COLONEL GADAFFI -- Friend or Foe?

Was he really a friend of ours?

It fills me with a certain degree of scepticism about human nature. When Tony Blair in 2005 welcomed Colonel Gadaffi back into the fold after he had renounced his WMD I was always unsure about this as the level of political repression in Libya was still severe and this was always just a gesture on Gadaffi"s part to gain international acceptance. Libya's status as an oil rich country always had a lot to do with our politicians creeping over there to do trade deals with this unsavoury individual. Yes if we didn't do it someone else would but it still shouldn't make us feel any better.

I am still not sure as to why this all changed so quickly why did he become our foe when he was our "friend". He did after all apologise for his WMD and perhaps we should have forgiven him? Or perhaps we were waiting for a credible opposition to form itself into a force that might overthrow him? Once that force crystallised then we were ready to sacrifice millions of pounds for an air blockade along with the French and Americans and our other Nato allies. It seems to be working but Mr Gadaffi is presently nowhere to be seen. What of the aftermath of all this? Will it produce a stable political outcome or another Iraq style bloodbath? The only thing that unites all the current rebels together is their hatred of Gadaffi, when he has gone they will have lost their unifying element and they will need to work with each other to rebuild the country. This is notoriously difficult in the Arab world where factionalism, tribalism and other sectional interests often predominate these situations. Will it be CIVIL WAR OR CIVIL PEACE? One thing is certain -- The West will need to supervise the re-building of Libya both structurally and politically orelse chaos will ensue. At least if Libya's assets are unfrozen the costs of the re-building will be l;argely paid for. What about those politicians and other cronies who beat a path to Gadaffi's door? Does the LSE regret accepting a donation however indirect, from the Libyan government? I'm sure they do, but the real lesson of this is to choose very carefully who your friends are and not be swayed by how much (oil) money they have. After all it may not always be in their power to share that money with you. As we have now found out with Mr Gaddaffi himself.

THE CAUSE OF THE ENGLISH RIOTS -- IS 1981 2011?

Will we see more of these on our streets soon?

Rioting, social disorder and challenges to authority have not been new in British Society. The latest problem dates from the vigil for Mark Duggan,killed by police in Tottenham,overheating into something different and violent. Some of the rioters were angry with the Police about this particular killing whilst others were just angry with the Police full stop and others probably wanted to exploit the situation for their own economic ends, in a period of high social pressure in areas of relative poverty. In 1981 I was a trainee accountant working for Greater Manchester Council when the Moss side riots broke out and I was seconded to the Riot Damages team. In those days if a riot occurred, the Police Authority (Us) was responsible for funding the damage. My job was to deal with the people who had lost their homes and possessions and who were claiming compensation from us for failing to control that explosive situation. It was an interesting but very difficult job and I really do understand the losses that people suffered last week. In the early 80's expenditure cuts contributed to a high level of unemployment and a lot of the riots were directed at the police and at destroying certain buildings although looting did not seem to be as prevalent as it was last week. There was also more of a racial element to the violence at that time. The riots then, seemed to be more driven by explosions of violence caused by groups reacting to their deprived and under invested surroundings. I am not sure that last week's riots were due to exactly the same factors.

In last week's riots there were clear pressures in place -- but these were also linked to criminality and a desire to steal valuable things and also to destroy buildings as well. The people who did this acted with impunity and exploited low police numbers to do it. They obviously did not see this as being morally wrong in their own eyes and this is the most worrying thing about the whole episode. Did they have any pangs of conscience about stealing things and trashing neighbourhoods or did they think that only other people and not themselves would suffer? Probably yes.

Camila Batmanghelidjh, the founder of the Kids Company which works with disturbed and excluded youngsters has pointed to the existence of an underclass of young people who have never worked, been excluded from mainstream society and have developed a perverse morality where crooks and drug dealers become the heroes and everyone else is just a mug for not getting ahead. In many instances gangs take the role of parenting and give these people a sense of belonging to something, even if it is deeply flawed. Many of these people do not possess a father figure which, combined with the economic circumstances they find themselves in, does not help matters. The combination in some areas of high unemployment, poor education , diminishing job prospects and a minimal stake in society form a dangerous cocktail which will express itself in violence on the streets. The danger of violence on the streets was always a likely consequence of the Coalition's policies and reports by the Runnymede Trust even named Croydon and Birmingham as likely hot spots of conflict. To be fair,this underclass has been developing in the UK for nearly 40 years and it is time that something was done about it.

Clifford Longley has quoted Dickens from Barnaby Rudge about the characteristics of an angry mob. It is worth reproducing this quote as follows.

" A mob is usually a creature of mysterious existence,particularly in a large city. Where it comes from and whither it goes,few men can tell. Assembling and dispersing with equal suddenness,it is difficult to follow to its sources as the sea itself; nor does the parallel stop here, for the ocean is not more fickle and uncertain,more terrible when roused,more unreasonable or more cruel."

Where do we go from here? Greg Clark the Tory MP has been appointed as Minister for cities and charged with leading the social,environmental and commercial renewal of the largest 8 connurbations outside London. Nick Clegg will chair a senior group of ministers charged with moving forward Mr Clark's agenda. Haven't we been here before in the 1980's with Michael Heseltine as the minister for Merseyside? Will we just throw some money at the problem and make things better for a few years and then things will revert back to what they were before? Perhaps we need a sustainable approach so that people can change themselves and their own surroundings for the long term.

Perhaps it is time for a more radical solution. An article in the forthcoming Guardian has argued that power has been concentrated in too few hands to the detriment of the majority of people in the UK. It argues that  1,000 citizens should be selected at random to sit on a public jury that will propose reforms to banking, and politics. The jury, to be funded from the public purse, would examine:

• Media ownership.
• The financial sector's role in the crash.
• MP selections and accountability.
• Policing and public interest.

• How to apply a "public interest first" test more generally to British political and corporate life.

The scandals of MP's expenses, bankers bonuses and phone hacking have undermined our democracy and given certain parts of  society a licence to misbehave. We need to bring back greater honesty and trust into society and tackle inequality more robustly. The riots of 1981 are not the same as 2011 -- there was some excuse for the 1981 riots, much less so for their 2011 equivalents.

The spending cuts have not yet bitten as strongly as they will in 2012/13 -- We do need to address these issues now to avoid any repetiton of such events in the future. Locking up the current rioters is required - but if the same social conditions persist won't other potential troublemakers just take their places unless something concrete is not achieved?

THE SMOLENSK AIR CRASH -- Any nearer the truth?

Smolensk - Will the real truth ever emerge?

The first anniversary of the Smolensk air crash where the Polish President and more than 90 other people of the Polish military and civil elite perished; has come and gone - but controversy as to the causes of the crash is still very live within Poland. One of the passengers who perished on that awful day was my former parish priest Father Bronislaw Gostomski, so I have a personal interest in this tragedy. The group were on their way to celebrate the anniversary of the murder, in 1940, of around 20,000 Polish officers by the Soviet NKVD (Secret Police)in and around Katyn in the period before Nazi Germany attacked the Soviet Union, and the Nazi-Soviet non aggression pact was still intact. Two tragedies affecting the Polish nation, both on Russian soil, the first a calculated move to destroy potential "Enemies of the people" and pave the way for a post war Polish communist state - where the absence of a non-communist elite would make it easier to control such a state. The second was a tragic accident which should never have happened but through a litany of poor planning and communication, nevertheless did happen and with such awful consequences.

From the Russian side, the airport was not the best, messages from the control tower to the plane were confused and misleading. From the Polish side, the presidential party should never have flown in such a concentrated group within one aircraft,this should never have been allowed and was a clear lapse in security. The pilots apparently were not as experienced as they should have been - especially for a landing at such a rugged airport and in fog as well. The result of these unfortunate happenings is now visible for all to see. A Polish government report on the disaster is due by the end of August where other issues may emerge. Some Polish military and political figures have already lost their jobs. The bigger question on everyone's lips is, who is to blame for what happened.

The Polish Law and Justice party blames the Russians for the disaster and although they may have contributed to it I believe that in this instance blame cannot be laid solely at their door. I am not a fan of Soviet Russia, my own mother was deported to Kazakstan as an 11 year old girl when the Soviets and Nazis carved up Poland in the Second World War. She worked in a forest camp in the freezing cold, with very poor nutrition. Many of the prisoners died in those extreme conditions. She was lucky in the sense that when the Nazi's attacked the Soviet Union in 1941, Stalin and the Polish Government in exile negotiated an "amnesty" for Polish prisoners on Russian soil (Though they had never committed any crimes). These former prisoners joined an army which was meant to fight the Nazis on Soviet soil, though circumstances changed. This army managed to be transported through Iraq and Iran to Palestine, where they came under British command and later on, fought as the Free Polish forces on the Allied side. My mother spoke little of her incarceration in the Soviet Union, although she did mention that the ordinary Russian people were as kind as they could be in such a Stalinist system.

In this case the Poles cannot exclusively blame the Russian bogey man, they must examine their own shortcomings as well. All sides need to learn from this tragedy -- political capital should not be made out of the suffering of the dead and their living relatives as well. Though apparently some relatives of the dead are now planning to stand for election to public office in Poland. Let's hope they are standing for proper reasons.

A Polish report on the crash will be due out at the end of August -- Perhaps we will return to it again --

Lets hope and pray that both countries can move on from this disaster.

NORWAY AND AUSCHWITZ - The Links

Freedom through work? - Not in this place

Having just got back from Krakow in Poland, I visited the the Auschwitz Birkenau concentration camp where over 1 million people were murdered by the Nazis. It really does make a huge impression on a person when you see the piles of children's shoes, suitcases, human hair and spectacles amongst other things --- All these belonged to living people who were murdered for a perverted ideal. The linkages to Schindler's factory in Krakow where 1,000 Jews were saved are obvious. Similarly the links to the other people who so bravely saved the lives of those most persecuted should always be celebrated. "Freedom Through Work" the motto of the camp,never had a more hollow ring; to my horror, German drugs and cosmetics firms tested their products on the Auschwitz inmates, which again beggars belief. We thought that the horrors of Auschwitz were buried forever, but unfortunately they re-appeared in Norway where a member of an extreme right wing organisation, murdered over 90 innocent people in the name of de-islamification and racial purity. Where does it all end?

People may be prejudiced against others -- the right thing for all of us to do is to recognise these situations and to fight against them ourselves. We may all have individual battles to fight but we should never abandon the fight against such unseemly views both in ourselves and others as well. Only then we will ensure that events like Auschwitz and Norway do not recur.  

UK FISCAL SUSTAINABILITY -- The next 50 years?

50 years of frugality?

The Office of Budget Responsibility (OBR) has published its first report on fiscal sustainability which is proving to be very interesting reading indeed.

The Office for Budget Responsibility (OBR) was created in 2010 by the coalition government to provide independent an authoritative analysis of the UK’s public finances. As part of this role, the Budget Responsibility and National Audit Act 2011 requires the OBR to produce “an analysis of the sustainability of the public finances” once a year. This Fiscal sustainability report is its first such analysis. Its approach is to try and examine the future and look into the period 2015-15 to -2060-61.

How many of us will be around then?

The report predicts that age related spending will exceed 27% of GDP by 2060 and PSND could rise to over 100% of GDP unless corrective action on public expenditure is not taken 

The government would need to implement a permanent tax increase or spending cut of 1.5 per cent of GDP (£22 billion in today’s terms) in 2016-17 to get debt back to 40 per cent of GDP and a cut of 0.8 per cent of GDP (£12 billion in today’s terms) to get debt back to 70 per cent of GDP.

It must be remembered that these are forecasts and with them they carry significant risks. If the structural primary balance in 2015-16 was worse by 1 per cent of GDP than in the OBR forecast, then Public sector net debt (PSND) would increase to around 150 per cent of GDP in 2060\61. Similarly if NHS spending will grow by 1% over GDP growth in the future then PSND could increase to above 200% of GDP in 2060\61. 

This attempt to examine the growth of PSDN and the primary balance is extremely useful, but it emphasises the fragility of future public sector revenues and expenditures in the light of huge pressures like the ageing population, migration, inflation and pension liabilities, all areas which will need to be addressed by public sector financial planners in the medium to long term. For a full version of this report please view:

http://budgetresponsibility.independent.gov.uk/wordpress/docs/FSR2011.pdf

A COUNTRY IS NOT A COMPANY -Exploring the thoughts of Paul Krugman

Can he run the economy as well?

Next time you hear that a successful businessman has been promoted to the cabinet. Please consider why that person was chosen, do brilliant businessmen always make great economic advisors for whole countries? Paul Krugman argues that they do not always see the big picture. They are used to situations where they can act very quickly and have a direct command and control of the resources within their enterprises that can make a timely impact. Often they do not need to persuade diverse groupings of the need to take take a particular course of action -- they can act speedily and unilaterally,often without a particular focus on some of the social consequences of their actions. When they enter government, this modus operandi changes and life for them can become more difficult and frustrating. They need to negotiate a much more complex environment and try to cajole and persuade people to do things -- not just command them and sit back waiting for everything to happen.

Krugman argues that businessmen support free trade and also exporting industries because de-facto they believe that they lead to increased employment prospects. However one country's exports are another country's imports. The importing country will shift purchasing away from its own domestically produced goods to imports. Then the domestically produced good industry will suffer at the hands of greater imports. Will the export boom in one country have an adverse effect on employment in the importing country? The answer is probably -- Will there be an increase in jobs globally? Probably there will be a neutral effect on job creation.

Similarly, when multinationals directly invest in a country, the common belief is that the country which has received the investment will have a trade surplus,on the contrary, this is not the case -- an increase in inward investment will lead to a trade deficit on the balance of payments. This is because inward investment will appreciate the currency of the investee country which will lead to weaker export performance and greater imports. If there is a deficit on a country's trade account there will be a surplus in its capital account and vice- versa. The balance of payments as a whole is always zero when a country's capital account is included in the analysis.

Business executives operate intuitively and look for specific opportunities to make a profit, when they write books about their life stories and how they made it, then their books are interesting, but when they try to enunciate a general theory of their own success they are less well received by the populace. A country is vastly more complicated to run than even the biggest company, the economy needs to be run on sound economic principles within a framework -- detailed policy intervention is often unnecessary and even undesirable. In many ways a company is more of an open system than an economy. It may double its sales for example - however taking a wider perspective, within a country if a company doubles its sales other companies have probably had their sales considerably reduced. Something that can work successfully for an individual company, might not work for the economy as a whole. An individual company increasing its savings may not be significant for the economy but if all companies act in this way the results on aggregate demand in the economy might be disastrous. The difference boils down to this -- Businesses are relatively open systems that can act with autonomy and can increase their activities without having much direct impact on themselves, whilst countries are still regarded as closed systems where most change is in essence a zero sum game.

So when you next hear a businessman expounding on the economy make sure he\she knows what they are talking about -- a company or a corner shop are not the same as an economy. Perhaps it would be better to focus on the life story of the businessman where valuable lessons on intuitiveness, creativity,hard work and responsibility can be learned -- Perhaps that is why so many biographies of businessmen and women are sold. Leave the finer points of the dismal science to the dismal scientists.

AUDIT COMMISSION AND NEWS OF THE WORLD -- Will we miss them?

Just reflecting on the abolition of the Commission and will it be missed -- I think on balance yes but only in some areas. The Commission's work on value for money and other management\financial studies on efficiency\good governance and other practices was very useful indeed in helping authorities manage their resources much more efficiently and effectively. It is a shame that this independent guide\assistance function will now go and it seems we will need to rely on the big accoutning firms to help us in this context. Lets not kid ourselves, the big 4 firms are rubbing their hands in glee at the opportunities this will present to them. Prices for audits will rise and the more remote authorities will not benfit from cross subsidisation as they did previously and will pay even higher audit fees. The circa 50 million pounds savings claimed from abolishing the Commission have never been adequately quantified in my view and I wonder if they have been floated to justify an essentially political decision. Some downsides to the Commision's activiites included the far too bureaucratic CPA regime where points and later flags were given for all sorts of performance based issues, often this did not chime with people's experiences of authorities on the ground,when they dealt with them, which was a shame but called into question the validity and relevance of the whole CPA regime. The Commission did itself no favours on that one,similarly in my experience of them as external auditors they have been extremely pernickety and picky forcing me to do certain calcualtions\presentations which although pure in the accounting sense, did not help the punter on the street very much,better understand his authority's accounts. There is talk of a mutual organisation emerging from the ashes that will compete against the big 4 -- But how is it going to be funded? There has also been some talk of its major competitors probably,individually,wanting to stangle it at birth so that a form of audit oligopoly can be maintained,lets hope the rump of the Commission can successfully set up something that will provide more competiton to the people who are so keen to step into its shoes.



Will we really miss it?



As for the NOTW, did we really expect anything else from this scandal sheet? It claims to have broken a number of very important public interest stories, but I do not recall that many of them. Illegal phone hacking,denial, links with politicians of all parties,illegal payments to police officers have given it exaggerated power. It did have 2.7m readers, presumably those interested in its scandal ridden pages. It is strange how in Western societies we really do go in for this type of nonensense in the press and pretend it is something else. There was so much fear of NOTW and the whole News International (NI) brand that politicians of all persuasions felt they had to indulge NI staff to ensure their own political positions. Tony Blair, Gordon Brown and David Cameron all courted NI, this was clealry a mistake of huge proportions by all concerned. They felt they has to invite NI executives to their personal events like weddings, children's parties and even funerals. This was over the top for me.

Will I miss the NOTW ?-- Not really - However watch out for The Sun on Sunday -- TheURL has already been reserved. As for the Audit Commission, well perhaps a few tears will be shed, but not for some of their purist audit approaches. I'm not sure that a new version of the Commission will emerge,which is a pity.

GREECE -- Can the Tragedy be avoided?



Greece- How do we save the patient?



After years of lax fiscal discipline and fiddling the economic figures, Greece is in a real crisis -- that incidentally will touch us all -- even in the UK,although we keep pretending that it is a pure European affair, it isn't at all. Greece should never have been allowed into the Euro as its debt was not in line with the principles for joining the single currency, thought it looked as if it was at the time,suspiciously so, some commentators thought and they were proved right.

Holders of Greek government bonds are nervous, although interest rates on their bonds are high,this reflects the fact that the risk of debt default by the Greek government is viewed as likely by the bond markets. Its debts are nearly 160% of its GDP and it is destined to receive a 110 billion euro bail out this year with another 100 billion euros to follow to keep the country going until 2013. The IMF is demanding privatisation of Greek state assets and deep public expenditure cuts. There is already fighting Syntagma square. Is this approach sustainable no matter what we think of Greek profligacy?

What is to be done?

Greece could default but even if it walked away from its debts it would still have to reform itself because it would just get back where it is now without radical reform of its public sector. It would have to leave the single currency and re-introduce the drachma which would probably need to be de-valued anyway. No-one would lend it any money so it could not afford to make any more mistakes

A more realistic option might be to re-structure its debt -- that is a proportion of its debt -- say 50%, could be forgiven. Good for Greece but less good for the private banks and government's (but mainly banks) that hold Greek debt -- It would still affect the global economy but the banks would probably be able to better cope with such write offs than they could have done 3 years ago.

Will Greece be ever able to repay over 200 billion of euro debt or is a restructure of its debt the best thing to do? In my view a severe haircut for European banks might just save Greek Society from catastrophe. Even after a re-structure the Greek economy would need to be nurtured for many years to come --

The patient would be sick but it could recover after a debt restructure-- Other forms of medicine might just kill the patient and no-one would want that.

NO JOY IN OLD AGE -- Return of the Death tax?

Who is watching over her?

I read Sunday's Observer with horror and dismay, when some of the proposals of Andrew Dilnot"s report on the funding of social care for the elderly were revealed. Middleclass people would have to fund the first 35k of their social care costs themselves , but they can always take out insurance to cover that 35k cost. I can just imagine the insurance industry rubbing its hands in glee --trying to ensure that it meets its social care insurance sales targets.

If someone needs residential care and has more than 23.25k in savings,capital or assets then they have to pay for the care themselves. This is exemption limit is not a great deal of money in reality but it means that the costs of residential care would fall on you. I know from personal experience that when my friend's father went into residential care, his house had to be sold to pay for the bills, the irony of it was that the buyer of the house was his own son. Therefore a house which he had bought over so many years, was sold to pay for his care costs and he could not pass the house down to his own son. Whilst his son, had to purchase the house he had lived in as a child, from his father. The father was upset that he could not pass on his house to his son and was annoyed with himself for being ill and depriving his own son of his inheritance. It is very disturbing and worrying for older people who have given so much to society to be put through this type of process.

Maybe insurance might be the answer but why should certain older people be penalised for being thrifty and careful with their money.

This is a difficult problem as the costs of social care finance are rising considerably and more and more people will need it, the 23k threshold could be increased but then the cots of social care support would increase as well and probably by more, Perhaps we need to do the following:

1.Raise the threshold of eligibility for social care support so that the richest in society will pay a larger percentage of their own costs -- the level could be raised to #75k or even more. They would only get support after the first #75 has been funded from their own resources.

2. There could be different exemption levels for different bands of people with the poorest having to fund little or no amounts of their own social care costs.

3. Tax relief could be given on any contributions to a savings plans for future social care costs

4. A proportion of any pension fund could be set aside to cover social care costs

5. Everyone could be given a one off endowment from the state which they could invest for future growth to fund social care-- If they do not need it then they can return all or part of it to the state or use it to fund a family member's social care costs -- The fund could not be used for any other purpose.

6. A proportion of everyone's income could be put into a national social care fund which would fund social care on a national basis.

These are just some ideas to make a death tax more palatable.

Which method might you choose?

OPEN PUBLIC SERVICES - How open and how public?

Open for personalisation?

In the past, it must be said that the delivery of public services has been somewhat inflexible and not always in the best interests of the user. Services were often standardised and homogeneous without taking account of the specific needs and desires of the individual. Residential care for the elderly was one such type of provision in defined service parcels. From the provider point of view, the provision of a standardised service is easier to measure in an input sense and easier to cost  -- when you are delivering standardised services it will be easier to argue in political and policy terms that each client is getting a similar level of service at a similar level of input cost. So when politicians and service users ask questions about service standards and costs then the provider can reply that the provision per individual is fairly uniform and few if any people are discriminated against in terms of public service delivery from the sense of input provision. They get a sort of equality of service provision -- it might be equally good or bad but certainly not geared to the individual.

The arguments are clear in the uniform and homogeneous sense,though the service outcomes for the user from the provision of a largely uniform service may not be too great. This is because this type of service delivery might provide a reasonable basic standard of service but it will not necessarily meet the client's service aspirations and this is where the problems start. What do people want from a public service and what can we deliver to them? Can we build in choice and involve the client more in service delivery and design? This is very challenging for public service professionals but ultimately it is desirable because if the public services will not offer such a flexible type of service then other entities will. The public service might not like these choices but in the final analysis it will have to take them into account because the old view that the public service provider knows best what the service user wants and needs is out of date.

We will need to constantly challenge ourselves to give our clients a fantastic service purchasing\consumimg experience. Often public services fail to do the latter and do not adequately recognise that service users' tastes and wishes do change over time. Often we are not bothered to find out why or how this happens and it is to our detriment.

The predicted role of greater personalisation in the forthcoming July 2011 White Paper on Open Public services is a key issue. An authority will work out how much a level of service could cost but the recipient may decide to spend that cash allocation on something else e.g. a teenager with stress and mental health problems might wish to join a gardening club or do an art course rather than attend formal therapy sessions. A terminally ill patient might spend the budget on a dedicated home nurse so he can pass his last days peacefully at home.  Al these decisions are personal,utilising a budget for a service but not spending it in the way some public services might expect or want a service recipient to spend it on. Will the authority be the sole provider of this different type of service offering or will it have greater competition from other service providers like charities and third sector organisations? This will depend on how sophisticated the local market for these personalised services becomes. Irrespective of this public sector organisations need to be ready for the personalisation challenge. They will need to think about how it will affect the structure of services in the future -- Will they be able to split up their existing budgets and make cash payments to recipients thus giving them the spending power to deliver personal budgets?

The real challenge will be to make personalisation work for the public sector and for the personal budget recipient as well. What if the budget recipient has special needs -- will future personal budget formulas take them into account -- perhaps to a limited degree -- But going too far down this road of catering for too many special needs cases would make personalisation overtly complex.

HENRI FAYOL -- Still relevant to-day

Henri Fayol, a French engineer and director of mines, was little unknown outside France until the late 40s when Constance Storrs published her translation of Fayol's 1916 " Administration Industrielle et Generale ".
His theorising about administration was built on personal observation and experience of what worked well in terms of organisation.

Like Peter Drucker he also had 5 main functions of management;

1. to forecast and plan - prevoyance -- Examine the future and draw up plans of action to meet future changes in demands and circumstances. If management is not about this then what is it about? Sometimes we do not get it right but often we nearly get it right and that is better than getting it wrong.

2. to organise -  build up the structure, material and human capacity and talent of the organisation to achieve organisational goals

Fayol - Still relevant

3. to command - ensure that desired tasks/projects are completed in a proper and timely fashion by ensuring the allocated resources perform properly.

4. to co-ordinate -- bind together, unify and harmonise activity and effort in the pursuit of the entity's goals -- ensuring we are rowing the boat together in the right direction

5. to control - see that everything occurs in conformity with policy and practise of the organisation and that if it does not, then we take corrective action to ensure it does.

These principles seem a bit dusty today but if you put them in a more modern context they are still relevant and useful.

We can still learn from the past and we will re-visit Fayol's writngs at a later date to see whatelse we can glean from them.

PETER DRUCKER'S MANAGEMENT WISDOM -- Still as meaningful as ever?

The Master -Still as relevant as ever

Peter F. Drucker was a writer, professor, management consultant and self-described “social ecologist,” who explored the way human beings organize themselves and interact much the way an ecologist would observe and analyze the biological world.

He provided the following lifelong tools for business effectiveness based on his Five Questions management framework.

The Five Questions are:

1. What is my/our mission?

2.Who is my/our customer?

3.What does the customer value?
4.What are my/our results?
5.What is my/our plan?

Do we really need anything else in maangement theory and practice?

EFFECTIVE MARKETING - What we need is not always what we get

Marketing - Do we get it right?

I am sure that there are very many excellent marketing approaches in the business world but often the marketing approach is not fully integrated with  the way the business is going. Malcolm McDonald from Cranfield Business School characterised the problems thus:

• Growing vulnerability to environmental change
• Too many products
• Pricing confusion
• Wasted promotion
• Meaningless numbers
• internal strife between departments

Perhaps you recognise the symptoms because I do. Too often marketing has been confused with promotion and sales and much advice that I have received has been sales and promotion advice and not marketing at all.

In the textbooks and in real life as well, marketing is defined as " the identification and profitable satisfaction of customer needs". This is a simple definition but one that is often operationally difficult to achieve and meet.
Marketing should have 3 components:

1.Identifying needs
2.Satisfying needs
3.Making a profit

Marketing is therefore a process that needs to be a fundamental part of our business planning -- but it is often not a fundamental part of it. It is frequently an add on and an afterthought and this is where the problems commence.

Marketing should be helping business units identify customer needs and satisfy them at a profit. This means helping us identify current and future products and services that are likely to be winners, learn from competitors, identify our own strengths and weaknesses and deliver excellent service and experience that people want to come back for.

The first thing we need to try and do is identify what the business is about -- the business is not defined solely by itself,by its articles of association etc -- According to Peter Drucker, this can only be answered from outside. Therefore the mission of any business is to satisfy its customers' needs. This is probably more important than accounts and sales reports but is often omitted in the final analysis. We should constantly ask external people how we are viewed and what we need to do in the light of this information to change our mission and our vision for what our company is about.

If we understand our customers and their needs well enough and can meet them -- then the need for high spending on sales teams, advertising and publicity will not be that great and the customer should be ready to buy and we have moved from selling\publicity to a really effective marketing approach.

Selling is the last stage of marketing and if the marketing job has been done well then it will still be challenging but not impossible. The worst scenario we can have is to try to sell someone a product\service we think they want when they actually don't want it. No repeat business there then!

How you might wish to approach the branding of your company.

REDUCING THE UK BUDGET DEFICIT -- Slow,Slow,Quick, Quick, Slow

Is there a secret plan B for
cutting the deficit?

Like an ill trained tango dancer the government itself is dancing with the budget deficit and how quickly it needs to be reduced.Should cuts in public expenditure be kept at the same levels as now i.e. an elimination of the structural deficit by the end of the life of this parliament ( Possibly 2015?) or is the medicine killing the patient, with economic growth being relatively flat for the foreseable future. 

Since Christmas 2010,on the whole, economic growth has been very disappointing, reductions in public spending do produce an effect on national income which is greater than the value of the intial spending cut. This reduction in spending in the economy is subject to a negative multiplier effect which amplifies
the effect of the spending reduction on national income.

If you are not a Keynesian,then you will always be nervous about having a government budget defcit, even in times of high unemployment, because that defcit needs to be financed,usually by the government issuing UK bonds to foreign investors,including foreign governments. The larger the deficit, the greater the theoretical risk of default, the more that needs to be borrowed externally and the higher the rate of interest that the UK government will have to pay out to foreigners for holding UK bonds. The higher interest the UK needs to pay, the fewer resources it can devote to its own speding programmes. However, probably the most effective way of reducing our external borrowing is to promote higher UK growth,which will mean higher profits and incomes and greater tax revenues for the UK government to utilise in any way it sees fit,usually to redeem existing debt. The problem of low economic growth is therefore directly linked to the speed with which the deficit can be reduced and external debt repaid. The more that deficit reduction and debt repayment can be tackled by higher economic growth the less the requirement for painful public spending cuts.

There is however more to this approach than meets the eye. The public spending cuts are supposed to lead to a position where the private sector can fill the employment and output gap. There is a view that public expenditure crowds out the private sector for example if public spending is higher, then competiton for scare resources is greater,lower public spending means that the private sector will have easier access to these resources,will not be crowded out and will be able to produce greater wealth and employ more people and resources. Such arguments may be valid,but only in the long run, as any such adjustment would take a long time to work through the economy. The private sector will have a big gap to fill and no-one really knows whether it can successfully fill it.

Therefore this week the IMF backed the government's current austerity approach,whilst a deputy director of the OECD intially stated that the UK should think again about a plan B for the economy,before his boss presumably pulled him out of the firing line.

If UK economic growth persists in being as weak as it is at the moment, for say the next 6 months, then George Osborne really will have to think again -- but this will obviously be dressed up as something else under the banner of a flexible response or something like that. The alternative plan B for tackling the UK budget deficit will remain secret for now.

Perhaps the taxation position will be slightly eased or certain public sector projects will be retained.

After all, in 2015 there is an election to be won (or lost?)

THE PAY GAP - Are we all in this together?

The British People believe this

Work by the Institute of Public Policy and Research  (IPPR), has shown that nearly two thirds of Britons would support some form of action to reduce the gap between high and low earners. In the corporate and banking sector, large bonuses have been paid to a small number of individuals whilst the rest are left behind in terms of any pecuniary incentives that they receive. Good performance should be rewarded but bad performance should not -- perhaps work teams should be collectively rewarded for good performance -- this would cause far less antagonism and jealousy. The benefits of success should be more fairly distributed and should not be concentrated in the hands of the few. Unfortunately the position in the UK flies against this, between 1975 and 2008 the top 1% of UK earners increased their share of the UK wage bill from 5% to 8%.This rise in top pay has been concentrated in publicly listed companies.

Arguments are always made that pay levels are driven by market forces,but the market itself may be distorted, as in the UK favouring salaries in the financial sector over all other sectors. Can such a distorted  position continue into the future? Especially when the market seems to be out of sink with what the general public thinks. The IPPR  work quoted people saying that the chief executive of a large public company should not earn  more than 350 thousand pounds per annum when infact many of them are earning nearer one million pounds. Will Hutton has argued for a ratio of circa 26:1 in terms of the earnings of a chief executive vis a vis a regular shopfloor worker. With average earnings of around 25k per annum this would give an annual salary of 650k for the chief executive.

Earnings differentials between employees are important in that they should reflect differences in skill,knowledge, training,occupation and work output.In classical economic theory, labour would be paid in accordance with its marginal productivity. In the real world this is not always the case. One factor we need to remember is that labour markets are very different to commodity markets in that employment involves a continuing human relationship between the employer and the employee.

In terms of earnings of individuals, there must come a point where an extra increase in salary does not matter that much to the individual -- who would ever need more than one million pounds a year?

BARCELONA - Management Secrets

The New Home Grown Messi?

No-one who saw Barca's demolition of Manchester United last Saturday could fail to admire the fluent football that was played by that team. I know from Junior football in the UK that the temptation is to have a big strong lad up front who can kick the ball with force and a goalie who can kick the ball far and high. If you roll the ball out to the full back to play it through midfield then the coaches criticise you for not getting the ball up field fast enough. This track and field type football does work at certain levels but not at the very highest levels unfortunately. In the UK we still have to learn that fact.

What about Barca themselves?  According to a recent article in the Economist

" .... Barça plays as a team in a sport that has far too many prima donnas. It keeps the ball moving, dominates possession and keeps its opponents under constant pressure. But there is a less obvious answer, too, and one that has implications beyond the football pitch. Barça has provided a distinctive solution to some of the most contentious problems in management theory. What is the right balance between stars and the rest of mankind? Should you buy talent or grow your own? How can you harness the enthusiasm of consumers to promote your brand? And how do you combine the advantages of local roots and global reach?"

Barça puts more emphasis than any other major team on growing its own players.  Eight of the team’s leading players are products of its football school, La Masia. The students are relentlessly instructed in the importance of team spirit, self-sacrifice and perseverance. They are also taught that Barça is “more than a club”: it is the embodiment of Catalan pride.  

Boris Groysberg, of Harvard Business School, has warned that companies are too obsessed with hiring stars rather than developing teams. He conducted a fascinating study of successful Wall Street analysts who moved from one firm to another. He discovered that company-switching analysts saw an immediate decline in their performance. For all their swagger, it seems that their success depended as much on their co-workers as their innate talents. Jim Collins, the author of “Good to Great”, argues that the secret of long-term corporate success lies in cultivating a distinctive set of values. For all the talk of diversity and globalisation, this usually means promoting from within and putting down deep local roots.

So there you have it -- Do you build from within or buy in superstars to make a difference?

Is there really any substitute for mining and developing your own business and management talent?

How many times has the external superstar come into a business only to find that he is not used to its culture and values and that he cannot replicate his earlier success.

Lets look at what we can develop ourselves before we go elsewhere.

http://www.economist.com/node/18709691?story_id=18709691

Intervention -- Can it be justified?

The arrest of Ratko Mladic takes eveyone back to some of the darkest parts of late 20th century European history and the Balkan wars of the 1990's. In July 1995 in the town of Srebrenica, some 8,500 muslims were massacred by Bosnian Serb forces under the noses of a United Nations peacekeeping force of some 700 Dutch marines and a lack of action and will by the West European governments including Britain and France. The pangs of guilt at this inaction have echoes in today's approaches to intervention in Libya.

 

Srebrenica - Could we have done more?


When the residents of Misrata were threatened with death by Colonel Gadaffi's forces,there were fears on the Western side that a lack of intervention in the Libyan conflict could have lead to massacres on the same scale as Srebrenica in the past. This explains the intervention in Libya but the prospects for success here are problematical and we could be in for a very long haul. When might such an intervention justified?

It must be emphasisied that although there is a general abhorrence of war,in some cases it can be justifed on the following grounds, rooted in the teachings of the catholic theologian St.Thomas Aquinas and also in the work of muslim scholars.

The Catechism of the Catholic Church, in paragraph 2309, lists four strict conditions for "legitimate defense by military force":

• the damage inflicted by the aggressor on the nation or community of nations must be lasting, grave, and certain;
• all other means of putting an end to it must have been shown to be impractical or ineffective;
• there must be serious prospects of success;
• the use of arms must not produce evils and disorders graver than the evil to be eliminated. The power as well as the precision of modern means of destruction weighs very heavily in evaluating this condition.

Interestingly, these guidelines do not specifically mention civil war which we do have in Libya, however they do provide a very useful guideline to this position. In the case of Libya I am not sure that all these tests were properly assessed by the West but the echoes of Srebrenica probably dictated the course of events.If there is intervention in Libya, then why not in Syria,whose people in may ways are suffering much more than the Libyan rebels? Presumably the Western powers have decided that the prospects of a successful intervention in Libya are greater than in Syria. Therefore, a particular intervention in a specific situation might be justified on several grounds but may be abandoned on the grounds that the prospects of a morally good intervention being successful are too remote to carry it out. Therefore we can only do good if we think we can pull it off? In the final analysis this is more of a pragmatic approach rather than an ethical one. Perhaps we can only intervene when we have a good chance of making a difference.

We were in a position to make a diference in Srebrenica,less so in Syria. Where might this lead in terms of other "just" interventions in the future?

Squeezing the Middle -- When might it end?




Not keeping up with the Jones's

The Independent Resolution foundation has just published a report which argues that millions of low to middle income earners will face years of declining living standards even when the economy does eventually pick up in 3 to 5 years time. Certain jobs it argues, which were skilled before, will be replaced by advancing technology and that will cause problems for future employability. Times are tough, but not for everyone, higher earners appear to be taking a larger share for themselves even as the economy bounces along the bottom in terms of growth.

In future years,social policy will not only need to tackle the problems of the poorest but also the problems of those who although not considering themselves as poor, have been dragged into higher tax rates which were originally destined for the very richest in society. It is all about that magic word incentives -- what incentives will the squeezed middle have in the years to come -- they probably will not be linked to monetary gain and the other incentives,apart from cash,will become a bit wearing after a while..

The other issue apart from incentives is one of aspiration,people thinking they should be somewhere better or different than where they currently are. Will the diminishing ability of people to achieve their sought after places in society cause future political problems? The demonstrations in Spain, where youth unemployment is circa 40% are a testament to what might happen in the future, if young people are not given a chance to shine.

We need to find a way of ensuring that a greater element of society will be able to share in the gain of increasing prosperity - though there won't be too much of that in the years to come.

A guide to their report can be found at:

http://www.resolutionfoundation.org/publications/squeezed-britain-low-middle-earners-audit-2010/

everyone always wants their children to do better than they have done in society. For future years this may not be the case, perhaps some aspirations will need to be abandoned?

The Big Society - What is it?



The Big Society- Does he get it?



The Tories in opposition and also now in government have had the Big Society as a main plank of their social and economic policy. Citizens will participate fully in society by contributing their time and effort for free to run services and help each other.In a recent speech David Cameron stated that this is not "add on" but a central part of what the government wishes to achieve. HM Treasury's Green book on option\project appraisal will be revised to include the "social value" of projects as well as their economic return. Quite how "social value" will be measured is still a bit unclear, I remember from my university days examining cost benefit analysis of large public sector schemes,the analysis was far from value free and it really did depend on how you defined and measured costs and benefits to determine whether a project was socially justifiable. I suspect the same will apply here. Having strong and socially responsible communities is extremely desirable,but realistically,in the light of the most severe public spending cuts since the end of WW2, how easy will that be to achieve? Many third sector organisations depend, to a large degree,on public sector funding,therefore it is difficult to estimate how many of them or indeed how many professionals, will take over local services under the localism agenda. There is a danger that under the open public services agenda large non local organisations will take over these services with little local responsibility unless such moves are restricted by any forthcoming legislation.



I am a person who has done his fair share of charity work and know how rewarding it can be, but it also takes up a lot of time as well. Social enterprise is part of the solution,businesses that are run at a profit offering the community valuable products and services,however the profit motive is not the overriding factor;social objectives of the business are equally important e.g. re-investing in the business itself and the local area and community,providing the community with employment, providing employment to socially marginalised and disadvantaged groups.these are also important as well.

Philip Blond in his book "Red Tory" envisaged a society where local\regional firms and institutions were strong and non-speculative community banks supported local industries\firms. Society would not be dominated by large monopolistic firms and institutions which would stifle local initiatives -- I haven't heard these ideas being considered in the Tories" vision of the Big Society. There is much more to the notion of the Big Society than we constantly hear being debated in the media. We need to take a wider view of what it does mean.