The monthly employment burden…..

Salaries are great aren’t they? You turn up to work every day and at some point near the end of the month a sum of money arrives in your bank account. The cycle then repeats itself next month and so on.

At the start of my career at a well known plc I remember being summoned to an internal seminar where the Group Corporate Treasurer boldly stated that he had a dream. His dream was that instead of that regular dollop of money landing in your bank account one month we would just receive an IOU.

“Dear colleagues. I am afraid we don’t have enough cash to pay you this month. Please accept this IOU and hopefully we will be able to make payment shortly. Yours, Mr Treasurer.”

Slightly less inspiring than Martin Luther King you will agree. And yet quite alarming to a young impressionable employee. Mind you we never seriously considered that such a situation would arise in a major company. 

The fact is that when you work in a big organisation, particularly those in the public sector, the money just hits your bank account. You have no thought as to how it gets there. Indeed there is no question that it will ever not be there. Obviously there is magic or something at work to ensure that it happens. The cash situation of the company has nothing to do with anything.

It is only when entering SME land that I really started to appreciate the skills and fears surrounding cash management and in particular that time of the month (or week) when wages and salaries had to be paid. You can play around with supplier payments to a certain degree but employee wages are a last resort. Waking up in a sweat over that big payment that takes forever to arrive, and on which you are relying to pay those all important people who work for you, becomes a regular occurrence.

SMEs are viewed as the engine of growth and the most likely source of the new jobs that are going to be needed to keep unemployment under control. However a recent survey revealed that 85% of small and medium sized companies are not looking to take on new people any time soon and may indeed be about to cut back again. The usual excuses of red tape were trotted out but I think there something more basic at work here.

Forget excessive regulation and laws that provide a high level of protection to employees that is a barrier to recruitment. The feeling in the pit of the stomach when the time of the month comes to pay the salaries is the real employment burden SME owners and managers have to bear, and is probably a major reason as to why unemployment figures will remain higher in the short term that the Government would like.

I got the Haçienda business blues….

Having ploughed through a number of worthy, if slightly dull, business books in my time it was quite refreshing find one that combined business with another one of my favourite subjects, music.

OK, “The Haçienda – How Not To Run A Club” by former Joy Division and New Order bassist Peter Hook probably wasn’t intended to be a business book, but as it covers the rise and fall of a business venture, including issues such as personnel, management, marketing, finance and internal controls, it does as good a job as any that I have read recently.

I can hear you all saying now “Oh well, it was a business run by rock stars, no wonder it failed. Obviously no planning or review processes or proper management”. Well, no actually, what the book reveals is that they did have regular management meetings, they did prepare accounts and forecasts, and they did do their best to get the right people.

Indeed Peter Hook comes across as fairly switched on in terms of the shortcomings of the business, perhaps not unreasonably so, given that he, as a member of New Order was unwittingly bankrolling the whole thing. Sadly the same could not be said for some of his fellow directors, including the late and very lamented Tony Wilson, whose entrepreneurial zeal created the iconic Factory Records empire, and it was their shortcomings in cost control and cash flow management, along with some external factors such as drugs and crime, which eventually sunk the club.

Yes it was the fact that I consider Joy Division to be the best group ever to emerge from Manchester (it’s a generational thing – other people will cite The Hollies or 10cc or The Smiths or The Stone Roses or Oasis – no doubt Delphic who have been placed third in the list of the BBC’s Sound Of 2010 artists will be somebody’s choice in the future) that drew me to the book in the first place, but given that the history of the modern music business has many excellent examples of entrepreneurship, it was a valuable business case study in its own right.

Meanwhile Peter Hook is clearly a glutton for punishment – he has just announced that he is opening a new live music venue at the old offices of Factory Records in Manchester. He says it will differ from the Haçienda, and he aims to make money this time. Right. Well good luck with that one then Pete….