Effective Conversations

I am constantly surprised at the number of people (a lot of them being my fellow professionals) who do not ask enough questions to provide effective solutions to their clients.

I ask so many questions. I’m probably quite annoying – in fact my kids tell me I am very annoying. But without effective questioning you don’t get to the heart of the matter. Things just hang. Problems can be identified, but solutions are not proposed. And clients get frustrated with this approach. I don’t blame them – I would.

Without getting too technical I saw a set of accounts this week which had been subject to an audit. The audit opinion had been qualified by the company’s auditors. This, in itself, is unusual – this was qualified on four separate counts which is almost unheard of. After questioning the director for about three quarters of an hour, we discovered that he could provide information in advance of the audit that would satisfy all of those things. As the nature of the company’s business involved substantial bank borrowings, the last thing the company needs is a qualified audit report which will most certainly spook the bank. Oh, and the audit will be cheaper this year as less angst needs to be expended by the auditors on the actual wording of the audit report!!

I looked as another set of accounts for a new client a couple of weeks ago where the owner directors were purely remunerated by salary. Without them having to sell one other thing, or incur one extra cost, they are now getting an extra £5,700 a year each after-tax in their hands. Suddenly, their view of the business is different, as now they can afford to enjoy more of what they work for.

These are just two examples of me not doing anything particularly clever. I’ve just asked why are you doing that, or why can’t you do this? I’m amazed that in times of recession simple effective well tried advice is still not being given, because the professionals are too obsessed by the technicalities. It’s a simple case of not seeing the wood for the trees.

Here’s another one. Another audit, which means that the auditor has to send a management letter to the company outlining issues that the auditor has discovered. The auditor correctly identified that there was a major issue with subcontractors which if there had been a PAYE investigation might have led to a very substantial bill for the company. I’m talking £250,000 or so. They put this in the management letter. With the management letter they sent their bill, which was double what the company was expecting. They did not tell the company how to rectify this problem. I did!

What did they do wrong? Well, apart from not warning the company about the increased fee, they forgot that they were not just doing an audit. They got to the end of the audit, filled in all their questionnaires and checklists, and stopped. They did all their internal processes, which are important to them, but no one else, bluntly, gives damn about them.

These are all relatively recent – I can find lots more. It’s exasperating.

I have a simple rule for my professional colleagues that work with me. Anybody in the office can come to me with a problem. The door is always open. But – they must come with their proposed solution as well. It’s what I want, and I know full well it is what my clients expect - solutions Why have so few people failed to work this out?

And for your businesses, do your internal processes stop short of what your customers need and expect? Should you be looking at ways of asking better questions, before your competitors do?

I’ll happily look at them with you if you like, to get you to be as annoying as me!

QE2 - the new Titanic?

QE2 is the name for the latest round of quantitative easing announce by America’s Federal Reserve this week.

If you want a 15 minute lecture on what QE is, go here What is quantitative easing?, it’s actually quite enlightening.

The Fed can’t cut interest rates (already done that, so has the Bank of England), so it has to print money to stimulate the US economy.

This has an impact on assets prices – stocks and bonds. We’ve done it here as well. It means, with low interest rates, that investors are driven to more risky assets to try and beat inflation with their money. Weaker, more indebted, less efficient companies survive, when in reality they should have failed, or been bought up by more successful rivals. Good companies are thus penalised, and handicapping the better businesses hampers your economy. So if you’ve got a decent business, blame the central bankers if you can’t expand, get credit, or buy up a competitor.

It also weakens the currency, which makes it easier to export, or such is the theory. But every major currently is trying to do the same, and they are all chasing their currencies down. Sooner or later, a major economy is going to say enough is enough, and introduce trade barriers, which should ensure we all suffer.

China is already not happy – they hold trillions in foreign currency – mainly dollars, which have just devalued. And China needs to export to maintain its growth. Where do most of those exports go? You guessed – the most consumption hungry country on the planet – the USA.

Commodity and food prices are already rising, and this would accelerate the trend. Inflation in prices but not in wages will hurt far more than anything the Chancellor proposed recently.
But anything to avoid the issue for a bit longer, which is the Fed’s game plan.

The Fed, by the way, has been in existence for 97 years. And in that time the dollar has lost 95% of its value. Not long to go!

Keep calm and carry on. Unlike the French..

Just a few miles of water, yet so different. Here, we calmly accept swingeing budget cuts in welfare and public services. Over the Channel, there are riots over the relatively small change to pension ages. Even from schoolchildren who frankly don’t know what they are rioting for.

Yet, we, in Britain, are facing much more hardship in trying to deal with the public sector deficit. And let’s just remember, lest we moan first and ask questions later, that what is proposed is to take us back to spending levels in 2006-7, when we were hardly on the breadline. So maybe we can do this.

In earlier times, we as a nation were less keen on quantitative easing – a practice which now has worldwide approval, judging from the numbers of governments that practice it. In 1142 Henry II, when finding that some of his officials had debased the coinage, castrated some and cut the hands off the others. Now, their descendants are applauded for helping us to continue to spend above our means. Henry understood that the coinage was the wealth of the country, and debasing it devalued everything that could be bought and sold using it. How did we forget?

How much can we easily do without if we had to I wonder? Why not try now, while you still have the choice, and see what you can do? Will the car last another year? Do you need two foreign holidays next year, remembering that Airline Passenger Duty has just gone up? Can we manage? Of course we can. Will some people suffer? Of course they will? Will it be fair – when a good chunk of the burden falls on an overblown benefits system – no, it won’t. But is there a better way? Doubtful, and can we really wait to find out?

I know the answer to that one. I’ve had to be the nasty man that has employees that they have lost their jobs because the company couldn’t carry on as it was. I’ve known that it doesn’t just affect them, but their families, their kids’ aspirations, their community. And I’ve probably cut too deep, and put too many people out of work. Better too deep, and reemploy later, because if I hadn’t, and cut too little, they would all have been put out of work later. And that I think is where we are now. So it will hurt – a bit for some, a lot for many. Better than a lot of suffering for many.

And on a more cheery note, we can always remember what the difference is between civilised mankind and the animals. The English Channel!

You don’t have to be a genius to make money (but a genius can lose it for you)

I’ve always curious about the role of the credit rating agencies (you know “Ireland has been degraded to AA, this has been graded a junk bond “– that’s BB by the way). And now, thanks to Addison Wiggins and The Daily Reckoning, I know. And more importantly I know why it matters to us all.

There are 3 main agencies – Standard & Poors, Fitch, and Moodies. All reside in New York. All staffed by geniuses, who do complex projections on the worth of sovereign debt, the bonds and credit worthiness of companies listed on the New York Stock Exchange, London Stock Exchange etc. Their ratings give us a clue as to the financial strength of the companies we (and our pension schemes etc) invest in. So AAA is the best, BB is junk. We thus have information how to best put our hard earned, after tax income. They are supposed to provide a clear playing field for all investors.

But they haven’t. They have mispriced risk over the last decade, and it has cost us all dear. A Senate study showed last month that over 91% of the AAA rated mortgage backed securities issued 2006-2007 have been downgraded to junk. S&P rated Iceland A+ three months before its currency collapsed. Only really clever people can muck it up this badly – hence the second bit of the title. All three rating agencies are run by brilliant quantitative economists, with Mensa levels of IQ and zero common sense. No model they used took account of generational crisis – all models were too short term. As I’ve pointed out before - study history!

Still they pontificate, and are used by just about all major firms and countries in the world. Why - because those firms offer securities which they want to be sold – to you and me, directly or otherwise. So we need information to encourage us to buy them. Would we buy if we thought our money was at far more risk, or would be expect more reward in terms of interest if we feared we would lose our capital? Of course we would, but that would make the cost of capital for the issuing firms that much higher, so the issuer wants a good rating.

Here’s a good rule that accountants use (well I do anyway). You should, too. Follow the money. Who gets paid by whom for what?

How do ratings agencies get paid? The big three get paid by the firms issuing the securities. That’s not to say the agencies are in cahoots with these firms. They are not; it’s simply a flawed model. Too cosy.

Other agencies do a different job – some would say better. Egan Jones is paid by the buyers of the bonds it rates. Does that sound better to you?Should you trust the truly important investments in your life to this circle of self interest? Ratings agencies, investment banks et al don’t bother with small companies, commodities, smaller funds and other such things with limited potential to make them money. Not you – them. Should you.

So by all means look at the barometers shown by the agencies, because that will tell you what everyone else is thinking, but don’t trust your widows and orphans fund to anything you don’t understand, or where you have to rely too much on someone else’s opinions. Especially if you aren’t a genius and they are.

Elimination of risk

One post on decisions, and lack of knowledge, avoid risk! Now one on taking it...!

Our guiding principle in this country is to avoid risk – there are masses of legislation to reduce, avoid and cater for any piddley little risk or unforeseen event that may or may not come to pass. And we, the majority, have to comply lest one poor and maybe thoughtless individual should fall into a hole clearly in front of him, drink milk that smells like drains or otherwise suffer some catastrophe that a moment’s thought might have avoided. The State is our brain, filled with so so many things to guard against. Most of which will not and never will concern us.

This assumes that we are happy that someone or something else does our thinking for us. Most of this seems to involve some sort of regulation and form (or forms) to be filled in. We are required (how I hate that - can't someone simply say "can you please...?") to give information. Have you noticed the main point of this exercise is the filling in of the form, the assumption of authority over some trivial act we may have committed or omitted? The form is king – what anyone does with the information contained seem somewhat secondary – except to the official with the form who can then prove that their job has been done.

Would Baby P and others like him be so at risk through Social Services failures if those people charged with looking out for him had more time to do and less time spent on administering? The cry went up "we follow procedures” but to what end? Not the procedure itself, but so it seems. And whilst I’m at it, nurses spend 30% of their time nursing – you can guess what the rest of their time is spent on. And please don’t stop at nurses.

Where does this take us with risk? Ever fallen in love? Bit of a risk, putting yourself out there - so vulnerable, so open? Ever get burned? Did you do it again? Why? No Health and Safety edict and set of forms for romance yet. If they did, forget falling in love, as in practical terms it would be impossible.

We know what is certain in life – death and taxes! Ignoring taxes – no we won’t – did you know that the taxes statues now run to 11000 pages having more than doubled over the last 14 years? More than any developed country. Mainly in the name of eliminating loopholes, and achieving fairness. Can you quote them? Me neither, although I do know that more legislation (the accountant’s friend!) leads to more loopholes. And - why are we blaming people who exploit loopholes, when perhaps our ire is better directed at those who draft and pass such laws.

On to death then. Do we want to eliminate risk? Or we do we want our journey through life to be worth the price we pay for it? Do we want to be in the position where we are empowered to do the most we can with what we’ve got? If we do, then we need to be aware of risk and dangers, and enough information to be able to make an informed decision. But essentially, we want it to be OUR decision, don’t we?

There was a subversive but wonderful advert with an elderly couple; one says to the other: “Do you remember the time we almost went to Turkey?” Just go!

Risk aversion is fine. Measured, considered and then accepted as the price we are willing to pay for a life well lived. Which is also true of how you run your business life and I think, doesn’t contradict my earlier Ignore negative advice – I think..

Ignore negative advice!

Actually, don’t..whatever your psychological hang-ups. Which we all have – psychologically we avoid negative advice. But people do not realise that success comes from avoiding losses in the main, rather than making profits.

Think about it. Where do you get positive advice? Bookshops are full of it. There are so many self help books, none called “What I learned from going bust”. A pity, because those lessons, hard learned, are more compelling and more lasting.

And whilst I’m at it, this country doesn’t give failures a chance. In America, someone fails, and people assume they have learned something, so at the least, they will not repeat that particular mistake. Here, more of a stigma. Once a failure, always a failure. Obvious nonsense when you think about it, but so true to the British, more pessimistic, mentality.

Linked to this need for positive advice, is the need to take some sort of action. Even when doing something is damaging. There is a presumption in business men that they are decision makers, so they must make a decision. Ignoring the fact that doing nothing is also a decision. How have they assessed the chance of error, if there is this need to make a decision? And how have they learnt how to do this?

For error avoidance is a skill, and it needs to be learnt. It comes from thought, research and planning. Decisions later..

But I’m getting ahead of myself. No chance of a decision until you’ve thought about the limitations of your knowledge.

When did medicine start saving lives? Any further back than last century? No, I’m not being rude. It’s simply that knowledge wasn’t advanced enough to save more than a small proportion of patients. Sometimes there was enough knowledge, sometimes it was luck, most times mortality rates improved through better sanitation and nutrition. And which doctor, when faced with symptoms outside their knowledge, would admit it? They would have a go, do their best, and hope.

So, for the business man, should he explore what he doesn’t know before he acts? But, when would any decision ever be made, I hear you ask? Later! Or not..

If we are trying to rely on financial markets, we now know (for the moment) we can’t. We thought we could. Our regulators have let us down .And we have been gullible and thoughtless. So is more regulation the answer? Doubtful, when the regulators don’t understand the ever more complex financial products available for a willing customer to buy (who certainly can’t be expected to know what they do).

We and our betters have relied upon the risk measurement scores of credit agencies, which weakened the system as bankers used them to build the very positions that failed. Simply put, no one really knew what the products actually did. And we, poor saps, jumped in – lemming like - so we didn’t lose out, relying upon other people’s assessments of risk and reward. They weren’t trying to mislead – they simply didn’t realise the limits of their knowledge.

Stop assuming that your house will provide your retirement fund, or that it will go up year on year, as it simply is putting too many eggs in one basket. (This country is obsessed by house prices!) Your shares, unit trusts, pensions plans aren’t given to certainties, no matter how many expert opinions you get. Use all the facts you can, realise where the knowledge stops, and if you don’t understand it, don’t do it!

Round and round the mulberry bush..

I happened upon my dissertation , written in 1993, on the topic of small business failures and how to avoid them. I'm not claiming to be clairvoyant, but it's interesting to reflect how things don't change too much..

"The main sources of capital for small businesses suffer from the same problem, as they (the clearing banks etc) are all quoted companies. Given that banks lend other people's money (their depositors), but all losses of depositors' money are made good by the bank out of profits, the prospect of loss is relatively high over the short term, with consequent loss of investor confidence and reduction in share price. This is perhaps one reason why small businesses in this country suffer from short time horizons in financing the business.

The other ideology of wider home ownership was widely accepted particularly in the 1980's as house prices rose substantially over the whole country year after year. The policy was perceived as being extremely beneficial, as ordinary people found that they were getting wealthier and wealthier on paper as the equity in their homes grew. Lending criteria became more relaxed as the cover for any lending increased over time, as most lending for business was secured on the owner's house by way of second charge. Basic loan appraisal techniques of analysis of the business were discounted, as banks became readier to lend more and more. This led to better profits in the short term for the banks, all based on perceived good risk business with excellent security.

Businessmen were encouraged to attempt projects that their businesses may not have been capable of, as no cost benefit analysis or basic business plan was demanded of them before the bank would lend them the money to finance the project. Government fiscal policy at the time also contributed to the rise in credit taken, as the capital allowance and stock reliefs available could be largely financed on extended credit. The repayments, constituting a fixed cost, were not thought to be a burden, as continued growth in the economy and hence the firm, would soon see this extra outlay as a small and cheap price to pay for expansion and low taxation.

It is clear now what eventually happened. The boom years of the 1980's were followed by bust. The self perpetuating cycle of increasing house values, cheap and readily available credit and poor business analysis turned into a self perpetuating downward cycle as house prices fell, reducing bank security margins at the same time as interest rates rose reducing profits.

Banks, in an effort to mitigate losses, foreclosed on thousands of businesses, flooding the already depressed market with ever cheaper houses. Just about everybody in the country has been living with the consequences since the late 1980's, with some semblance of stability and growth being experienced in 1993 again."

And here we are again. Note the time scales particularly - late 80's, back to some sense of normality by 1993. About 6 years.

What have we learnt? This splits between people who were in business in the 1980's (and are still now - they've learnt quite a bit if they still exist now. And those thousands who never have experienced a recession before. There was an explosion in new businesses starting up in the late 90s and early 00s - things had never been so good, and money was easy to make. If you are still here, and suffering, better get some advice from someone who has seen it all before. Before you end up as a statistic, as frankly, there' s more pain to come, and a few years of it.

Firefighting – it’s not the new black!

Are we getting out of the recession? Will it be a double dip recession? Will we end up like Greece? Will the Germans offer to buy the Isle of Wight and would we care? How will we survive? And what’s this got to do with firefighting??

Answers in order:

No (or maybe very slowly)

Very likely (supplementary question: Will Government cut backs make it worse? Yes, but no cuts will make it worse for longer)

Probably not!

The Greeks didn’t care what the Germans thought..perhaps they misheard that quote about the technological revolution. The Geeks shall inherit the earth. Oops.

By not firefighting! I’m getting there eventually.

What is firefighting? The (in)ability to manage what the day brings so you end up running around like your bum is on fire dealing with emergencies that you didn’t foresee or didn’t plan to avoid. Which in its turn leads to a poor performance all round, lost resources, lost profits and a generally weakened business if it happens too often. In fairness, we all have a day like this sometimes. It’s when it’s the norm because you don’t control your business, you will end up failing. The business will control you. And then stop.

Yet so many businesses are still doing it. And wondering why they don’t make any money, have to argue about which bill they will pay this week, have regular discussions with their bank...Is it so fashionable? Is it the new black?

Of course not, but so so hard to stop, once you’ve started on this path, apparently.

It’s no good saying I’d change, I’d plan, I’d write down what we do so I don’t have to repeatedly tell people how to do simple things...BUT...I’ve got all this stuff to shovel, so there’s no time, there’s no resources, I’m tired. You don’t understand. (Sorry – yes I do!)

Some people have plenty of time to moan about it, or even to do it again when it goes wrong, but no time to think about it so it doesn’t go wrong in the first place...rework is after all, the most expensive work you can do...

The good news is that it’s generally simple enough to fix. You don’t have to throw the baby out with the bathwater; you don’t have to stop doing all the things that are just about keeping you afloat whilst you sort it out. It doesn’t take enormous manuals and huge amounts of creative juices, with multiple business degrees. Or lots of money. Any more excuses? No, on we go then.

It just takes you to write down in note form what you do, see the holes (they will be obvious) plug them with another note, and tell people this is how it is. Or a diagram, or spreadsheet. Whatever is easiest for you.

Most businesses just need a few little tweaks, which together can have a cumulative big effect. Then, with your business running slightly better, you can afford a bit of time to look at a few more tweaks, which you will (I hope you have already identified), and implement them. It’s very energising, and gives you the encouragement to do more. It gives you back control and choice in your life.

I’ve just spent a day with a business who know exactly what they are doing (and not doing), exactly what results they need to survive, and even what the gap is. They have stuff written down, but they don’t tell people about it. People like their customers. They just needed a method and process to do it.

We are doing it all the time with our clients, (and often getting Government funding to do it) which is why they will survive and even prosper. Single dip, double dip, inflation, deflation – whatever. A well run business will find a way to survive. We know how. Your competitors know how. Hadn’t you better find out? Black may not suit you!

PS See Duct tape – the reason small businesses exist?

Shower gel – design and time management

I suppose this is my Peter Kaye moment – shower gel is my garlic bread!

In my household there is a need to produced detailed specifications of some things which are not important to me, but that’s my problem.

Shower gel being one. Which I don’t understand. I struggle with the rules, which I clearly don’t know. Or perhaps want to. I have design issues...

We must have shower gel which:

Is of a colour (or range of colours – more difficult) which matches the bathroom;

Has a smell of some sort, which will complement the other unguents applied (deodorant, perfume etc) and not overpower or conflict (non smelling shower gel fits that criteria, but no smell is a no no!)

Be female oriented (I wash too by the way)

Be appropriately priced (I can do that – have you seen the cost of this stuff?)

By the way, we cannot use the various hotels’ products we assiduously collect on our travels, nor can we use them at the hotel; we have to bring our own.

And all for something, which by design and definition is poured down the plug!

So time is taken, over something which, in utility terms, can be obtained quickly and cheaply.

It’s about design you see. Not function at all.

In these days of abundance, we can choose from many different shower gels (or washing powders, toasters, kettles, and innumerable other essentials of modern living). But how do we choose, and what is their real function?

Obviously shower gel is for washing. That’s its function? Right?

Well, it’s one of its functions, and maybe not the most important. The amount of time you spend showering is 10 minutes a day? Times how many people in your household? Not long then, out of all the waking hours available. You may (or in my case, may not) appreciate exactly what you are using to shower with. In which case smell, texture etc may be more important to you. For what is, after all, a fleeting experience, this is of little interest to me.

All the rest of the time the shower gel is fulfilling its other function. Looking pretty in your bathroom – adding to the bathroom experience, and general ambience of your house. Telling visitors, (and reinforcing to you too) what sort of people live here. What their style and ethos is. Which is why so many shower gels are on the market (or toasters, kettles etc). The only way one manufacturer can differentiate its product in ages of abundance is through its design!

Design is increasingly the predominant purchasing driver – we assume that all shower gels get you clean, toasters toast bread, kettles boil water. Sometimes, after reading the technical bits, we still buy the one that looks good over the one that tells us it performs best. Just through better design. Look around your home – why is that product that colour, material etc? Because you decided it fitted best for you. Now look around your work. The same rules apply.

Now look around your products and services – are they designed to fit your customers’ needs and wants? Should they be...?

For someone who prefers minimalism (me), just go for the one which is quick and easy to find and buy. Time management is my driver. I’ll tell you why one day soon. Here’s a hint – it’s the only resource you can’t replace or extend.

And just don’t start me on fabric conditioner...!

Duct tape - the reason small businesses exist?

So much to do, such little time...the constant lament of the small business person. Some other problem to rush to, some fire to put out, so many idiots who don’t understand...so organised!

Do most of us feel in control of our business lives? Or do we feel like the boy with his finger in the dyke, eyeing up a trickle of water just out of reach and dreading the next crack appearing? Will we cope? How can we take on more? Is this what we signed up for?

Where’s the duct tape? Slap it on everywhere and hope it holds. Cobble it together until there’s time to do it properly. Except - there’s never time – something else has cropped up.

So may people I speak to are in such a rush. No time for any thinking about their business, as they are too busy doing it. Doing what exactly though? Keeping themselves in some sort of job maybe – certainly not building a future for them and their families. So many people buy a job; they don’t buy a business. And it shows. It shows in results that mean you work more than the average number of hours (a lot more) for less than the average pay. It shows in more stress, less time with the family, less fun!

Less fun – what am I saying? This is no fun for anyone. None for the business person, the staff in the firm, the family who gets a tired stressed, snappy parent and partner...probably not even for the customers who have a less than perfect experience as everyone is too busy to do the job properly.

And those customers tell their friends...on average a good customer experience is reported to 7 people. A poor one to 19! It’s all (and more) in my free eBook – on www.hixsons.co.uk. How to get the customers you deserve? Just don’t be very nice to them. Those customers who remain will be less likely to pay premium prices for better products, because they don’t believe the firm sells that sort of product as their experience of the firm tells them differently. A bit of a downward spiral, if the business person isn’t careful.

This has got to change, if you value your sanity, your relationships, and your family (and your business). And please don’t tell me that you are doing it all for them. Have you asked them what they would like? You might be surprised. They might like the old you back, even if that means a worse standard of living. As my father would say, “The road to hell is paved with good intentions”. If you are doing this for your family, your relationship, your ego – whoever! Do it right!

Take some time to reflect. And if you haven’t got time (I can hear you now!) – reflect on what it’s going to be like if you don’t. And if some other issue came along, you’d find the time for that, wouldn’t you?

So – reflect on what you want instead of what you don’t want. You can change this – much more easily than you think, and in simple small ways that are easy to think up and implement and manage, yes, at the same time as you are slapping duct tape onto some other problem. I know how; I’ve seen it done many times.

Just ask.

Why are lawyers so miserable?

I think it’s because they are driven by the clock. Every 6 minutes they have to record what they’ve done, and bill it to someone. Very little latitude or autonomy – they have to produce, produce, produce.

Accounts historically have done the same. Your bill is the sum of the time that has been taken. Never mind if some of that time wasn’t effective, or was wasted. The client (you) still pay for it. How fair is that to the poor client?

Of course it isn’t. I don’t expect to go into one of my client’s businesses and pay more if he dithers or muck it up!

And yet it is the way that most accountants and lawyers still work. The way their clients frankly distrust. And these are your closest professional advisers – the people you entrust with your hopes, dreams and every details of your business life?

Bizarre!

Still – lawyers (and accountants) are miserable. Why do they stay in this misery then? What makes them persist? Partly the management structure of their business I suggest. Most management thinking (everywhere – not just lawyers!) is carrot and stick approach (or stick and carrot!) with a top down control based style. And in any type of work which is right brain dominated – that is, creative, where people have discretion over what they do – it simply stifles creativity and diminishes performance. Not what you want from your accountant or lawyer?

It’s the place where science and business diverge. Business simply hasn’t caught up with the science of what makes people tick and want to do well. There was a study of 320 small businesses, half of which granted workers autonomy, the other half relying on top down direction. The businesses that offered autonomy grew at 4 times the rate of the controlled ones and had 1/3 the turnover of staff. That’s impressive, and we know how, and we are telling our clients!

It doesn’t work in all cases, and certainly not in routine tasks, but it does for more creative ones, like accountants and lawyers.

So – happy accountants and lawyers, which means that there are happy clients. But only if the time sheet is binned. That makes for happiness all round.

We binned them some time ago. Our clients hated time sheets, so we did it simply because if that. We keep timesheets solely as a budget tool – so we can quote prices for future work based on past experience. Clients know they can ring up whenever they like, get the help they need, and know they won’t be getting a bill. We are happier knowing we can do the best job we can, as we are not driven by the clock too. Win – win. That’s rare!

Mergers & Acquisitions - do they work? Ever?

You can grow organically, or you can buy another firm. You look for synergy, and economies of scale. In umpteen years of advising clients on buying out others, I’ve never seen them. You might think you can cut costs in the merged firm, but don’t underestimate the costs of integrating two different ways of working. You may be getting access to a bigger customer base, or new markets. You may be a megalomaniac.

The Economist says that three quarters of mergers fail to increase shareholder value, and half destroy it. Look at the RBS ABN Amro debacle, which we are paying for. Don’t think it’s just big companies that muck up like this – anything they can do, so can small companies!

A lot of mergers or acquisitions are the result of management boredom, ego, and are encouraged by the advisers. The only ones guaranteed to profit from this exercise. Personally I spend my clients’ money like it’s my own. See the moths!

Some find out well into the buying process that it’s not what they thought but they feel that they are committed, so go through with it anyway, hoping it will work out. It won’t – they know that deep down, so smile sweetly, pay the bills, and walk away. It’s cheaper.

A lot of my clients have preserved wealth and gone on to grow through knowing what deals to leave on the table. Just about every deal I’ve seen has been underestimated in terms of cost and effort, and overestimated in terms of benefits. So if it’s looking marginal, it isn’t. Walk away. Another deal will come along – you won’t miss out.

Kraft and Cadbury will be interesting – looks like Kraft paid too much and Cadbury got too little. So many cultural differences will take an awful lot of effort to overcome. But with deals like this the ordinary man can make money too. Here’s maybe how.

Generally, owners of predators worry about overpaying, which sends their share price down. Whilst investors get excited about the target and that sends the target’s share price up.

So if you expect a bid (and Kraft’s was telegraphed a long way off), you buy the target and sell the predator. You can do this with a long spread bid on the target and a short spread bid on the predator. If the deal is announced and predator price falls and the target’s rises, you should make money on both positions. You need to commit the same amount to of money to each part so your strategy is market neutral, so if you’re right about the deal you should make money if the market rises or falls.

Of course if you thought the Cadbury deal would benefit Kraft shareholders, you would have simply bought Kraft shares. But you didn’t, did you?

PS This is not investment advice! Speak to your professional advisers if you are contemplating doing any of this. Each deal is different.

It's a farc-ade!!

Just over 300 years ago the Bank of England was founded in what was the old Mercers Hall in London, and then moved to its present building in Threadneedle Street.

Current public debt stands at about £840bn. In the first 300 years of the Bank of England’s existence public debt rose to £300bn; in the last 10 years it has more than doubled. That is largely because of printing more money. By a government it’s called quantitative easing; by an individual it’s called counterfeiting. Henry VIII debased the currency by adding more base metal to the silver coins, such that when they wore down, it gave him a new name – Old Copper Nose. So it’s nothing new. Governments have been doing it for time out of mind. That doesn’t make it right, except that might is right.

John Mowlem rebuilt large parts of London, and carted the reclaimed bits back to his home town of Swanage; so much so that Swanage was known as Little London. There’s the clock tower (no clock now) that stands at Peveril Point; that used to stand at the end of London Bridge, commemorating the Duke of Wellington.

And then there’s the facade of Mercers Hall, (you know, the original Bank of England) which was reclaimed and now adorns the facade of Swanage Town Hall, surely the most impressive small town hall facade in the land. But that’s all it is: a facade.

So is printing money. It brings to mind that old definition of corporate advertising: its bit like peeing in your pants. You get a nice warm feeling but no one notices any difference. Except in Iceland, where everyone has been asked to pay about 40% of their salaries to us and the Dutch for their banks’ mistakes. No warmth at all, and they have noticed the difference. The temperature has dropped here too, and soon we will notice the difference when we have to pay all this back.

Behind the impressive Swanage Town Hall, down a short narrow lane, is the town jail. No hint of facade here; its four stone walls, and a thick wooden door. Trouble is, it only houses one, and there’s such a list of candidates!