OK, it’s not sex, though at least I have now grabbed your attention. But can pensions ever be fun? I have to admit that the thought of a pensions dedicated event did not fill me with enthusiasm. Fair play then to Melanie Stern, and her team at Financial Director magazine, who put together a really enjoyable and informative evening at the London Stock Exchange last week.
Of course it helps if your speakers are entertaining, and in Kevin Wesbroom and Jackie Daldorph from Hewitt Associates, Allan Course, an independent pension trustee, and Michael Johnson, author of a Centre for Policy Studies paper on changes to state, private sector and public sector pensions, Melanie had made some wise choices.
Kevin and Jackie set the scene with an amusing overview of the current pensions scene, including the election pledges of the three main parties, the key issues that nobody seems prepared to address, public sector pensions and the likely impact of NEST and NEO. Allan highlighted some of the challenges that pension fund trustees were facing in a world that wants to move away from final salary pension schemes.
Yet it was Michael who advanced the notion that the problem with pensions was the concept of pensions themselves. He strongly advocated a wider more flexible savings method that was more in tune with the uncertain times that we were now facing.
There is an argument that says that pensions are “so 20th century”, and they are in desperate need of a rebrand for the new millennium. Certainly the original aim of Lloyd George to provide a few years of well earned rest and recreation for 70 year olds following a lifetime’s toil does not match with today’s possibility of the retirement period lasting almost as long as the working life that has to pay for it.
The pensions model as we know it would appear to be broken. New ways of thinking are essential if we are to reach the stage where pensions will occupy our minds more than sex does with sufficient wherewithal to enjoy our twilight years. The evening spent with Financial Director magazine was a valuable step in the right direction.
Wednesday, 19 May 2010
Friday, 14 May 2010
Wanted – FDs with a vision
John Vincent, co-founder of Leon Restaurants and head of Vasari Global, is frustrated by empty companies. In a recent blog in Management Today he railed against zombie businesses that focus on share price with little or no concern for people and society. He believes that companies need to have a sense of mission beyond the share price, or they won’t last.
I can relate to that. There is nothing worse than a company that has no purpose other than to make money. Indeed it is clear that a business that pursues profit without any thought for the way that it does so is unlikely to be sustainable.
But hang on. Apparently I am not supposed to think like that. I am a finance director. It seems I don’t get this vision thing. I am a process guy who likes nothing better to wallow in the numbers and cut “unnecessary” costs. That is apparently why FDs do not make good CEOs.
Balderdash! Good FDs are good precisely because they do get this vision thing. They can look beyond the numbers and appreciate the difference between cost and value. They do understand how wealth is created.
However they also know how easily it is destroyed. Indeed there is an argument to say that some CEOs have too much vision and that a little focus on the numbers would not do them any harm at all.
The truth is that a good CEO is a good CEO regardless of his or her discipline. They articulate the vision, support the processes, engender trust and ultimately create wealth.
Actually I do have a vision. It is of a business that I have helped to know where it has been, know where it is going and know that it has enough fuel in the tank to get there. It may not be bright and fluffy, but it is reasonable and achievable, and has helped a number of CEO “visions” succeed.
I can relate to that. There is nothing worse than a company that has no purpose other than to make money. Indeed it is clear that a business that pursues profit without any thought for the way that it does so is unlikely to be sustainable.
But hang on. Apparently I am not supposed to think like that. I am a finance director. It seems I don’t get this vision thing. I am a process guy who likes nothing better to wallow in the numbers and cut “unnecessary” costs. That is apparently why FDs do not make good CEOs.
Balderdash! Good FDs are good precisely because they do get this vision thing. They can look beyond the numbers and appreciate the difference between cost and value. They do understand how wealth is created.
However they also know how easily it is destroyed. Indeed there is an argument to say that some CEOs have too much vision and that a little focus on the numbers would not do them any harm at all.
The truth is that a good CEO is a good CEO regardless of his or her discipline. They articulate the vision, support the processes, engender trust and ultimately create wealth.
Actually I do have a vision. It is of a business that I have helped to know where it has been, know where it is going and know that it has enough fuel in the tank to get there. It may not be bright and fluffy, but it is reasonable and achievable, and has helped a number of CEO “visions” succeed.
Wednesday, 28 April 2010
The value of “experiences”……
The truly depressing statistic that emerged from unemployment figures released last week was that the level of unemployment for 16-24 years olds had almost reached one million. This growing number of NEETs
(Not in Education, Employment or Training) is a national tragedy in a number of ways.
For the hard pressed Generation Xer though, struggling with pressures of family responsibility, job insecurity and collapsing pensions, the trials and tribulations of Generation Y may seem of little concern, especially when they are constantly told it is down to them to adapt to the values of this generation rather than the other way round.
Indeed it is fashionable to claim that school and college leavers and graduates attempt to enter the world of work with little or no concept of what is required regarding skills, discipline and timeliness, and with more interest in what the job can do for them rather that what they can do in their job. There are glib suggestions that a haircut and a makeover are all that is necessary to turn things around.
All this is extremely unfair on young people. They are not stupid. Many are very entrepreneurial in their own way. They recognise trends. They can react quickly. They often start their own businesses. They can think the unthinkable. They may suffer from lack of conventional “experience”, but the most tech savvy generation ever already have a wealth of “experiences” to draw on.
The growing NEET problem is clearly not all down to employer attitudes. Young people do need to be more aware of the challenges facing their elders. Family environments and educational establishments have to do a lot more to encourage the right sort of thinking and attitude. Initiatives such as Surrey Young Enterprise , which are excellent ways of engaging young people with business and commerce, need to be strongly supported by business and government alike.
Yes, it is not easy in a world where it seems more and more people are chasing fewer and fewer opportunities, but opportunities are often created in adversity, and finding ways to tap into the talents of an increasingly forgotten generation is surely as good a place as any to start.
(Not in Education, Employment or Training) is a national tragedy in a number of ways.
For the hard pressed Generation Xer though, struggling with pressures of family responsibility, job insecurity and collapsing pensions, the trials and tribulations of Generation Y may seem of little concern, especially when they are constantly told it is down to them to adapt to the values of this generation rather than the other way round.
Indeed it is fashionable to claim that school and college leavers and graduates attempt to enter the world of work with little or no concept of what is required regarding skills, discipline and timeliness, and with more interest in what the job can do for them rather that what they can do in their job. There are glib suggestions that a haircut and a makeover are all that is necessary to turn things around.
All this is extremely unfair on young people. They are not stupid. Many are very entrepreneurial in their own way. They recognise trends. They can react quickly. They often start their own businesses. They can think the unthinkable. They may suffer from lack of conventional “experience”, but the most tech savvy generation ever already have a wealth of “experiences” to draw on.
The growing NEET problem is clearly not all down to employer attitudes. Young people do need to be more aware of the challenges facing their elders. Family environments and educational establishments have to do a lot more to encourage the right sort of thinking and attitude. Initiatives such as Surrey Young Enterprise , which are excellent ways of engaging young people with business and commerce, need to be strongly supported by business and government alike.
Yes, it is not easy in a world where it seems more and more people are chasing fewer and fewer opportunities, but opportunities are often created in adversity, and finding ways to tap into the talents of an increasingly forgotten generation is surely as good a place as any to start.
Monday, 19 April 2010
Business planning – up in the clouds or down to earth……?
The two major news items of the moment, Nick Clegg’s apparent triumph in the televised election debate and the volcanic cloud that is currently playing havoc with the skies have brought to mind Harold MacMillan’s alleged quote when asked what was most likely to blow a government off course.
The source of the ex Conservative prime minister’s comment “events dear boy, events” has never been properly substantiated, but nonetheless, it is probably haunting his would be successors now, as all their months of meticulous election planning have had to be put to one side, to deal with these two unexpected events.
Many businesses, not least those involved in air travel, are also having to come to terms with the impact of the Icelandic eruption, which threatens to wreak more havoc on the UK economy than the collapse of the Icelandic banking system. Whether it is key employees being stranded, or the disruption of key transport connections, or the impact on customers and suppliers, companies are having to find solutions to the problems that have emerged.
It is moments like this where the merits of business planning tend to be questioned. “How can you plan for this?” is a common jibe, dug up whenever somebody has the temerity to suggest that their organisation might need some sort of business plan. A lot of this stems from the corporate or government approach to planning, which in many organisations means a political exercise designed to promote or preserve the position of senior executives or civil servants.
The reality is that planning is not just about plotting a single course. It is about preparing for the unexpected. It is about creating a culture within which uncertainty can be recognised and dealt with. Above all it is about producing a framework within which quick decisions can be made to deal with a range of scenarios.
Businesses with robust planning processes will have already started to look at the risks and opportunities that the current situation presents. They will be aware of the resources that they have available to manage these, and will be working out how to deploy them to maximum advantage. In short they will be much better prepared and much more able to survive than businesses that don’t have such processes.
As for the politicians…..
The source of the ex Conservative prime minister’s comment “events dear boy, events” has never been properly substantiated, but nonetheless, it is probably haunting his would be successors now, as all their months of meticulous election planning have had to be put to one side, to deal with these two unexpected events.
Many businesses, not least those involved in air travel, are also having to come to terms with the impact of the Icelandic eruption, which threatens to wreak more havoc on the UK economy than the collapse of the Icelandic banking system. Whether it is key employees being stranded, or the disruption of key transport connections, or the impact on customers and suppliers, companies are having to find solutions to the problems that have emerged.
It is moments like this where the merits of business planning tend to be questioned. “How can you plan for this?” is a common jibe, dug up whenever somebody has the temerity to suggest that their organisation might need some sort of business plan. A lot of this stems from the corporate or government approach to planning, which in many organisations means a political exercise designed to promote or preserve the position of senior executives or civil servants.
The reality is that planning is not just about plotting a single course. It is about preparing for the unexpected. It is about creating a culture within which uncertainty can be recognised and dealt with. Above all it is about producing a framework within which quick decisions can be made to deal with a range of scenarios.
Businesses with robust planning processes will have already started to look at the risks and opportunities that the current situation presents. They will be aware of the resources that they have available to manage these, and will be working out how to deploy them to maximum advantage. In short they will be much better prepared and much more able to survive than businesses that don’t have such processes.
As for the politicians…..
Wednesday, 14 April 2010
Feeling good – for now…..
The latest business trends survey released this morning by BDO , the accountancy firm, reveals that business confidence has reached its highest level for four years. This pretty much fits with much of the anecdotal evidence that I have gleaned from clients and contacts over the past few months, and is a welcome antidote to the gloom and doom that has been prevalent for the last year or so.
But anybody who takes this as being the end of the recession and the beginning of a glorious sustained recovery is being a tad naïve. As the survey itself says, much of the boost in output has been down to companies deciding to re-stock after letting their stock levels run down during the recession, and that a significant, and as yet unidentified, increase in private sector investment is needed to keep any recovery on track.
Many businesses that have cut things back to the bone in response to the downturn are now having to get their stock levels back to a least a reasonable level. Building maintenance and basic equipment upgrades can only be postponed for so long. But like the VAT reduction and quantitative easing, these are only going to be one off boosts to economic activity.
UK economic growth is driven by public sector spending, consumer demand, business investment, and export activity. It is the latter two that are likely to lead the way out of this recession, and given the comments above regarding investment and the fact that global demand is still not exciting enough for there to be a strong expansion of exports, the situation remains fragile.
Add to this the fact that businesses are understandably not believing any pre election pledges about what the parties intend to do, and are waiting for the reality of the post election economic situation and the actions that will be necessary to deal with that, you can understand why I am still cautious about the immediate future.
I still believe that it will be up to businesses to make their own recovery in 2010 (and maybe even 2011), and that the basics of business planning and financial management that many companies have had to revisit during the recession will play a key role in any success they hope to achieve. There is still a long way to go.
But anybody who takes this as being the end of the recession and the beginning of a glorious sustained recovery is being a tad naïve. As the survey itself says, much of the boost in output has been down to companies deciding to re-stock after letting their stock levels run down during the recession, and that a significant, and as yet unidentified, increase in private sector investment is needed to keep any recovery on track.
Many businesses that have cut things back to the bone in response to the downturn are now having to get their stock levels back to a least a reasonable level. Building maintenance and basic equipment upgrades can only be postponed for so long. But like the VAT reduction and quantitative easing, these are only going to be one off boosts to economic activity.
UK economic growth is driven by public sector spending, consumer demand, business investment, and export activity. It is the latter two that are likely to lead the way out of this recession, and given the comments above regarding investment and the fact that global demand is still not exciting enough for there to be a strong expansion of exports, the situation remains fragile.
Add to this the fact that businesses are understandably not believing any pre election pledges about what the parties intend to do, and are waiting for the reality of the post election economic situation and the actions that will be necessary to deal with that, you can understand why I am still cautious about the immediate future.
I still believe that it will be up to businesses to make their own recovery in 2010 (and maybe even 2011), and that the basics of business planning and financial management that many companies have had to revisit during the recession will play a key role in any success they hope to achieve. There is still a long way to go.
Tuesday, 6 April 2010
Job Creation vs Job Preservation…again…
It is jobs stupid! As the official election campaign finally gets underway and we prepare ourselves for a month of claim and counter claim, promises and pledges, and of course the obligatory carefully staged photo opportunities, the economy is likely to come under renewed scrutiny as the political parties endeavour to persuade us that they have all the solutions.
It does not require the powers of Nostradamus to foresee that unemployment and job creation are likely to be at the forefront of the electorate’s current list of concerns. However, as touched upon in a previous blog, it remains clear that politicians still do not really understand the difference between job preservation and job creation.
Take the recent car scrappage scheme that has just ended. A great success it seems, in that it apparently saved 4,000 jobs. However this scheme appears to have had a budget of about £400million. Being an accountant, I am obviously not very good at maths, but I calculate that, on this basis, each job preserved has cost the government £100,000.
And there is no guarantee that the 4,000 jobs mentioned above will still remain in the future. As manufacturers and car retailers downgrade their sales expectations for the coming year it is hard to believe there will not be job losses in the sector. All that seems to have been achieved by the scheme is some short term job preservation.
It would have been more worthwhile to have given 4,000 SMEs approximately £100,000 each to see how they would have used the cash. Some no doubt would have squandered to the money (perhaps on a new car or two), but I would like to think that those that did use it wisely would have ended up creating more than 4,000 jobs, and, more importantly, that those jobs would have been sustainable and longer lasting. Perhaps they might even have further boosted the anticipated “green jobs bonanza”.
Anyway that’s my suggestion. The perfect combination – job creation with green credentials. The election’s already in the bag….
It does not require the powers of Nostradamus to foresee that unemployment and job creation are likely to be at the forefront of the electorate’s current list of concerns. However, as touched upon in a previous blog, it remains clear that politicians still do not really understand the difference between job preservation and job creation.
Take the recent car scrappage scheme that has just ended. A great success it seems, in that it apparently saved 4,000 jobs. However this scheme appears to have had a budget of about £400million. Being an accountant, I am obviously not very good at maths, but I calculate that, on this basis, each job preserved has cost the government £100,000.
And there is no guarantee that the 4,000 jobs mentioned above will still remain in the future. As manufacturers and car retailers downgrade their sales expectations for the coming year it is hard to believe there will not be job losses in the sector. All that seems to have been achieved by the scheme is some short term job preservation.
It would have been more worthwhile to have given 4,000 SMEs approximately £100,000 each to see how they would have used the cash. Some no doubt would have squandered to the money (perhaps on a new car or two), but I would like to think that those that did use it wisely would have ended up creating more than 4,000 jobs, and, more importantly, that those jobs would have been sustainable and longer lasting. Perhaps they might even have further boosted the anticipated “green jobs bonanza”.
Anyway that’s my suggestion. The perfect combination – job creation with green credentials. The election’s already in the bag….
Tuesday, 30 March 2010
An FD’s view of the Budget
Having been inundated with e-mails from various accounting firms providing both the highlights and the details of last week’s budget, I thought I would take a bit of time to digest them all before making any comment. That, and the fact that because of the Easter weekend, the last day to get anything done in the current tax year to mitigate the impact of the new 50% tax rate is actually April 1st.
Of course given that there is an election imminent, any thoughts that I might have could be totally redundant, as could the Chancellor and many of his colleagues. However, as this was probably one of the more SME friendly budgets of recent years, it is worth looking at some of the proposals put forward by the Chancellor last week.
The headline grabbers were the doubling of entrepreneurs’ relief, for those who sell their business, to £2mio, the cut in business rates from October 2010, and the doubling of the annual 100% investment allowance to £100,000. The latter is only a short term cash benefit rather than a subsidy, but very helpful if you were going to undertake that capital investment anyway. If you are only going to do it for the tax break, then the best advice is probably don’t.
There was an extension of the “time to pay” scheme in respect of business taxes for the lifetime of the next parliament (which in the case of a hung parliament may not be that long). This can be a very useful scheme, but its use needs to be used as part of an overall business restructuring plan, and not as a way of delaying the last rites of a failing business. Getting a scheme past the Revenue is also becoming more challenging.
There were a number of schemes aimed at providing loans and investment to smaller businesses, including a new national investment corporation, a new “green bank” and more money for university spin-outs. Reading the small print, many of these new funds are dependent on private sector and European Union funding as well as government money. However, assuming the application process is not too tortuous, these could provide useful funds to early stage businesses.
There will also be yet more pressure brought to bear on the banks to lend, including a “Credit Adjudication Service” who will deal with complaints from SMEs which have been refused bank loans, and who will have legal powers to “enforce its judgements” if credit has been “wrongly denied”. I can’t wait to see this in action, although I suspect the biggest business beneficiaries of this scheme will be the accounting and legal professions.
The elephant in the room for SMEs (and many larger businesses) remains the 1% increase in National Insurance that will kick in from April 2011. However you dress it up, it is a tax on employment, which seems perverse to me given that the economic confidence which comes from having a job will be a vital part of any recovery.
So yes there were some very interesting proposals in the budget for smaller businesses and entrepreneurs but sadly, given the impending election, they are only proposals and will only be implemented if Labour is re-elected. In the end the whole thing was possibly a waste of time, money and paper and maybe the government should have just enacted legislation to enable them to continue to collect taxes.
Personally I am looking forward, if that is the right phrase, to a proper budget once the election is out of the way, regardless of who wins, so I can start planning with some certainty.
Of course given that there is an election imminent, any thoughts that I might have could be totally redundant, as could the Chancellor and many of his colleagues. However, as this was probably one of the more SME friendly budgets of recent years, it is worth looking at some of the proposals put forward by the Chancellor last week.
The headline grabbers were the doubling of entrepreneurs’ relief, for those who sell their business, to £2mio, the cut in business rates from October 2010, and the doubling of the annual 100% investment allowance to £100,000. The latter is only a short term cash benefit rather than a subsidy, but very helpful if you were going to undertake that capital investment anyway. If you are only going to do it for the tax break, then the best advice is probably don’t.
There was an extension of the “time to pay” scheme in respect of business taxes for the lifetime of the next parliament (which in the case of a hung parliament may not be that long). This can be a very useful scheme, but its use needs to be used as part of an overall business restructuring plan, and not as a way of delaying the last rites of a failing business. Getting a scheme past the Revenue is also becoming more challenging.
There were a number of schemes aimed at providing loans and investment to smaller businesses, including a new national investment corporation, a new “green bank” and more money for university spin-outs. Reading the small print, many of these new funds are dependent on private sector and European Union funding as well as government money. However, assuming the application process is not too tortuous, these could provide useful funds to early stage businesses.
There will also be yet more pressure brought to bear on the banks to lend, including a “Credit Adjudication Service” who will deal with complaints from SMEs which have been refused bank loans, and who will have legal powers to “enforce its judgements” if credit has been “wrongly denied”. I can’t wait to see this in action, although I suspect the biggest business beneficiaries of this scheme will be the accounting and legal professions.
The elephant in the room for SMEs (and many larger businesses) remains the 1% increase in National Insurance that will kick in from April 2011. However you dress it up, it is a tax on employment, which seems perverse to me given that the economic confidence which comes from having a job will be a vital part of any recovery.
So yes there were some very interesting proposals in the budget for smaller businesses and entrepreneurs but sadly, given the impending election, they are only proposals and will only be implemented if Labour is re-elected. In the end the whole thing was possibly a waste of time, money and paper and maybe the government should have just enacted legislation to enable them to continue to collect taxes.
Personally I am looking forward, if that is the right phrase, to a proper budget once the election is out of the way, regardless of who wins, so I can start planning with some certainty.
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