.
It's up to employers to decide how they to reward their employees (particularly good ones) as well as to employees to decide whether they want a higher financial reward and decide how they spend it or whether they accept a lower financial reward but to have, say, funded healthcare, dental care or childcare. The latter for working parents can be a critical factor.
Conclusion: each employer is going to have to mix and match, depending on the market in which it operates, how its competitors compensate their employees, the culture of the market and innumerable other factors. Getting it right, will continue to be a guessing game and requires a high degree of flexibility, understanding, and insight.
To this mix, we must factor in changing generational aspirations. Some workers will naturally value certain elements of compensation more than others, whilst their younger colleagues may show different preferences. In short, poor old HR not only have to manage an incentive scheme, but one that responds to the needs of different generations!
I suspect that in the end money will remain a prime consideration.
I am more than willing to be proved wrong. I do not want to accept that only money is the way forward.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.
Labels: Career, Financial, Productivity, Strategy
When Prices Are "Too High"
A friend of mine was recently quoted £200 for a contractor to pressure wash his paved driveway. For the same amount of money, he bought his own pressure hose.
This got me thinking: my friend is now the proud owner of a pressure hose with which he can now clean any part of his house or car and lend to neighbours as he sees fit. He also, however, needs to store it, maintain it and deal with any other technical issues that might arise. These would normally be dealt with the contractor who charged him or quoted him the original £200 price.
At what point do our products or services become “too expensive” for our customers? There seems to be a psychological barrier above which customers consider something is “too expensive”, but this can vary depending on any number of factors.
As business owners, it’s our job to understand this price limit and work as best we can within it. Go “too high” and business drops off.
Good businesses know how high they can go. Another point is that customers may be prepared to pay more if they consider that that product or service delivered by that particular business is worth it. In other words, if they think that we provide better service or added value than the competition, our price may be less of a factor in the buying decision.
I have no idea of all the factors that my friend took into account when making his decision to buy his own pressure hose, but for whatever reason, this particular business failed to convince him that they were delivering value for money. This is the key issue for any business.
How do we as business owners, convince customers that our products or services represent real value?
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Customer Care, Financial, Selling, Strategy
Cost of COVID
Many of us have started to feel the financial effects of COVID. By this I mean rising costs, resulting from two years of no business and companies now trying to recover.
One recent example was a letter I received from a bank advising that the costs of sending money using their telephone banking centre were going to rise as the costs of maintaining said, telephone banking centre were increasing.
They explained that people were using phone banking less: this may be because people became much more used to using online banking services as call centres couldn’t be fully staffed at the height of COVID due to social distancing constraints, or because of other factors.
Whatever the case, with both the costs of recovery and events in Eastern Europe raising the general cost of living, we can expect to see rises from suppliers, stores and others whose services we use.
As businesses, we need to contain costs as much as possible, or we go out of business. Business owners are now in a dilemma: raise prices and lose customers or hold prices as long as they can to keep business coming in and hope that things will, eventually, calm down.
How has your business been impacted? What have you been able to do to contain costs?
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Financial, Productivity, Strategy
Checks and Balances
With the departure of the latest prime minister of the UK on 20th of October 2022, the world witnessed the concept of checks and balances in one of its purest forms.
A “mini-budget“ announced on 23 September 2022 ran into a solid wall of opposition from financial markets and criticism from financial bodies respected around the world.
The result was a sell-off of gilts (UK Treasury finance bills) and a looming rise to unprecedented levels of interest rates to counter V inflationary pressures that would result. As the Economist observed in its 22nd October 20 222 edition, “Mr Kwarteng (Chancellor of the Exchequer/Finance Minister) declined to show it his draft budget, which threw monetary and fiscal policy into conflict: he just opened the taps and declared it Andrew Bailey’s (Head of the Bank of England) job to deal with the resulting rise in inflation.“ suffice to say, Mr Kwarteng did not last long after that. He was sacked on 14 October 2022.
A new chancellor/minister of finance has been appointed. He trashed the policies that caused the economic ruckus and financial markets stabilised as a result.
There can be few better illustrations of the “checks and balances” system that prevails in democracies and financial and free markets. The downside may be that it may be the markets that have control over free democracies rather than governments themselves. In this case, I prefer to take the view that the proposals made on 23rd October would have resulted in incredible economic hardship for the UK and its people, let alone provoked massive inflation which would have resulted in even more increases to the cost of living exacerbated by the conflict in Ukraine. Clearly something had to be done and it was. Brutally.
If nothing else, we have all been presented with a lesson in the danger of “hubris” - excessive pride in one’s own intellect and capabilities, leading to one’s downfall. The Chancellor has gone. The prime minister has gone. I suspect that, at the next general election in the UK, the governing party will also go.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Financial, Leadership, Strategy
A New Era of Protectionism?
Recently, I asked whether global globalisation was finally in retreat. The retreat was mainly caused by the coronavirus pandemic of 2020 to 2022 which saw the worlds factory (China) close down because of coronavirus concerns. Even now China continues to pursue a “Zero-Covid“ policy.
On realising the downside of relying on overseas partners to produce strategically important products, many countries began to consider “re-shoring“ production previously outsourced overseas.
This is a perfectly natural and understandable reaction. The downside, however, is that it can also act as a justification for a new round of protectionism. At times this may have little significance. At others, especially in regions such as the EU, we may find that countries that compete in the same industries not only re-shore production, but also recommence handing out state subsidies in order to boost those industries’ strength vis-a-vis competing countries.
If coronavirus and the current events in Ukraine are taken in a certain way, it clearly makes sense to become once again self–sufficient in the production and distribution of strategically important goods and services. The problem comes when this morphs into protection and subsidisation of inefficient and outdated national champions who, in the “free market”, would be consigned to oblivion. This has been a constant refrain in the EU over examples such as farming subsidies which some see as benefiting inefficient producers using outdated methods but who must be kept happy to preserve governments.
China’s rise as an industrial superpower resulted in a number of small and medium-sized businesses not only competing against cheaper products, but also, at times, becoming customers of the very country that was putting them out of business. This is one of the drawbacks of so-called “globalisation”. It’s necessarily implies a re-distribution of production capacity and this is usually accompanied by a fall in demand for workers in the industry affected in the other country.
Offshoring has its benefits; of that there can be little doubt. Balance is necessary, as we have seen, to ensure that in an emergency, vital supplies can still be obtained. We none of us want to rely, for example, on another country racked with pandemic or that has become a political foe (as is the case with the invasion of the Ukraine by Russia) and can therefore “turn off the taps” as Russia has done with the flow of gas to Europe.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610
Labels: Crisis Management, Customer Care, Financial, Productivity, Risk, Strategy
Is Globalisation in Retreat?
From the late 1980s two roughly the end of the first decade of the new millennium, globalisation was the rage. Goods which would normally be expensive at home dropped in price as the manufacturers outsourced manufacture to low-cost countries. As part of this, a huge and complex global supply chain group developed alongside. Consumers, manufacturers, labour markets in low-cost countries, and transport companies all benefited.
All this was great whilst it worked. Look at what we are facing now however, and one begins to wonder whether globalisation is finally coming to an end.
After years of “cheap money“ following the financial crisis of 2008 to 2009, interest rates are now rising. Global inflation is also rising, putting pressure on central banks to increase interest rates even further. The US dollar is at its strongest for some time, meaning that those with US dollar debt Have a problem. Shares have dropped in terms of value meaning that pension funds are also shrinking resulting in reduced purchasing power for pensioners.
The question now is whether we are in for a period of economic uncertainty for a major sea change. The coronavirus pandemic of 2020 to 2022 has taught us the danger of outsourcing the supply of critical goods and equipment overseas because, as was clearly demonstrated if a pandemic hits the country that manufactures those goods, those goods will not be in production. This will mean that certain goods will now be “insured“ again and this means a possible increase in price.
Additionally, in order to keep their economies going, governments poured huge amounts of money into compensating workers for drugs that, of course, could not be done due to social distancing requirements. Those governments are now working out how to repay this debt, some perhaps with more success than others.
Events in the Ukraine also resulting in great uncertainty. Oil and gas prices have increased as a result putting all economies on the more stress. We may also see an increase in defence spending amongst the countries that constitute the EU and that are members of NATO.
In many of the developed countries, populations are a dream. This means significantly increased costs in the healthcare in general.
Will we see countries retreating into economic and financial isolation? Personally, I don’t think so. What we will see is a review of supply lines for what are considered essential goods and services for economies, a review of defence spending, more of a tilt towards energy sources that rely less on oil and gas. The global supply chains are still heavily interlinked and will take time to dismantle (just as they took time to build in the first place). What I do think we will see is a restructure of the global economic order but whether this is for better or worse has yet to be decided.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Financial, Productivity, Selling, Strategy
Payment Terms - Get Them Right
I had a fascinating discussion with one of our business clients. The issue was the meaning of “30 days“ payment terms.
Previous experience suggests that if one says that one’s practice is a 30-day payment period, then the person who is expecting payment should receive it on or before the 30th day after date of the invoice (or max. 30 days after invoice received). When I questioned the client on why their customer were quoting 30 days payments but then stating my client could expect payment after 44 days, the response was “they said management needs time to approve”.
Professionally speaking, when one asks for or states that one will pay within a certain timeframe, the timeframe should include sufficient time for all processes involved in the payment of an invoice to be carried out within the timeframe allotted.
It is not for me to judge, but I would consider it unprofessional to state payment will be made within 30 days but not to mention the fact that it might take an additional 14 days for management to approve the invoice. In this case it would be more professional (and dare I say, more ethical) to say that payment will be made within 60 days.
The reality of the situation, however, is that suppliers are more often than not in a weaker position. One can take the matter before the courts, but the likely outcome, even if you win, is that you will lose that buyer’s business. If it’s a large client who gives you high volumes and values of business, this would be an act of corporate self-destruction. The exception is, if you decide that it is preferable to lose that customer’s business.
I do however believe that a business is absolutely within its rights to:
Stipulate how long it is prepared to wait after the date of an invoice for payment to be received
Chase the Client once the deadline for that invoice has passed
As long as the chaser is polite, it should have the desired effect of reminding the customer (courteously) that they owe money and that payment has taken longer than expected. If one is diligent and can show a “paper trail” of reminders/equests for payment, then this reinforces the validity of the claim if the matter finally does go to arbitration.
Attempts at threats or penalties generally do not work unless one is in the position to make good on them (and to lose the business).
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Customer Care, Financial, Risk
Risk, Reward and...?
Many business leaders will be familiar with the term “risk/reward” that describes the approach to taking risks if the rewards are justified. This two-dimensional view has served well for some time, but at times I wonder if there are other aspects to consider.
To keep things simple, we’ll use “High”, “Medium” and “Low” to describe a risk. These are subjective descriptions but suffice for our purposes. In the same way, rewards will also be classified as “High”, “Medium” and “Low”.
We now have a situation where, traditionally, if the risk of taking an action was high, but so were the rewards, management would consider it (especially if they could reduce the potential risk somehow). Conversely, if risk was low and rewards were high, the action would be taken. In between lie all other permutations.
Into this equation, we now need to add two more elements: cost and consequences. The cost is the cost in terms of time, resources and money of undertaking an action. Generally, these are inter-related in that, the less time available, the more the cost in terms of money and resources to complete the action will be.
Consequences are the results (short-, medium- and long-term) of undertaking an action (or not undertaking it). A simple example might be: the consequence of not installing self-service checkout counters will be a loss of business. This could be said to be part of the risk of doing something, although it is more aptly described as consequences.
The risk of installing self-service checkout counters could be low as we know that the equipment is available, can be installed with minimal disruption to the business, employees and customers at acceptable cost, operates efficiently, has low maintenance costs and will last a set number of years at defined rates of use. Absent staff available to man checkout counters, this looks like a “good bet”.
If the costs of operating (say) three self-service checkout counters over a given period are lower than those of recruiting, training and employing the people to do the work, then the next step is clear.
There are other consequences to installing self-service checkouts, of course, such as:
- The machines go wrong and need a member of staff to stand by to troubleshoot;
- Certain customer groups may be scared of using them and prefer traditional “face-to-face” interaction with a cashier;
- The equipment relies on back-office computers for details of price, quantity, special offers.
All of these can be overcome but must be factored into the “cost/consequences” of the equation. If, for example, the installation is poorly done (risk), customers may lose faith in the equipment and simply refuse to use it.
Appreciating the interrelationship between risk, reward, cost and consequences helps us make better decisions for the business, our people, our customers and our community.
How do we in our organisation weigh cost/risk/rewards/consequences? Everyone has their own approach.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Financial, Productivity, Strategy
Rent vs Buy
I’m always interested when I look at the costs of renting versus buying something. Sometimes one makes more sense than the other.
Let’s take a simple example. We can buy a house with a mortgage and pay, say, $1,000 per month mortgage instalments. Alternatively, we might rent a house for $1,000 a month. In each case, depending on the terms of our contracts, both mortgage and rental costs may increase periodically. The difference is that buying a house on mortgage allows you to own a property which, if it appreciates in value, can be sold for a profit. Renting, on the other hand is a “sunk cost“: money paid out in rent cannot be recovered.
The advantage of renting, however, is that we may not be liable for maintaining the building as we would be if we owned the property. Just as rental costs can go up when demand for rentals is high, they can go down when the market is low.
The above is a problem for many (or at least those who can afford to buy a house). A more recent example of where ownership might deliver more value than renting lies in the price I recently saw for renting the latest “Jurassic World" film on iTunes. For a one-time cost of £15.99, I can watch the film once (with as many people as I like) in the comfort of my own home. Compare this with the price of cinema tickets and drinks/snacks in the UK for a family of four or even for a couple, and this is worth it.
Alternatively, I could wait a few months and the film would be available to purchase on iTunes (for £13.99 if past behaviour is anything to go by). I could then buy for a reduced price and watch it as many times as I wanted. Wait a year or so, and I could probably buy it at a much-reduced price as the iTunes Store tends to drop prices after a year or so.
In this case the cost of ownership reduces every time I watch the film. In the case of buying a property on mortgage, one might say that the incremental cost decreases the longer one lives in the property. Hopefully, one happy day, the mortgage will be paid off and the property will be mine to keep. Any capital appreciation on sale is mine to do with as I please. If I wish, I could also remortgage it and use the finance raised for other purposes.
Another example might be deciding to lease a piece of equipment for my business, rather than buying it outright. Leasing means ownership of that equipment remains with somebody else, as do the costs of maintaining and replacing it if it proves defective. There might also be tax benefits to me to lease the equipment, rather than own it.
Renting/leasing versus buying offers advantages and disadvantages. For equipment, it may be better to rent or lease it, as ownership remains with the person renting it to you, and therefore so do the costs of maintaining it. The rental agreement may also allow for you to replace the equipment after a certain period of use or if it breaks down. All this at no extra charge. The risk remains with the party renting it to you.
In some cases, outright ownership, and therefore control, of the item or property in question may make more sense.
As business owners, we are often faced with whether we should buy or rent/lease A property or equipment. Sometimes there are even tax advantages to doing one over the other.
What is best depends on the circumstances: how much can you afford is it better to own or lease the item or property concerned, is there a tax advantage in either owning or leasing? If you own, at one point, if any, do maintenance costs start to outweigh the benefits of owning that item?
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Financial, Productivity
Eggs and Baskets
Russia cuts off Poland and Bulgaria’s gas supplies. Europe moves to block Russian oil imports. Rather like the precipitous drop in supplies of PPE from China during the COVID crisis, we see another illustration of the risk of putting all your proverbial eggs into one basket.
Globalisation has its benefits: for example, the ability to centralise production in a country that can do it better/faster/cheaper (or all three) and exploit the process of just-in-time-delivery made possible by modern supply chain management techniques, ensuring ‘lean manufacturing’ with minimal raw material holdings and many more finished goods shipped faster from warehouses to wholesalers and consumers placing orders online.
Jobs have been created in lesser-developed countries with lower labour costs or in countries with higher technological capacity/expertise, resulting (over time) in increased spending power and improvements in living standards. Increased disposable income has created a new middle class with demand for quality goods, holidays and housing.
However, those same benefits are now proving to be the Achilles’ heel of globalisation. With many eggs in one basket, the results are beginning to speak for themselves. Economies that offshore hand a potential strategic advantage to adversaries.
The choice is either to re-onshore production if one can (with increases in cost of goods manufactured in a potentially more ‘expensive’ labour force) or to accept the inherent risk of offshore production. Another choice is to diversify suppliers with the intent that if one is lost, the others can take up the slack. The coronavirus epidermic, however, proved the downside of this as almost every manufacturing country of any significance in the world found itself under siege from the epidemic as well.
As we have seen, when the world system goes down as it did with coronavirus, all these benefits come to nought. We may well have to get used once more to a world that is more fragmented and expensive, but perhaps also more secure in certain respects. The likelihood is that regional and trading alliances with become more, rather than less, prevalent. Small countries that choose to ‘go it alone’ are likely to find themselves at a disadvantage.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Customer Care, Financial, Risk, Strategy
80/20 Thinking
How many of us have heard of the ‘Pareto Principle’, the old 80/20 ratio? Bit of history: it was developed by Italian Vilfredo Pareto at the University of Lausanne in 1896 in his ‘Cours d'Economie Politique’ when he showed that approximately 80% of the land in Italy was owned by 20% of the population.
Since then, innumerable cases of what has now become known as ‘the 80/20 rule’ have been (and continue to be) identified. The principle (or rule) asserts that, 20% of effort accounts for 80% of results, or that 20% of the faults in a system account for 80% of problems, etc.
The ‘Pareto Principle’ isn’t set in stone. We may, for example, experience a 70/30 instead of an 80/20 spread, but the principle (less causes more) still holds.
The conclusion is that if we can successfully identify where the 80/20 rule is at work in our lives and businesses, we can focus our efforts more effectively, earn higher profits, live happier lives, enjoy better relationships. The list is endless and limited only by one’s imagination.
There are objections, ranging from the Chinese philosophy yin and yang to diplomats’ conversations. Taking the first, it states that, to appreciate (say) the light, one needs an equal amount of darkness (not just 20%). Swap ‘good and evil’ for ‘light and darkness’ and so on and one can continue the argument.
In response to this, the answer is that our lives don’t need to reflect a consistent 80/20 balance 100% of the time. In some areas we need to be unbalanced; where we need to be efficient, then perhaps the 80/20 principle does apply. Where the concern is being effective, then more time is needed. It’s the difference between ‘doing things with minimal wastage’ (efficiency) and ‘doing things right’ (effectiveness). Surgeons concentrate on effectiveness, production lines on efficiency.
In terms of the ‘diplomatic conversation’, when experienced diplomats claim that they gather their best information at the innumerable social and official functions that they attend (and which take up a lot more than 20% of their time), their view is that they learn whose judgement is sound and whose not. This is true, but once you’ve identified the ‘sound’ and ‘unsound’ people, you would then want to focus more on the ‘sound’ ones and minimise time spent with the rest.
80% of business may be done on the golf course, but that doesn’t necessarily mean mean we send almost five hours on the golf course (well, some people may!). Allowing for eating, sleeping and other necessary activities, I suspect the answer is closer to 20%. If you choose to use 20% of your time on this activity, then people will notice and comment that ‘You spend all your time on the golf course!’.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Career, Customer Care, Financial, Leadership, Productivity, Strategy, Teamwork
