Is Smoking Good For The Economy?

I read a vitriolic attack by Duncan Bannatyne last week on taxes and it is pretty clear where his opinions lie on smoking. Frankly, I think most people would agree with him - smoking appears to be on the increase again.

In a bizarre situation in the Hubei Province in China, Local Government officials have been ordered to smoke in order to boost the local economy. The edict has ordered them to collectively smoke around 250,000 packets. There are also fines if the officials do not meet their targets or are caught smoking rival brands manufactured in other provinces.

Even local schools have been issued with a quota for teachers. It puts a new spin on kids smoking - they might actually get forced to go behind the bike sheds and have a puff. Of course, this flies in the face of national anti-smoking policies as directed from Beijing but this is aimed at boosting local tax revenues.

There is even a 'special task force' to enforce the quotas and one teacher was put on an 'official warning' when rival brand butts were found in an ashtray.

Capitalism And Other Agendas

While this is one of the most odd scenarios you can imagine, it is not so stupid as it looks. Capitalism and its pursuit will, in tough times, almost certainly mean sacrifice of more progressive values like Green Policy, Carbon Emissions and the search for alternative energy.

Even we practice it. While we loaded up the budget with £500m for a new wind power project, we are supporting the car industry with a £2.3bn bail out. While we put more money into energy efficient homes, we put 2p on the duty for fuel. While we spend on large overt advertising for giving up smoking, we add some extra duty on cigarettes and alcohol - we actually want the extra revenue, not to stop smoking or drinking.

In fact, of the tax revenues raised from alcohol and tobacco, a large proportion helps balance the bill for treating people on the NHS. One could argue the jobs created by smoking in the tobacco industry and the NHS are good for the country just as we rush to save the car industries with bail outs and scrappage when we know the cars contribute to the CO2 emissions in the atmosphere.

Capitalism has the habit of trashing many progressive ideas. People will always find good arguments not to change. Just the other day over a beer, a friend said that there was new evidence to show climate change was a myth and that we are more likely to have a massive eruption of a volcano which will blot out the sky than the damage we are doing as humans. So the message was carry on driving, flying, switching on lights as there is no point in stopping a good thing.

When times get tough, logic goes out of the window. The fancy words from Darling and Mandelson on building a new 'greener' economy is just waffle, as in the same breath they support industries which cause the problems.

The Future Is Here

Some would argue we are beyond the point of actually helping the planet and that is terrible thought as a legacy of this generation. But when you think about it, it's true and there are good reasons to think it. We are fighting more wars around the world with more lethal weapons than ever, we are emitting more CO2 into the atmosphere than ever, we are consuming the world's resources at a higher rate than ever before and we still fight wars over owning resources that may kill future generations as we consume them.

Yet, having realised we have a problem, we do not let up. In fact, we moan and wriggle about the cost of alternative energy research and pay less into it than on current energy research and marketing, while we pay $5 trillion in an instance to save banks.

The future of the world is in our hands but we live for the here and now. Just as you might leave a place tidy after you have used it, the world needs to be on a better course after this generation dies. However, our priorities are nowhere near where they should be.

The madcap and stupid edicts by the Hubei Province officials are exactly the logic we all use. Our future generations may pay a far heavier price than our tax bills for their future because of it. They may not be able to live.

How To Avoid Tax - Get Rich

At last a credible figure in the world of celebrity has come out and identified the need for greater transparency in the tax system (should have mentioned public servants' expense accounts but maybe that's for next week). None other than Dragon Den's star, Duncan Bannatyne, in his column in Today's Telegraph identifies that super rich people are the ones who most easily avoid paying tax in this country - sometimes none at all.

Lord Levy and Lord Sainsbury famously paid naff all tax at least one year and then became Government Ministers. Now we have the raft of bankers, and board directors of conglomerates who either award themselves large tax free entitlements like pensions or some other form of cleverness. At least two people knighted by this Government use the 'non-dom' status to avoid paying huge sums in tax - Easyjet's Stelios and Arkadia's Philip Green are the culprits. Green sets a bit of a record having one single bank loan converted into a £1.2 billion dividend which was paid to his wife, who happens to qualify as 'non-dom'. Neither paid a penny of tax on it, and he is so proud of himself.

It's frankly disgusting. Why on earth we allow it is beyond the wit of sane individuals but, as always, the richer you are the less tax you will pay because you can afford to find ways not to pay your fair share. It has to be stopped - the burden of tax is getting heavier and much of it is thanks to the greed and senseless actions of the richest people in the world who caused this financial meltdown.

Yet they seem to treat Britain as a slot machine with a fault - it always pays out for every go, tax free.

Bannatyne makes a very important point from a business perspective also. Such super rich, tax free people have a competitive advantage over those who cannot claim 'non-dom' status and who pay their fair share of taxes as these people have more of their profits taken by the Government which cannot be re-invested in their businesses. The super rich use this competitive advantage to leverage even greater amounts of money from banks and funds to acquire more businesses and make even more money - and at each turn they cover their tracks carefully.

This Government has granted special tax status to such people and we must stop it. In particular, private equity people are doing more harm than good and the argument they are saving businesses and jobs does not stack up. Every business attempts to do the same thing and has to pay taxes. They have special status for doing so and making vast profits - and in many of the cases their gains are short term as the companies they buy and sell are left to whither.

Yesterday was a chance missed yet again by Brown and Darling. When will we make sure that everyone who makes profits in doing business in this country in whatever form pays the same level of tax as everyone else?

Death By Meeting

How many managers can identify with my heading today? Sometimes a business day can just seem an endless stream of meetings, with little chance to do more than answer a few emails and return the odd call in between. In fact, sometimes it seems that all managers do is meet and do not actually DO anything.

Meetings in business are of course a necessity. In fact, I would argue that in times of a recession, it is important to meet MORE rather than less.

I have said it many times before, the speed at which this recession is striking is breath-taking - one minute the business looks pretty sound and the forecast is good, the next sees sales collapse, orders dry up, forecast dwindle and cashflow decline sharply. While small businesses can adapt quickly, too many get caught in rich veins of business or a few large customers which are fantastic when the market is strong but hit very hard when the market goes down.

Meetings Are Crucial

The need for faster, more effective meetings is paramount in times of hardship.

As market conditions and customer buying patterns change almost daily, it is critical to meet more often to make sure you are on top of what is going on.

Many firms I talk to wait until the monthly management meeting to discuss the forecast discrepancies, as a good for instance. With a fixed agenda and several topics for discussion, this is the 'formal' stake in the ground or governance for most firms. Again, when times are good, that is well and fine, but why wait 4 weeks to discuss and action news of a major lost piece of business or the withdrawal of a lending facility when it could have a profound affect on the business in bad times?

I have seen many managers with their 'One Minute Manager' or 'How to Run Effective Meetings' books - these are great tools, don't get me wrong, but it is a sad comment that most managers have little clue as to what an effective or productive meeting is. It seems many just call meetings to occupy their daily time and do not actually achieve a great deal other than fuel a cycle of more meetings. The fact is, instinctively knowing what the business issues are and how to go about solving them should a basic skill for every manager. Yet, they more often than not either stick to given formulae or delve into text books for answers, when the going gets tough.

Priorities and Measurement

I don't have a secret elixir or recipe for managing in a crisis but what I do know is that very quickly, the executive team need to decide the priorities of the business, then have some key measurements of its progress against these priorities and then have a process to review the progress and adjust the business to put it back on the right course or remedy the situation. For this, I advocate more regular, shorter, more succinct and action-based meetings with a rapid cascade of actions after.

Deciding the priorities really comes back down to understanding what is going on in every part of the business to a granular level of detail. I cannot stress enough that in the sales and marketing areas, for instance, there is a huge requirement to review every deal reported on the forecast and have an understanding of all the dynamics in the marketing areas.

What I mean for sales is not a wishy-washy look at the forecast but a face-to-face, eye-to-eye review with every salesperson and a detailed look at every deal of significance and look at the situation of each customer. It's time for hard questions about every deal and its chances, about every customer and their situation and what every salesperson is doing to remedy shortfalls and to replace business that will not happen. It is also time to look hard at what existing customers are doing, what are they experiencing in the recession and how their buying patterns may change.

In marketing, it is about looking at how every penny is spent and how it can be geared toward supporting the sales team in remedying a shortfall. In short, it is getting alignment - through finance, operations, administration, IT etc - the business needs to be fully aligned to the common priorities.

These then become the template for the short review and action meetings.

Rocket Science?

Too often sales and marketing executives run their teams with wishful thinking - believing deals will come good or that customers will buy even when the data is obviously refuting this. Then, when all goes to pot, the same executives are the first to hand over control to the finance team and cost cutters and then bemoan the fact they don't understand the business. Theirs is a world of simple arithmetic and they don't see the long term as by the time the company is handed to them, the sole priority is survival.

Avoiding this is not rocket science - it is simple, practical management. If cashflow is declining and sales falling - the adage 'cash is king' becomes the mantra. The accountants can certainly batten down the hatches and collect cash more voraciously, pay suppliers on longer terms and drastically reduce costs. But viewing it from a holistic position, the salesforce and marketing can be refocused to drive a short term opportunity for more cash based sales via special promotions, targeted marketing and negotiating current deals to bring them and the cash in faster. Such priorities can be easily measured and reviewed very regularly, weekly, even daily. If one offer does not bite, try another - if one set of customers don't respond, try others.

More regular, more tactical management meetings really do drive the business around the twists and turns of a recession rather than waiting for the formal ones.

Cut Non-Priority Meetings

It is a direct outcome of this thinking that allows managers to quickly recognise what meetings are simply not essential. If the meeting does not help the business' priorities then do not have it - it's that simple.

Prepare in Advance

How many times, because business seems an endless succession of meetings, do you enter meetings where either you have not prepared or at least one of the other participants has not prepared for the meeting. Too often, there are 'I will have to get back to you' or 'the data was not available' or 'I got called into another meeting beforehand' given as an excuse. The fact is, if the priorities are not priorities for everyone then people will find excuses and revert to type, wasting time and energy on non-priority tasks.

Recessions are not forgiving - ignore them at your peril. If there is one time in your life when you deliberately skip non-important meetings then this is it.

In a recession, there should be no excuses. If managers do not prepare, there should be little room afforded and no tolerance as it is managing for a failure. And for the excuse of the 'data was not available' that too is symptomatic of non-aligned business processes. If IT is not aligned with the priority of producing data ready for the preparation, then a step is missing or again managers are not tuned in.

There is no room for non-alignment.

Use Technology

Using web and telephone based technology allows you to meet more people, more regularly and with less impact of dead time like travelling on the business. It's more green too which means it not only is better for the environment but it is cheaper for the business.

Stop Looking For Answers

From Government to business, we hear everyday that this is a global crisis and so it effectively answers all questions on performance. There is always an excuse.

That is not true. We know that many famous businesses actually started during a recession (e.g, Cisco, Facebook)and many more actually thrive during them. They do it because they do not look for excuses and answers, they look for opportunities, prioritise, align, measure, review and adjust. This comes from rapid planning, executing and a less focus on 'going through the motions' of business like having just the one monthly management meeting.

Companies who survive or thrive in a recession are absolutely on top of their business and understand exactly how they stand and what they are doing for the future, in every part of the company, from top down and bottom up.

I have used the example of Aviva changing its UK subsidiary's name, Norwich Union, during a recession with a £ multi-million series of high profile advertising. Within weeks, they announce bad results, lose 33% of their market value and cut 1,900 UK jobs. This is monumental hubris and lack of management in a crisis. They just did what it said on the monthly meeting minutes and ignored the world around them until it was too late. In fact, it could even be worse than that - they may have actually decided to spend all the money KNOWING the results were bad.

That would actually be close to criminal negligence - deliberately diverting funds into stupid marketing that could have saved jobs. But it illustrates what I mean - priorities have to change in a recession.

Practical Solutions

I have blogged endlessly on the subject of managing during a recession yet I still see companies around me falling into the same traps. Often we get Dragon's Den heroes talking of their fantastic anecdotes and what has served them well. Duncan Bannatyne, who is one of the best of them, actually told the story of one of his managers calling and telling him a rival gym was putting leaflets on cars in the car parks suggesting a £50 reduction for signing up. Bannatyne gave the entrepreneur's response - only 5% of the City's population paid for a gym, so he wanted to focus on the 95% who didn't pay for a gym as there was a much bigger opportunity than just nicking customers from another gym.

But this was not practical advice - certainly not in a recession. If he is not providing enough value to his current members that they see a £50 offer as a good alternative, then he is going to lose customers. What is more, we all know it costs roughly 4 to 5 times as much to find a new customer than to keep an old one. The number one priority for every business must be to KEEP as many of its customers as it can - and if a £50 leaflet on a car window is taking customers away, then Bannatyne's business model is flawed - and ever more so in a recession when customers may walk just because they cannot afford it. Common sense would say the market opportunity on a 'nice to have' item like a gym will diminish in a recession - current cash paying customers are jewels in such an environment. In fact, in a recession, his advice could not have been worse.

But sometimes that's where entrepreneurs fail - they get too caught up in their own world to see the outside. I think Bannatyne was just illustrating a point because I cannot believe he got where he is today on such a course of action.

Sound Thinking

Again I don't have all the answers - but as an entrepreneur who has managed businesses through several recessions, I have learnt the hard way that applying the same principles in a recession is business suicide. Many of today's business people would not have gone through even one recession let alone a few, so solid thinking and good advice is actually very valuable - pithy anecdotes on the road to success from famous people often glosses over the point.

The question always remains - what does that mean to my business?

I have made the offer before, but I am very happy to offer my practical advice to businesses. Please contact me at nigel.dunn@calxeurope.com or 0207 193 2356.