POLICY IDEAS NEED TO DELIVER AND NEED TO BE DELIVERED

Public policy is for people not policy makers

How often has one come across the highly intelligent person with the brilliant ideas who can map out a series of steps and actions (A policy) and who believes that by actually undertaking that process that will be the end of the story. Things will happen, outcomes will be delivered, problems resolved, the job is done and the world is a happier place. The sheer brilliance of the idea and the intelligence of the person who formulates the policy will be sufficient to carry the day. Nothing else is really needed or so they think. The end is never achieved by putting forward brilliant policies and waiting for things to happen. We can never divorce policy from its implementation. A policy which cannot be implemented in the real world is not a policy it is a waste of everyone's time.

 

So what happens when policies which look really good in a ministerial briefing document don't come up to scratch?  There are several potential causes. Policies may be prepared by people who do not know of, or who do not share the life experiences of, the people who the policies are supposed to benefit. They think that everyone thinks and acts like they do. When the policies unravel, they just do not understand why. Logically,according to their knowledge and experience they should work but they don't deliver the intended outputs and outcomes. This underlines the need for plurality and diversity not only in the types of policies themselves but also in the people who prepare those policies.

Diversity is not always evident in the higher echelons of government policy making professionals and that is a great shame. Another important point about a lack of diversity in these areas is that people of the same background with the same experiences and the same cultural outlooks will, yes you've guessed it, approach the resolution of social problems and challenges in very similar ways. Other people outside this magic circle of achievement will not get a look in which is always a great shame and also can contribute to policies which look good on paper,never working in practise.

There is also the cultural barrier, these bright people who come up with wonderful ideas about how to resolve problems and challenges are often not the type of person who likes getting their hands dirty or who wants to get things done. They prefer to think about things rather than do them. A lot of people are very intelligent and talented but that in itself does not make them effective. The cultural divide also expresses itself in the fact that very often, these people look down on the grunts who are supposed to make these splendid ideas work. The plumbers who are there to ensure that the water flows through the pipes. Yet without the plumbers doing their job effectively -- no policy will ever succeed and the policy wonks must learn to love and respect the plumbers but this does not always happen.

What about testing policies out before they are implemented? If there is a policy idea then has it worked in another setting? If not why not? If yes then is the setting comparable with our own living environment or not? Can we make these judgements if a policy appears to have worked in a setting but that setting is very different to the life we lead? If the policies have not been tested in other settings then can we pilot them in our own setting? Will we learn from that and apply the lessons to make sure we do not make mistakes we could have avoided  at the outset? Will the lessons be learnt in time?

The UK tax credits system is a good example of where things go wrong. Policy makers assumed that all recipients of tax credits would easily be in a position to undertake an annual reckoning with the HMRC and settle any anomalies. Sounds really sensible until one digs a bit deeper and finds out that people who are struggling with their finances live from week to week and even day to day. They are not in such a good place to do a logical annual tax credit reckoning up because many of them lead unstable and chaotic lives, lives that are very different from the policy makers who dreamt up the policies in the first place.

Practical application is the key here -- will the policies work and have they been properly tested. We need to do this more and more so that we can solve policy challenges in a better way.

Good ideas are important but so are the plumbers who make them work if they have been proved to be workable in ther first place. We cannot forget that.
 

The CIPFA FUNDING ADVISORY SERVICE

Launching a Brand New CIPFA Networks Service

 

 

I am delighted to inform you of the upcoming launch of our new CIPFA Funding Advisory Service (FAS).

This new CIPFA network aims to examine (and tailor to each subscribing authority) an impact statement relating to all the funding streams currently available to your authority, explaining the drivers of change and sharing sensitivity analysis modelling projections, on how these grants are likely to impact your council's overall resource envelope, both in-year and over the medium term.

Balancing budgets and anticipating all revenue funding streams is not just good business in local government – it is a legal requirement, and this new network is designed to offer you maximum support in understanding what your grant levels will be, during these most uncertain times of austerity.

A change in the grant distribution formula, further reductions in financial support from central government and the increasing switch to more localised social, economic and business growth indicators, are all factors that will bring constant change to your actual grant levels.

For many practitioners these are changes that will prove very difficult to quantify and apply to their authority, so the launch (in September, 2014) of this new funding advisory service should prove to be very timely indeed – to help understand and anticipate these very complex funding areas.


Specific areas of grant support/ awareness that will be offered to members of the FAS, will cover the following:

• Formula Grant
• Retained Rates Scheme
• Council Tax & New Homes Bonus
• Social Care Integration
• Better Care Fund
• Other Specific Grants (including capital finance).


The FAS is a subscription based service and is competitively priced at £2,000 p.a. for District Councils, £2,500 for all other authorities. It is a CIPFA network which is offered in partnership with Pixel Financial Management Limited, who have been providing guidance and advice in these grant areas to authorities for many years.

This new service then, brings together significant policy, practitioner and technical expertise for authorities, that is simply unrivalled elsewhere.


If you are interested in knowing more about the Funding Advisory Service and/or you would like to register an interest in subscribing to the FAS, please contact Cliff.Dalton@cipfa.org  Or Roman.Haluszczak@cipfa.org

 

 Many thanks

Cliff and Roman

JEREMY BENTHAM AND THE MORALITY OF PAY DAY LOANS

 

Jeremy Bentham - Someone who could run Wonga?

 

Jeremy Bentham (1748-1832) the great utilitarian English philosopher may have more in common with pay day loans companies than you think. In his writings he treated money just like any other good, whereas other writers saw things rather differently. They argued that money had four functions which differentiated it from normal goods namely that it was a; medium of exchange, measure of value, standard of deferred payments and a store of wealth for the future. These reasons were meant to underpin the argument that money just isn't like other goods and should be subject to different rules. The price of money, its rate of interest, is determined by many complex factors and there is in reality, a term structure of interest rates reflecting how the market for money might behave at different points in the future. All this is fine however in several cases some market rates for borrowing certain sums of money are so excessively higher than most other market rates of interest, that we begin to worry and wonder why that is.

Jeremy Bentham's arguments need to be restated to assist us in our deliberations. Adam Smith initially argued that people who borrowed money were often poor and needed help and therefore he was in favour of ceilings on interest rates. Jeremy Bentham argued that if someone lends his money to someone else he needs to be compensated for foregoing his right to that money for himself. Any laws that were designed as ceilings on interest rates would discourage lending and would mean that there was less lending for poorer people and innovative businessmen alike. This would hurt the standard of living of both the rich and the poor. If the poor could not borrow money they would turn to other ways of getting it namely crime and there would also be a burgeoning black market in loans to the poor which would be unregulated and uncontrolled. In time, Adam Smith was persuaded by Bentham's arguments and changed his stance on interest rate ceilings.

Attempts to control the market are very difficult to achieve and often prove to be unsuccessful. Higher interest rates for certain borrowers reflect the attached risk premium attached to them. The lender wishes to be compensated more because he is lending to someone who is less likely to pay everything back.

Will poor people who are trapped by high interest rates benefit more from interest rate ceilings or a larger number of ethical lenders entering the market? Although imposing an interest rate ceiling looks initially attractive -- poorer people will benefit much more from a higher number of ethical lenders who will hopefully help educate them in financial matters and lend at more reasonable rates.

The lenders who charge excessive rates can be identified and encouraged to reform themselves by being subject to public pressure ( The Starbucks Effect) but the negative aspects of an interest ceiling policy should be brought out in the open. It is not necessarily a quick fix for the poor - we need a better way.
 

 

 

http://romanhaluszczak.blogspot.co.uk/

 

 

ADAM SMITH AND THE KEY PRINCIPLES OF PUBLIC FINANCE

 

Adam Smith also had strong views on public finance

 

Adam Smith (1723-1790) wasn't only the father of laissez faire capitalism, he also had a profound influence on the principles of sound public finance especially as it referred to the revenue raising powers and activities of central government. He was an enemy of monopoly and distorted competition in markets and an advocate of free trade as long as the UK's military position was unharmed. He also had a lot to say regarding the public finances of the state and these are issues we will consider below.

In respect of taxation of he wrote in an era where taxation of the population was characterised as being regressive meaning that larger shares of the income of poorer people were taken as revenue by the state than the shares of richer people's income. He proposed that there should be a proportional tax -- where everyone should pay the same proportion of their income to the state. In modern parlance this would be deemed a flat tax where the average rate of taxation would equal the marginal rate. In Smith's time this was viewed as a radical way of helping the poorer people in society. He did not appear to advance support for a progressive tax system (where richer people pay a higher share of their income to the state than poorer people) -- It is not wholly clear why he did not openly support a progressive approach but it can be surmised that if marginal tax rates were constantly escalating and especially at lower levels of income, this would act as a disincentive for workers to offer more hours of work to their employer. In modern times the effects of such a flat tax would be considerable in terms of its impact on society as a whole -- with those in the middle of the income distribution taking a bigger tax hit than now. Nevertheless Smith's implied focus on the cliff edge dis-incentive effects of high marginal tax rates and applying those high marginal tax rates lower down the income distribution are still important to-day.

He was also a firm believer that tax payers should be kept up to date with the facts of the tax regime which applies to them. Tax payers should know in advance how much they owe and when they are required to pay it. Tax laws should not be changed frequently because this would lead to confusion with uncertain tax flows coming into the state's coffers each year, thus making the state's financial planning process arbitrary and uncertain.This would not bode well for the country's welfare.

Taxes should be levied at a time and in a way that would make it as easy as possible for people to pay them. Taxing capital gains on assets only when the gains  are realised is a good example of this approach. Taxes should be easy and cheap to collect. There should be no need for huge armies of tax collectors and taxes should not undermine taxpayers' economic incentives nor should they create a pervasive climate of tax evasion. In Smith's time the main tax evaders were smugglers but in modern times this has widened a lot to huge multi -national corporations named after fruit and South American rivers. Taxes should be at a level whereby taxpayers will be in a position to pay them,albeit reluctantly. They should not be at a level where taxpayers will move mountains to evade tax payments.

Finally the state should not impose penalties on tax evaders that are so severe that the tax evaders will be financially ruined. The level of penalties should be adequate to ensure that evaders change their behaviours but the medicine applied should not kill the patient. Can this be achieved in the modern era? Many public campaigns have forced companies,like Starbucks, to pay more in UK tax and there are moves to implement general anti avoidance tax rules (GAAR) in the UK.

All these principles are designed to ensure that taxes raise as much as possible for the state whilst minimising the financial blockers to a country's economic growth and to workers' incentives. We need to ensure that governments do not ignore these important principles when they set their tax policies.


 

ADAM SMITH - HOW THE STATE MIGHT ENHANCE AND PROTECT THE WEALTH OF A NATION



Markets left purely to their own devices will not always achieve equilibrium 

Adam Smith (1723-1790) is well known as the father of the modern capitalist economic system -- especially with his emphasis on efficient manufacturing output and the benefits of the specialisation of labour (Splitting the production of pins into several component parts readily comes to mind). The pin factory example meant that ten people specialising in productive tasks could produce 48,000 pins a day - some 2,000 times more than if the 10 workers had not specialised at all. Firms could vastly increase their production and productivity but they would need to be in a position to sell that increased output. The latter might mean that the UK would need to expand its market for British goods and this would mean foreign trade without barriers. Smith was in favour of free trade as long as it did not increase the military might of the UK's competitors.

However there are some surprising conclusions within Smith's seminal work entitled," The Wealth of Nations"  (1776). For markets to allocate resources optimally some additional conditions must apply and in many popular discussions of Smith's work these are seldom if ever properly examined. The focus is on the laissez faire nature of Smith's thoughts, nevertheless these alternative perspectives do need to be considered by us in this modern day and age.

Smith was in favour of increased production and productivity which would increase a country's national output thus going hand in hand with expanding international trade. However he identified monopoly practises as the enemy of  a country's free trade and economic growth aspirations because monopoly:

1. Inevitably led to higher prices for consumers making them worse of than they could have been.

 

2. He viewed them as " a great enemy to good management." Competition forced managers to be more innovative and more efficient. Monopoly induces managers to stick with tried and trusted profit maximising approaches as they have no need to really do anything radically different. They will only innovate when their monopoly position is threatened by third parties.

 

3. Monopolies were more likely to be successful in pressurising governments to support the status quo in terms of maintaining the monopoly position (Unduly influencing or even corrupting governments) -- Sounds a bit familiar?

 

4. Monopolies lead to the mis-allocation of economic resources -- investment would go into monopolies precisely because they were monopolies not because the goods they produced were necessarily needed by the economy as a whole at the prices that the monopolies sold them at.

 

So whilst he was generally regarded as the father of modern capitalism that is not to say that he did not see a role for the state in guaranteeing economic freedoms . He viewed the role of the state in the following ways:

1. As a vigilant sentinel against the rise of monopoly power in the economy which would guarantee competition and a path towards the greater optimisation of the use of resources.

 

2. Defending the nation against external threats of aggression

 

3. Maintaining internal order and defence. The police and the judiciary and the rule of law. Without the rule of law economic and property rights in a competitive environment could not be protected.

 

4. Approving the provision of public goods where there were significant externalities.

 

The fourth point above is perhaps the most controversial. In a simple world the buyer buys a good or service from the seller. The buyer pays a price for the goods or services and consumes them whilst the producer receives payment for the goods and services which cover his costs of production and gives him a surplus to either consume and\or re-invest in his enterprise.

 

However such transactions are often not a purely private affair between the buyer and the seller. From certain types of transactions outsiders to the main transaction can themselves experience gains or losses and indeed the sum of these gains and losses can be argued to represent the gains and losses of society as a whole resulting from actions which were initially meant to just affect the two original contracting parties. The best examples of externalities are pollution - emanating from industrial processes (a negative externality) and  education\training (a positive externality).

 

The moral of externalities here is that without state intervention -- the market on its own could not hope to guarantee that nearly enough would be spent to properly combat pollution to ensure it does not critically affect our society nor can it guarantee that there will nearly be an adequate level of education\training for all in society. Poor children could not obtain the level of education commensurate with their needs and aspirations because their parents may not be able to pay the market rate for it. Pollution causes costs and dis-benefits which may not much affect the two initial parties to the transaction. These two parties do not have the incentive to, or the financial means of, ensuring that, society is safe from their polluting activities.

 

Hence in both these situations the state would need to ensure that the benefits of positive externalities were amplified as much as possible and the dis benefits  of negative externalities were similarly muted as much as possible.

 

The above four points and especially point four, describe the proper role that the state should play in a potentially thriving economy. Adam Smith recognised this and it is a shame that some people who purport to be his followers focus on laissez faire factors seeming to have forgotten what he said about the role of the state.

 

WHO WILL REPLACE MR PATTEN - AND SAVE THE BBC?

 

 

 

Is the BBC fit for modern Britain?
 - Image credited to the Spectator Blog

  

There is a perception in some quarters that for the highest BBC positions there is a template of a person that the interviewers already have in mind at the start of the process. Usually this encompasses an Oxbridge background and a good public school coupled with a knowledge and strong link to the social circles that person will be operating within during his (Yes his) career. Without many if not all of those prerequisites, a lot of other people just will not bother with such a time consuming process because it is loaded against them right from the start.

Mr Patten's appointment really epitomised this process very well as a merry go round for the great and good in British Society. In all honesty,although he has faced some big challenges - Mr Patten's performance has not met with universal approval. This was epitomised by the parliamentary committee grilling he received recently at the hands of my MP Phillip Davies.

The BBC and its executives also need to hold their hands up as there seems to be a culture of mutual support and admiration for that group of people and this was cruelly exposed in the parliamentary committee process when a number of BBC executives were given extra payments to "keep them focused" before they left the Corporation as part of a redundancy process. This should never have been allowed and reflects how detached the upper echelons of the BBC are from the ordinary viewer\listener -- That is why it is so crucial that a new candidate will be able to re-connect the Corporation with the people. Another person from the same background as the existing group of executives just will not achieve that.

Many years ago I remember listening to an interview with a former head of the Australian Broadcasting Corporation who was born in the UK on a council housing estate. One thing that struck me in his interview was his statement that if he had stayed in the UK he would never have achieved the equivalent position in the UK ( Head of the BBC) that he had achieved in Australia. He said that this would have been due to the class perceptions in UK society which are unfortunately still rife.

It would be great if we could get an effective candidate from an untypical background to move the BBC in a new direction (Please witness how old fashioned the BBC looks in comparison to some of the exciting reporting, coverage and commentaries on Al Jazeera). I was surprised to learn that for all its notoriety and fame  BBC 2's "Newsnight" reportedly averages only 600k viewers per night. Is it it a programme for the elite of our society or do we now get our news and information from different sources?

I won't be holding my breath though -- we will probably still get a candidate from the same narrow and shallow pool who will not rock the BBC boat too much. It is, however, a boat that does need to be rocked

HOW HR AND FINANCE CAN ENABLE BETTER PUBLIC SERVICES

Finance and Human Resources -- Can they re-define Public Services ?

The latest blog by CIPFA's Chief Executive - Rob Whiteman entitled  " In Support of Public Services" discusses how the HR and Finance functions need to evolve to make a difference to public service delivery.

It is entirely appropriate that Finance and HR should be enablers of change but very often that is not how they see themselves or indeed how they have been trained or how the organisation culturally perceives them.We can all be cheer leaders for innovation and enabling service managers to do better but if the organisation has never culturally gone down that path and is not really equipped, willing or ready to do that, then everything can go a bit pear shaped unless the ground is properly prepared. There needs to be a will to change and a recognition that change is necessary

 

For Finance and HR to deliver transformed outcomes they must think radically and outside many of their usual orthodox paradigms. How easy is that for them to contemplate? Not as easy as we think  -- Not as easy as it should be.

 

The organisation must be prepared to challenge itself and to try and meet those challenges. Finance and HR must support that process and they must look at themselves as to how they deliver their own services and whether they can be more successful and focused in the new era of austerity and how they need to get those changed services working properly.

 

Talking about doing transformation is all well and good but delivering transformation is very different because by its very definition transformation challenges existing norms and ways of service delivery. Many Finance and HR professionals find it very difficult to move in these new directions. This is very often a personal challenge for them because financial management and HR approaches need to reach out to the staff in an organisation and they must be far more participative,inclusive and dare I say democratic in the way that their  organisational roles evolve. Many HR and finance staff have great difficulties with these new approaches -- some want to change but cannot whilst others don't know how to. More democratic and participative approaches are challenging and time consuming but will ultimately deliver a more rounded and broad based public service.

 

If we do want to engage with our colleagues and foster creativity then lets set up the processes and mechanisms to do that, but are HR professionals, finance people and other senior leaders and managers really ready for some of the messages they might receive? How might they react to them? Are they themselves prepared to be challenged on how they deliver services and why? I am not so sure.

 

To ameliorate the risks of organisational change, HR and Finance professionals need to properly understand change and how it should be tackled. We need a combination of new skills, new approaches and a mindset geared to delivering change in a compassionate and understanding way. For Finance and HR to really innovate there will need to be serious consideration given to ideas and approaches which would not have been acceptable under traditional HR and Finance regimes.  These would involve greater consultation and involvement with non finance and HR specialists in our agendas, the generation of broader more participative approaches and the phasing out of many top down command and control methodologies which are the enemies of innovation.

 

The discussion of innovatory ideas should be done in an open way without prejudice. Some of the strangest ideas work the best in practise and everyone should be allowed to contribute without fear or favour. The collection of ideas from  diverse groups who have a different perspective on services is critical and must be actively encouraged. Top down approaches of white middle aged men in suits will not by themselves be drivers of innovation, participation and democratic control of public and not for profit services -- even if they come from our current Directors of HR and Finance!

 

SHARED SERVICES -- NOT JUST SIMPLY A TALE OF COST REDUCTION

Just Cutting costs is not enough

Given the austerity that many organisations currently face, is the solution to this a pursuit of a potential shared service agenda whose aim is to increase economies of scale for the organisation's service outputs?  Reducing the average cost of these service outputs is a necessary condition of a shared services  approach but is it sufficient on its own to make a successful shared service arrangement? There are huge pressures to cut costs but is it fair to use shared services as a cloak for cost cutting?

In my view shared services cannot just be taken as a route to speedy cost reduction although that is possibly what many practitioners think. There needs to be evidence of increased efficiency and in my view improved service outcomes from a shared service arrangement, without service improvement as a key element a shared service agreement will be an empty shell. It cannot be solely a tool for cost reduction

A shared services arrangement needs to be measured on a before and after basis showing how services have improved from a shared services approach. Prior organisational success in achieving cost improvements and better service delivery outcomes are helpful but the lack of previous success in these areas should not preclude an authority undertaking a shared service journey for the first time, providing it has got the tools and advice to move forward positively in this area.

Where external partners are brought into the shared services arrangement it is important that the contracts and other service agreements amongst all the key players are watertight and that the lead authority or whatever the structure of the shared service is -- has commercially based approaches which are robust and unflinching. This has not been an area where the public sector has excelled in the past and I believe it still has ground to make up here. The responsibility for the areas of service accountability and service risk ( i.e. avoiding service failure) should be clearly defined within any shared service agreement and the focus should be on service outcomes provided we know what outcomes the shared service is working to deliver and what influence it has over those outcomes.

The before and after approach to the performance measurement of shared services needs to be refined and developed to ensure that any authority embarking on a shared services journey should have the best prospects of successful shared service delivery. Cost  reduction can never be the sole measure of shared services success although it must be recognised that many people mistakenly think it will be. This assertion should be rejected

MAINTAINING HIGH STAFF MORALE IN TIMES OF AUSTERITY

 

The Beatings will continue until morale improves? 

 

The positive attitude of staff in the workplace should never be underestimated -- the state of mind in which they approach their work tasks should be as positive and enthusiastic as possible to ensure that optimal outputs and outcomes are delivered. Unfortunately many employers do not see it that way. Having good morale, defined as the spirit of a group and its level of confidence is not taken as seriously as it should be and actions which damage morale are not properly thought through especially their potential consequences for the organisation as a whole.

 

Equality of treatment of people in different and similar circumstances is a challenge which needs to be met or else the outputs and outcomes of the organisation in question,will, in some way, suffer, sometimes in a tangible way like falling revenues and sometimes in a more intangible way in terms of loss of staff happiness, belief and focus.

 

There are also reputational risks from low morale in that staff will not defend and promote their organisation as much as they possibly would have if they had a higher morale. Insensitive and thoughtless actions by management and other work colleagues can destroy or significantly impair workplace morale This aspect of work needs to be taken much more seriously because it can be tackled if there is a will to do so. Team building,bonding,mutual respect and high levels of ethical behaviour can, when mixed together, provide the secret recipe for creating and maintaining high morale amongst work colleagues.

 

When we are bringing forward new ideas do we assess how they might affect the morale of our co-workers and even our own morale? Do we care? Is there a point where certain actions have engendered a belief that the workforce no longer cares much about what will happen as its morale has fallen to new low depths?  Do we constantly assess morale and do we try and improve it in a concrete way if we find it to be unacceptably low? Probably not but we should.

 

Morale is a difficult concept to pin down but the organisational consequences of low morale can be devastating -- We do need to constantly assess its level and gauge the effects on morale of the major business decisions we take --

 

Indeed we should try to ensure that most of our key decisions do not lessen morale and that even those that might reduce morale are mitigated in some way. This should be addressed by us all because in times of austerity trying to maintain high workforce morale becomes doubly challenging but doubly important. High morale is not necessarily linked with high pay -- there are other motivational approaches to maintaining higher morale which should be explored and they include: improved training, broader work experience, research sabbaticals, financial support for alternative work skills, improved succession planning and on the job skills updating --

 

One thing is for sure the workforce's morale will not improve if it continues to take "beatings" -- these beatings are defined as insensitive and ill conceived strategies that harm morale for everyone -- Do we really do enough to avoid those?

SHARED SERVICES 2014 -- AN UPDATE



Sharing Services -- The message of the Future?

This analysis using LGA data is an excellent update on the shared servicesdebate and how it will need to move forward Shared Services Analysis Using LGA Data

This topic will return to this theme in later postings.

MAKING A SUCCESS OF SUCCESSION PLANNING

 

 

 

How can we ensure the baton is passed to the correct person?

 

Succession planning is a reflection of your own corporate mortality. No-one likes doing it -- just like writing your own will it is always something that you put off. Insider or outsider success depends on many factors. If the business needs to radically change from the status quo then an outsider will tend not be trapped by the internal preconceptions of the existing senior management. If an outsider does not or cannot understand how the existing organisational culture needs to be retained,to a greater or lesser degree, or how it can be reformed, then perhaps an insider is the better choice.

It is dangerous to try and make too many hard and fast rules on who will be ultimately successful. Much of it revolves around assessing what needs to be done and in which way the organisation needs to move or not, as the case may be. What is the mission of the organisation in the short to medium to long term and which person can best deliver that mission and over what timescale?
It may be that we are looking at several people - some might be there in the short term to distill the organisation into a leaner place. Whilst others will take this task on once the initial organisational distilling had been completed and they will focus on longer term growth and development. We need to define the organisation's future mission and then identify how that can be achieved and who might be best placed to deliver it and how they will do that.

The mission for Manchester United was to consolidate itself into a major European champions League Force perhaps overtaking Real Madrid and Barcelona - whilst maintaining domestic dominance as well. If that is the case then would you appoint someone who had never achieved similar levels of success before or did not lead the organisation in a certain way? If this person had not achieved these things before was his potential future capacity to succeed in this new environment ever properly tested? Probably not.
In summary we need to know what the future mission of the organisation is and can the new insider or outsider deliver that future mission. Mr Moyes probably could not - but many people said that at the outset of this and they have been proved correct.

BUILDING A MODERNISED FINANCE FUNCTION



We all want to build one but how?

Some very interesting perspectives on the modern finance function which are applicable over a wide range of sectors. It is critical that budgets are known to key decision makers and service delivery personnel well in advance and that the budgets fit into a realistic medium term financial planning envelope. Budgets must also be wisely spent in those areas of policy that will make a real difference to people’s lives and that is where the marriage between good financial management and the delivery of effective policy outcomes needs to be at its strongest.

 

We all need to be excellent financial managers and we also need to ensure that we do add value to the operation and delivery of key services to the population. That will involve us providing excellent advice and support to our colleagues, empathising with their challenges and providing them with innovative solutions to the really difficult choices they currently face.

We must however be honest with ourselves as well. Have traditional finance functions always delivered advice,support and understanding in the best way possible to key support delivery units? Often resourcing reports for monthly monitoring are presented in ways which are more convenient to the finance person rather than the person responsible for the delivery of a key service. We must move away from that particular mindset and embrace the business partnering\innovation role with gusto. This is not easy for everyone to master.

 

In my role working with finance practitioners for many years, they frequently are more at home with the technical aspects of finance and much less so with the business partnering\innovation dimension. This must change. If we were to ask financial managers which element posed the greatest financial management challenge we all will face in the coming months and years it certainly will not be IFRS, collection fund accounting or even zero based budgeting.

 

The high leverage of UK businesses, the state and individuals is a huge problem but perhaps what tops all of these are the financial and policy issues we will face as a society resulting from an ageing population. In 2011 in the UK there were 9.75m people aged 65 and over and 3m people aged over 80. In 2031 this is predicted to rise to 15.25m people over 65 and 5m people over 80. The modern finance function will need to be geared to addressing the financial and policy fall out from issues like social care yet perhaps within our existing mindsets, financial management is frequently more strongly linked with the ideas of stewardship and safeguarding rather than business partnering and innovation.

 

 Trying to convince some finance practitioners that issues like social care and its future consequences are more financially real to society than the technical accounting aspects so many of us know and love so well, is often a struggle in itself. The future of the public and not for profit sector will look very different in the medium term with the proliferation of smaller units like CCG’s, academies and trusts. As expert financial managers we will need to demonstrate to these units that we can make a real difference to their performance and their impact on society. If we cannot do this then why will these newly structured units engage with us? Financial managers will need to respond in new ways and add value to society.

 

We must ask ourselves honestly as individuals how will we ensure that we will be in a position to transform ourselves to demonstrate our value not only to ourselves but to society as a whole. -

PAYDAY LENDERS - A JUSTIFIABLE BUSINESS PRACTICE?

No-one should suffer the consequnces of abusive and excessive interest rates

Under Islam a charge for lending money to a third party is deemed to be usury. Usury being defined as an excessive and abusive charge for lending money onwards. Under the Quaran it is immoral to charge interest to people who you are helping from a charitable motive or who are in trouble and need assistance. Indeed it is often the case that this money will not be re-paid and the lender should not expect to get it back. This position was very similar under Christianity until Henry the 8th in 1545 ensured that an act of parliament was passed which allowed interest to be charged on sums lent. This revolutionised the use of rates of interest in the English speaking world.

 

In the early Christian Church, St.Thomas Aquinas argued that charging interest was like double charging a borrower. He is repaying you the sum he borrowed from you and you are charging the borrower a fee for using the money as well. If you buy a bottle of wine for a price you do not pay the supermarket an extra fee when you drink the wine. However, life is not as simple as that. There are crucial differences here between dealing with money and dealing with physical products namely, time and opportunity. 

 

By lending my money to you I am not going to have that money to use for my own purposes and I need to be compensated for that. I could have used that money on a project of my own or indeed I could have invested it in a bank to earn interest - so I want something for it. That is all well and good up to a point -- but you as a lender must make a decision as well. Are you lending to someone who is in a position to pay you back or are they not in a position to do so? If it is the latter then you are making a very poor business decision as well as a questionable moral decision. People who go for these loans are often but not always very desperate. Sometimes people need to get some temporary cash and can afford to be stung for a while and they get out of their crisis. For others, the payday loan is the start of a nightmare experience of stress, financial crisis and loan shark fuelled bullying. Interest rates shoot up and compound upwards many hundreds if not thousands of percent with little prospect of ever being repaid. Even if lenders do need to be compensated for lending to third parties there seems to be little justification for interest rates of this magnitude. The lenders come back with the argument that interest rates are so high because the transactions are so risky (Excuse me, doesn't that make my point?). We have legislation to curb monopolies and their excessive dominance of a market -- this needs to be extended to protect the vulnerable suffering from lender activities which do not bear any resemblance to the market structure of interest rates. Public authorities have challenged contractors when they have been overcharged and the same should apply here. The problem is multiplied because the people at the sharp end just do not properly understand the consequences of taking out these loans for themselves.

 

What can be done? The churches and mosques need to become more involved -- we need to extend credit unions and offer far more financial support and financial education to the vulnerable. The CAB has a crucial role to play here as has the Government's money advice service. These loans cannot take the place of properly constituted lending and other form of legal financial support to those in need.

 

The Muslim footballers at Newcastle took a brave stance in condemning their club for being sponsored by one of these lenders and Justin Welby the Archbishop of Canterbury is leading the way in this area. There is also a role for local and regional government to influence and drive this agenda in a positive way.

 

We need to convince people that the practise of charging these huge interest rates is not only morally wrong but is also bad from a business sense, especially if these loans are not or can never speedily be repaid. The consequences for society have not yet been assessed but there are better ways of addressing these issues.

 

SYRIA -- A MORAL AND ETHICAL DILEMMA

Not a terribly nice man - But would his successor be any better?

The decision to go to attack Syria is essentially a moral and ethical one. What evil has been done and who has done it and what punishment do they deserve and who should punish the perpetrators of this evil?

First of all -- is there overwhelming evidence as to the guilty party in this? Probably there is but what should be done?

The take on this can be traced back to the principles of a just war which were stated by a Doctor of the Church - St Thomas Aquinas.

1. War must be waged by a properly instituted authority such as a state ( Or even the United Nations?)

2. War must be waged for a good and just purpose -- not to serve the interests of a state or group of states or for self gain or for self interest.

3. A just cause means that a wrong that has been done must be righted (territory returned) or if that cannot be done then the perpetrators of that wrong need to be punished. But punished proportionately

4. A peaceful solution must be the ultimate intention.

An authority must fight for the just reasons it has expressly claimed for declaring war in the first place. There are rights to act in self defence and to punish a guilty enemy. War can be pre-emptive if a tyrant is going to attack you and you have incontrovertible proof of that. The use of more force than is absolutely necessary would constitute an unjust war. Civilians and prisoners of war need to be treated properly and that means without cruelty and with measured compassion. Interestingly the people have the right to oppose a state that wages an unjust war.
These principles are summed up in a modern way by the Catechism of the Catholic Church.

- 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

Probably on the basis of the latter 2 points -- The British Parliament has voted no to action in Syria. Will the US Congress follow suit?

Terrible things have happened in Syria -- but ultimately do we know whether any of our military actions will lead to something better?

 

Unless we are certain that military action will improve the lot of the oppressed we should think very carefully before we act.

OUTSOURCING UK PUBLIC SERVICES - HOW IS IT WORKING?

Outsouring in the UK - Are we storing up future problems?

 

I have just come across a very interesting report by Social Enterprise UK about this challenging issue. It is not a new report but one that I have missed and perhaps others have missed too, so I wish to draw out some of the key issues which we all need to think about.

 

In July 2012, the Financial Times said: ‘The collective growth of the outsourcing sector – dominated by FTSE 100 giants G4S, Capita and Serco – means Britain is in the grip of the biggest wave of outsourcing since the 1980s.’

 

Few can argue that in times of economic crisis, the value of every pound of public spending needs to be maximised however this report states this is not necessarily happening. The Government appears to be buying services from a narrow range of large companies and the complexity of its relations with these companies means that it has little room for manoeuvre or leverage over them. The research found that in critically important markets, private sector oligopolies are emerging, where a small number of companies have a large share of the market. Firms with large stakes in multiple public service markets are too big or too complex to fail.Does this sound a bit familiar to you? For example if a company provides different services to the government and one of these is not being delivered properly - the government cannot risk playing hard ball with that company for risk of affecting the other services the company provides to the government. Where is the potential control over the outsourcing service delivery outputs and outcomes?

 

  

Many of the smaller providers, often the social enterprises and charities that successive governments have marked out as ideal providers, are being forced out of the process. A narrower range of choice of providers is very likely to lead to higher costs for the delivery of outsourced services, if not in this contract round then maybe the next?

 

Complex business arrangements and a lack of information as a result of commercial confidentiality make it practically impossible to hold many service providers properly to account. When providers do fail to deliver, they often go on to win more business. This is a symptom of market failure as logically this should not happen. If public money is drawn out of the local economy to fund multiple subcontractors (who are not locally based) and other non local investors then what are the effects on our local area? How will that local area business rate base be affected?

 

 

for health services, and policing. The majority of people polled for the report had never heard of Atos or Serco,yet these firms and others like them, are receiving and are responsible for many billions of pounds of taxpayers’ money. The public are more likely to have heard of G4S, possibly due to media coverage of its failures in the run-up to the Olympics but that is just the tip of the iceberg. The private firm Atos is in receipt of around £3bn of public money but who has ever heard of them?

If these contracts are let to companies who drastically reduce pay and conditions then there will be associated welfare,economic and public health issues which would never have been factored into the contract bidding evaluation process. Debate about a level of a living wage becomes more relevant here.There is much evidence to show that private firms are placing vulnerable children and adults in parts of the country often many miles from home, but where care is cheapest for the firms to deliver it. This creates a strain on public services in already poorer boroughs and has a great human cost as well. So what at first appears on paper to be a cost saving becomes a driver for future increased costs in terms of improving care for these vulnerable people.

When problems do arise in cases such as the closure of Southern Cross as a result of complex financial deals designed to maximise financial gain, taxpayers are forced to pick up the pieces. The problem of privatised gains and socialised losses that we became familiar with during the banking crisis has many parallels in this process. In future, local authorities will have to bear the service reponsibility if these service providers fail.

A crucial element here is that public understanding of the effects and practices of outsourcing was found to be very low. In public polling carried out for the report, only one in five people knew that the majority of children’s homes are now owned by private companies. Respondents were much more likely to think that the state is still the main provider.

Public support for shareholder profit being made from public services is low.In polling for the report, two-thirds (66%) of adults said it is unacceptable

There should be much more debate on the outsourcing issue - and one of the report's recommendations is an oversight body for public sector outsourcing. Perhaps the PAC can have play a bigger role in this area?

 

Please read the full report at:

 

http://www.socialenterprise.org.uk/advice-support/resources/the-shadow-state-report-about-outsourcing-public-services

OUR BUSINESS LEADERS -- HOW WELL LOVED AND EFFECTIVE ARE THEY?

 

 

Is this Leader as popular and effective as he thinks he is? - Image from the Economist

 

Research by Sebastien Brion a professor at IESE has demonstrated that leaders greatly overestimate the support they receive from their subordinates. In group experiments carried out, those people primed with high power were convinced that those primed with lower power were on their side and supported them enthusiastically. In another group he found that lowly primed participants made alliances against the powerful even if it may not have been in their financial interests to do so.The powerful were blissfully unaware of this. They thought they were universally loved. This is a mistake that historical figures from Julius Caesar to Adolf Hitler have often made. Are we surprised? In an interesting aside when a boss tells a joke to a subordinate the boss loses the ability to discern whether the subordinate really finds it to be funny or not. This is a crucial element. Bosses do need to be aware of this bias and they do need to give employees the chance to say what they think -- but this is seldom the case unfortunately.

 

Some underlings see it is in their interest to support powerful leaders who are in situ because they see this as simultaneously advancing their own position in the organisation.Leaders then misinterpret this behaviour as support for their own actions and vision when in reality it is just self seeking on the part of the subordinates.We get to a position where the underlings will not publicly criticise their leaders out of fear for their own position and the leaders misconstrue the silence of their subordinates as acquiescence and support for their own actions, even when these actions put the organisation at risk.

 

It takes a brave underling to argue against the position of such a leader -- but that is precisely what must be done in many cases for the wider good of the organisation as a whole. The actions of some leaders need to be thwarted for the wider good but unfortunately few people have the courage to do this and later on down the line the whole situation of the organisation often ends in tears which very often could have been avoided.

 

Similar things can be said about the effectiveness of leaders. How many times are we told to focus on our strengths but according to " Kaplan and Kaiser" that can also lead to problems.

 

How often times have we seen being forceful turn into bullying or being decisive turn into being pig headed? A leader who is nice and all things to all men can develop into an indecisive person who is really no good for the organisation. People are often very comfortable in practising the skills which got them where they are  now -- but they do not acquire the new skills to move them forward.

 

If someone gets your former position when you move up can you resist the temptation to micro manage them even though you should be concentrating on your new job?

 

Part of the problem with the 2008 crash was that many of the banking leaders had been traders who were more used to taking risks -- rather than planning for the long term. This produced the obvious consequences. Leaders need to receive feedback on their performance in an open and honest way and be prepared to act on it.

 

Leaders like Richard Branson and even Margaret Thatched played only to their strengths but this does work in certain circumstances of crisis and when immediate action is required - though possibly less so in the long term when these preures have abated.

 

Leaders need to be able to build bridges as well as break down walls. It does take a very rare skill of effective judgement to realise when you need to pull out all the stops and when you need to moderate some of your approaches.

 

Being smart is always a virtue but according to Kaipa and Raida some of the most recent business scandals have involved very smart people who thought they were bullet proof and outside the normal rules covering decency and integrity, this is never the case.

 

Leaders need to be effective and they need to possess good judgement -- which unfortunately is not always readily available in large quantities.

 

Please read the attached articles from the Economist to learn more.

 

 

http://www.economist.com/news/business/21578990-leaders-need-learn-beware-their-strengths-too-much-good-thing

 

http://www.economist.com/news/business/21579031-powerful-overestimate-support-underlings-whos-behind-me

 

 

Look Again - A Blog by Grovehall: ORGANISATIONAL CULTURE - FIND OUT WHY IT IS CRITICAL FOR YOU

Look Again - A Blog by Grovehall: ORGANISATIONAL CULTURE - FIND OUT WHY IT IS CRITICAL FOR YOU

ORGANISATIONAL CULTURE - FIND OUT WHY IT IS CRITICAL FOR YOU

What is the culture of your organisation and why it matters.

I used to think that all this organisational culture stuff was tosh and the stuff of dreams and illusions but I have been proved wrong - not for the first time. Work by the Pacific Institute shows that organisational culture can be measured and that it does matter for organisational performance. Organisations grow, decay or are in a state of inertia. States of inertia can quickly lead to decay whereby an organisation starts to lose market share profitability and product quality -- We need to ensure that organisational culture does not contribute\drive such decay or else we are all in trouble.

 

Research undertaken by the Pacific Institute demonstrates that some 70% percent of organisations are defensive and only 30% are constructive . Whilst only around 30% of the workforce are fully engaged in their organisations 70% are not. Just imagine what we would get with full engagement?

 

Defensive cultures can be passive or aggressive. The main characteristics of a passive defensive culture are:

 

An approval culture -- Which means that conflicts are avoided and interpersonal relationships appear superficially calm but there is no constructive differing or expression of ideas. There is always a need to seek everyone's approval.

A conventional culture -- Organisations are traditional and everyone is expected to conform and follow the rules

 

A dependent culture -- Organisations which are hierarchically controlled and non-participative.

 

An avoidance culture -- Organisations which fail to reward success but do punish failure. This negative rewards system forces people to push responsibility to others and therefore to avoid blame for failure. New initiatives are avoided

 

Does this sound familiar?

 

An aggressive defensive culture is characterised as follows;

 

An oppositional culture - Members gain status by being critical oppose the ideas of others and make safe but ineffectual decisions. If its not their idea then it will go nowhere fast.

 

A power culture -- A non-participative approach where power control is rewarded and workers hold back from making any other future contributions because they are disenfranchised. Self promotion is the best approach

A competitive culture - You must win and therefore someone else must lose and this torpedoes effective joint working. Internal competition is more important than what your external competitors are doing

 

A perfectionist approach -- Everything must be perfect even if it does not need to be or resources should be focused on other priorities which really require this more. nothing is ever good enough

 

Does this also sound familiar?

 

Defensive organisations are over managed and under lead. They eat up overhead costs and reduce final profits considerably. Interestingly -- the passive defensive approach is probably more dangerous to an organisation in the long term because people do not realise what is happening to them.

 

We should be heading for a constructive organisational culture whose features include;

 

An achievement culture -- Always recognising success and achievement.

 

A self actualisation culture -- Always value creativity and quality over quantity. This leads to high level innovation and product quality.

 

A humanistic culture. Organisations which are managed in a person centred and participative way. Organisations are supportive and constructive.

An affiliative culture - Colleagues are friendly and open leading to constructive working relationships and a pride in working for that organisation

 

Those organisations which move more to a constructive organisational culture -- can increase their bottom lines by 5 or 6 times those which do not.

 

The trick is to try and move your organisation or at least the part of it that you are responsible for,into a more constructive type culture. The challenge is that maybe all of your organisation will not come with you. However you can show by example, that your bit of the organisation is performing well in a constructive organisational sense. Hopefully other parts of your organisation will see the light?