Should we Allow Phoenix'ing a Company?

It seems a weird thing when accountants suggest a course of action that deliberately puts a company into administration in order to be bought by someone else free of any old accountability but that's what 'Phoenix'ing' is all about. And accountants seem to love it.

Blacks is the latest firm to go into administration for a very short period so that the company can be bought free of creditors snapping at their backs. In this case, it is Dragon's Den Peter Jones who appears to be the buyer after Mike Ashley of Sports Direct, the biggest shareholder, refused to rescue the company.

I have seen it argued that by doing this Blacks saves the employees, around 3,500 of them, from the vagaries of going bust and the wrath of the creditors who will haggle over the assets left to pay outstanding bills. However, the Phoenix process avoids this by declaring the company safe from creditors then allowing the good assets to be bought cheaply by a new buyer and the debts left behind and so the new owner gets the good bits while the creditors and shareholders get nothing but losses. Nice.

Of course, in saving the workers a good thing has been done, argue the accountants. However, it seems they have lost their capacity to add up as debts remain and the creditors don't get paid and shareholders lose their capital. Some may not shed a tear for investors as they should know the risk but all companies need creditors and if they have to write off bad debts then they suffer the consequences of Blacks' demise. It is the creditors who have to lose the money, lay off staff or curb their plans etc. They may get some insurance back but there are always losses.

And of course, this ensures that banks and insurers get more prudent and so there is less insurance cover and creditors lend less after getting stung. The argument is that this is better than Blacks going out of business as it could not be sold as a going concern.

So who is to blame here? Well the survivors are generally the same managers and directors who have brought the company to its knees as they are the magicians who use the Phoenix system. The workers will inevitably suffer as there will have to be severe restraints put on the business by the new owner to stem the losses. The accountants, meanwhile, get fat fees for their wizardry.

There is something cheap and nasty about the whole thing. There is something laissez faire about the management cavalier use of it. There is something distinctly odd about accountants using it. There is something very unfair about it for creditors. There is something downright shameful for the directors who leap from one boat to another freeing themselves of the responsibility of failure.

But the new owner won't care about that. The assets are bought for a song and it's back in business. I wonder, in the world of 'zero sum accounting' that governs all such matters whether the spread of losses make this any the less traumatic in the long run or is this just a convenient way for directors to get away with daylight robbery?

Ban Social Networking at Work?

Yesterday I blogged about the sales collapse at Groupon in the lead up to Christmas and I have also looked at the apparent large drop off in use of social networking sites like Twitter over the traditional holiday period. In the two blogs, I have suggested that there seems to be a marked indication that social networking is being 'transacted' largely in working hours. If, I surmised, that the majority of all social networking is for 'social' use and not business, are employers going to get wise to the apparent fact that their workers are using social networking heavily in working hours which may be impacting productivity?

Indeed, should companies actively ban or limit the use of social networking at work? Should they have a distinct policy about its use? Should they only allow social networking to be used by agreed members of staff and for company promotional use only?

I ask these questions as the mini-debate in the comments on my blog sparked quite polar views. On the one hand it was suggested that people with certain types of job like bank-telling or police on the beat as examples should not use social networking as their job demands their full attention. As a good example, you would not expect a professional footballer to use Twitter while 'working' playing a match or a boxer during a fight or a rugby player during a game.

However, you might expect all of those people to engage in social networking outside of their working hours. Perhaps in their breaks - although I can't imagine Sir Alex Ferguson's reaction during the half time team talk if Wayne Rooney had his head down tweeting.

On the other hand at least two people argued that there should be full, unfettered access to social networking as this would enrich personal and team performance and make employees more productive as they are being more creative and happier. And there is a fair argument in working relations terms to show that happy employees are productive employees.

I have worked with companies who have distinct policies - say no more than half an hour on certain websites during work hours or social networking sites being filtered out completely. I have also worked with companies who have had full, unfettered access to the internet. I can honestly say that my own observation is that access to internet is vital for most people to do their job. However, at those companies where there has been a policy there has been a range of performance observations.

In the companies where there was unfettered access to the internet there was a cross section of performances on show. In one company I have worked with, a general monitor was put on staff to measure time spent on certain sites. The information was not used as an HR or management tool per se but it was used to develop policy although it was clear that certain individuals were spoken to casually about their usage specifically of Facebook afterwards. The results showed that specifically salespeople who spent more than 30% of their woking day logged into Facebook were markedly less productive than those who logged in less than 30% of their working day. 

A very interesting correlation showed that those who intermittently accessed the site during the day actually were more productive even if they were logged on on more than 30% of the time  - and there was no real timing pattern to this like lunch hour. 

The result of the survey was that company developed a policy around Facebook use specifically but it was extended to a number of websites including online stores like Amazon. There was a serious kickback at first and the policy was amended to accommodate some of the feedback but it eventually went forward with a limitation of use of Facebook in peak working hours. This has remained in force.

The results have shown that overall productivity as measured in a very detailed way in terms of access to work related systems, orders entered, sales achieved, profitability achieved, cash collected, supplier orders placed, stock reduced etc etc has not really increased or decreased appreciably. However, the company did hit all its fiscal targets in the following year having underachieved the year before. However, the budgets reflected the economic climate so were less onerous.

But, in certain job functions where there was a distinct measure on performance, productivity increased. More outbound phone calls were made, more access to the company CRM, online order and backlog systems were made, more physical transactions were made, more old stock was reduced.

It's arguable that none of those increases actually were related to decrease of use of Facebook specifically and they did not run a similar detail 'before and after' use comparison, mainly as there was some kickback about 'Big Brother' use of monitoring impinging privacy. But the biggest measure that was impacted was staff churn. In this specific industry, staff churn, particularly in the desk bound sales area, is high at around 45%. This fell to below 40% for the first time in 5 years.

I have only read the findings but anecdotally, I have worked with a company where there was no access to social networking or sports or retail sites during the day and that company has bombed since its IPO two years ago. Meanwhile, I have worked with a firm with unfettered access to the internet and seen salespeople even communicate in offices via Facebook - the company performance was poor and sales call out days were the worst I have ever seen in participation terms.

Yet those companies with clear guidelines seem to get something back. As in all things, there is a balance to be had. What the firm who did the study found was that there were some staff who just spent an incredible amount of their day on sites non-work related, but particularly Facebook. There was no doubt that those who did were the worst performing members of the company by some distance. But more importantly, these staff members actually brought the performance of their teams down.

I still think you have to look at this issue on a case by case basis. It was clear from this in depth study that people performed really well when they seemed to finish tasks and took a break on the internet. Those who never logged out were contributing virtually nothing and poisoned the performance of others. In reality, this is not rocket science and it's nothing new, as the HR Director pointed out in the narrative. This is just a case of certain workers either being in the wrong job or not being managed or trained well or being plain lazy, finding distractions to make their day more interesting. On company time.

So in my own, mini experience, I have seen companies like Google with the most whacky work environment possible for distractions to productivity become one of the biggest companies in the world, I have seen a public company hurtle downwards after restricting internet access and I have seen a company with a sound and fair policy get gains.

A balance is to be had and as with all things, where people know and understand the boundaries, you get good results.

Now here's the corollary to the findings at the company I mentioned. The policy of use of social networking sites ( and certain other sites) is a guideline and is voluntary. There is no monitor on the system stopping them after a certain time. The employees themselves police their own policy. Use of Facebook specifically has more than halved since the implementation of the policy and very few staff now log on for more than 30% of their working day. There have has been only one disciplinary related to excessive use of social networking and that was raised after members of the person's team brought it to their manager's attention.

I like to think that's a victory for common sense all round.

Apple is Anti-Competitive?

It had to happen. When you analyse how you can buy an Apple PC product, the Apple Authorised Resellers concept is really not particularly healthy, it seems. It appears to be even more more unhealthy when it comes to its own stores.

My own experience of buying an Apple Macbook Pro was not entirely pleasant, I have to say. I went to Solutions Inc in St Albans and made the fatal error of asking for some money off the bill as a discount - as you have the right to do as a consumer, you know. I was greeted with almost revulsion by the local sales manager who made it clear that Apple Authorised Resellers are 'not allowed' to offer discounts or they might lose their status. This status, he explained, was hard earned through training and other such things but it meant that in return, Apple always gave them first in the queue status for stocks of new products.

I actually did connect on LinkedIn with the owner of the reseller but after an initial interest he was more concerned that the sale was lost to Amazon who at least offered a few quid off the deal.

I actually think Apple Authorised Resellers and their Stores are a credit to Apple. They present products brilliantly, the staff are incredibly knowledgeable and you can get all sorts of added services from them which could make the buying experience brilliant. The easy comeback to me by the sales manager was to indicate all that value versus the lack of attention I would get from Amazon before and after the sale. As a simple for instance, there is no such thing as an Amazon phone number and support on any product is not offered. That would have been the best justification for the few pounds difference in price.

But what Apple and its Resellers seem to be risking is the obvious wrath of the European Competition Laws - and they are serious stuff. The spat in France is centred around stock allocations. Theoretically, no matter what status as as  store or reseller may have, access to stock should be on a timed order basis. But it appears that this is not the case.

The case in France is specifically about Apple favouring its own stores over its Premium Resellers but I suspect that this problem could spill over into ether areas. There may a suspicion of some level of collusion between Apple, its stores and the Premium Resellers to keep prices at one high level. If this is proven, then it has some nasty repercussions, as the penalty for breaking European Competition Laws is a fine of up to 10% of global annual revenue.

That's a big 'ouch' and on the face of it and through my personal experience as a buyer, I think they should be worried.

Groupon Fails?

It's a real swine when you get something right like a prediction for 2012 but I only made my observations about a  month ago and already it seems one has partially come true. Groupon has suffered a major set back and concerns about its business model are now getting serious. I predicted that Groupon would fail in 2012 and the news of a 46% drop in gross revenue in the lead up to Christmas and after Thanksgiving is a huge warning bell.

Like my blog over Christmas about the massive drop off in social networking activity at family holiday time, it seems that Groupon suffered from the same effect. Retailers in the UK, in the meantime, had strong a Christmas period rescuing a mediocre year with John Lewis reporting bumper sales. So it is not that we have suddenly gone off bargains, there is a real smack of traditionalism at this time of year. TV advertising and viewing peaks, social media goes down. Retailers have strong offers, voucher schemes suffer.

There is not an obvious correlation here and this must be worrying to Groupon's investors. Interestingly, Groupon's travel business continued to perform strongly so this is its core business that is creaking. We should also remember that this is a week's data we are looking at but it is a huge drop by any standards, so the full Christmas picture has not emerged.

But I have my suspicions. If 'social' type interactions decrease sharply during traditional family holiday periods (i.e. whole nations are not working at once) then it seems that Groupon also suffers. This would sort of suggest (anecdotally and not backed with real evidence) that most of the Groupon transactions are being done in working hours by people at work. This is once again a worry for investors in social networking companies. If businesses really get wise to this then I believe that social networking will get suppressed by companies during working hours. And if Groupon really does correlate to social networking, then its model could be at similar risk - given its offers are very transitory.

Whatever the root cause here, it seems that not all is well thought through in the business model. I have highlighted in the past that Groupon is a business of the period (we are in austere times), that it attracts 'discount junkies' and not long term customers, that retailers are not thinking offers through properly and that it is wide open to competition not just from like-minded businesses but from traditional retail. 

The final point here is that I think investors have got deceived by the vanity of the gross sales line. Even collapsing sales by 46% in a week meant that Groupon grossed $26.7million. But this revenue is split with the retailer and then you have the cost of customer acquisition and operating costs to deduct from the residual. There is no doubt that Groupon loses more money the more it sells. Many high growth firms consume cash and lose money heavily in the early stages, but at least those businesses make a good margin per transaction which clearly shows the future profits can overcome the past losses. But Groupon loses money heavily on every transaction and it is not clear when that can end if it takes pastings of this nature in a single week.

I stand by my prediction and this sales drop is evidence that the model invented was wishful thinking. It means that the IPO was vastly over called and investors really should be worried about the future of this business in its current form. In my humble opinion, of course.

No Credit, More Tax - That's the Way Forward, Britain!

Oh it would be too simple to collect the tax, or even just the interest, owed by such big firms as Goldman Sachs.

No, that would be too easy, wouldn't it? The interest lost alone is £millions. It's actually harder to get them to pay, particularly when it seems such companies have cosy relationships with the senior HMRC men. Nope, it's actually harder to go and audit the thousands of small firms who are working their hardest to make ends meet and contribute to British business, employing and managing the bulk of the workforce and already paying disproportionally higher taxes than larger companies.

These small firms don't have tiers of accountants, big auditors or lawyers to negotiate 'tax mitigation' or plain buy the HMRC off them. These companies are largely honest, pay their way and ask only that bureaucracy and red tape are reduced as much as possible to stimulate an already dead economy.

But nope, the HMRC doesn't see it that way. These small firms represent easy money as it is likely that many of them don't have the time or resources to keep their books entirely up to date with all the backing paperwork. And they pay, unlike the big boys who argue the toss or plead technicalities or hide IP assets in tax havens, or simply threaten to move their tax headquarters elsewhere.

Small firms are the backbone of this trading nation and rather than pick on them, the HMRC should be helping them relieve the burdens. A fair tax system with less red tape should the simple way forward and let these firms focus on what they should be doing - creating some wealth for the economy.

I dare say I will get it in the ear from the whinging HMRC people who claim they are over-worked, underpaid and under trained but I say we are in the same place in small business, life is no easier down here as a small business. And it's about to become harder.

It's great to see the Government bleat about it but isn't this their system? After a financial disaster of Depressional proportions, who gets the blunt end of the sword? Small businesses who get squeezed on credit and investment money, get higher taxes and red tape, tougher employment laws and now the merciless scrutiny from the taxman searching for pennies when they could be extracting gold from the big boys.

Welcome to Entrepreneurial Britain. This is the way to really get the economy back on its feet.

How to Win the Lottery in 2012

Here's a sure fire tip for 2012 - you have to buy a lottery ticket to win, so make sure you buy one. That is sound advice, as I can guarantee that if you don't buy a lottery ticket, you won't win.

The odds of winning are pitiful some might say at some 48 million to one for a jackpot win. However, I can tell you with absolute certainty that the odds of you not winning if you don't by a ticket are infinite.

With these sure facts in your mind, your strategy must be to go on line or to a participating shop and buy a ticket - this will dramatically reduce your odds of winning as a first step. Buy two and you exactly halve the odds again. Buy 10 and you will reduce your odds tenfold.

OK, let's wise up. Even if you buy ten tickets, your odds of winning a jackpot are no better than 4.8 million to one, so it's not much of a chance. Even if you buy a thousand tickets, then you are still looking at odds of around 50,000 to one which is still a very long shot, considering you would statistically have to buy the same amount for each draw to stand a chance.

In business, you wouldn't invest in opportunities at such odds, would you? Yet, many businesses will sign up in the new year for snake oil schemes to accelerate their business with secret panaceas sold by ebullient former salespeople who have slipped their cocoon of mediocrity in their own sales careers and suddenly found the obvious things they missed. Now they are selling them at nice profits.

Have you ever been intrigued by these adverts you read in papers about how to become millionaires in short order? When you send off for the literature it tells you that you should place an advert in the paper telling people how to make a million and then charge them for reproducing the same document you received.

Everyone wants to the answer on how to make quick riches. Everyone is selling the solution. The secrets of life, of self-confidence, of social media marketing, of sales success, of business knowledge. Some of these courses may well give some great ideas which can be implemented in the short term but few give the elixirs of future and sustainable success.

Why? Because people are funny things. Some days they are on top of their game, sometimes they are not. Some just aren't cut out for the role they are in, some are. Some may gain knowledge and leave, some may have to be paid more than others. 

Acquiring, developing and nurturing talent is a long term business for companies. People are incredible machines as they are the only intelligent beings in the Universe, as far as we know, and they can outperform any computer over a wide range of tasks. Develop them well and they can be incredibly adaptable. Motivate them cleverly and they will jump off cliffs for you. But keep them in a dark cupboard with no light and they become as dumb as mushrooms to the business.

When it comes to developing new business opportunities, it's fine asking for general purpose advice or training - that will help give the background tools for the job. But some people have specific knowledge, skills and connections and can help your teams 'see' the opportunities more quickly, gain success more transparently and help teams develop the skills for the new markets more quickly by actually doing what's required rather than talking about it.

Putting the specific power you require into the opportunity you want, when you want is a fast track way to gain success. Most other methods are as 'Hit and Hope' as buying tickets for the lottery. You may get lucky with a specific course but underlying selling skills are only a pre-requisite. Knowledge of markets is more valuable. In my lottery analogy, you are far more likely to win if you know the numbers that will be drawn - buying the ticket is only the pre-requisite to potential success.

So as you go into 2012 and look at the available opportunities in the Hi Tech markets, think not of buying lottery tickets but placing your valuable investment money into acquiring specific skills and knowledge, even if this is for the short term only. People are incredible machines, they can even learn and they do so better from watching others.

Get the right skills in, at the right time, to do the job you require for as long as you need it. The other members of your team will learn faster from watching success being achieved in front of their eyes.

It's the way I have worked with companies. Roll up your sleeves, show people how to win without talking about general, esoteric concepts. Don't just make contacts and widen your reach, target and value contacts, covet and nurture them. Social networking is a great shotgun but NOTHING replaces the value of individual, tailored, knowledgeable communication and interaction with specific follow up activities.

Nothing speaks louder than actions with successful outcomes. All the rest is just words.

Apple will Fail, Microsoft to Come Back?

In a boring conversation over Christmas, a friend of mine said that Apple will take a dive this year as, in his theory, they have saturated demand for their tablets and smartphones and their PCs will never get taken seriously by corporates. Meanwhile Microsoft will resurge back to normal growth rates, was his other prediction.

Of course, he's right on all counts.

Or is he? Having been recently converted to Apple, first via tablet, then iPhone and now the Macbook Pro, I have suddenly realised that as workers we have been held back from many productivity aids and better software over the years. As a for instance, this year over the Christmas period, I recorded and published a talking book of bedtime stories for my young boy which he can now read and listen to at his leisure from an iPad or one of our iPhones or any device that reads ePubs.

Apple Pages, at £13.99 for the software on a Macbook Pro (full end user licence cost), allows you to write the document while the free GarageBand software on the Mac allows you to record an audio file. You just add the media file to your Pages file and then export to ePub format. The recordings took 15 minutes each and the rest was done in minutes. The look on my little's boys face to see his pictures in the book and hear my voice telling the story? Well, priceless.

But this has nothing to do with business, has it? Oh yes it has. This week, my firm will use my Macbook to write several briefing and training documents about Cloud Computing which we will add audio files to and then export them to ePub format. We can then make them available to all tablet users as a multimedia document which they can listen to on the fly. Imagine you are an IT salesperson awaiting a first appointment with a client to talk about Virtualisation or the benefits of Cloud, these documents will be 15 minutes long as audio files to give first, invaluable briefings to make salespeople sound authoritative. And they can leave them with their clients.

What my friend fails to realise is that the PC market is plummeting - even servers - but Notebooks in particular are nose diving at over 50% per quarter. Vendors like HP, Dell and Acer question the viability at the low end as they can't make products cheap enough for the corporate market. Meanwhile, the software is still buggy and expensive and it does much the same as it always has done with precious little innovation over the last 5 years, particularly from Microsoft.

In the face of this, smartphones and tablets are rising at an exponential rate as the phenomenon of Bring Your Own Device (BYOD) takes off at work where our own devices are attaching to secure networks. And people using these devices buy their software in a different way - over the Cloud and for a few pounds a shot. And there's tons of it.

The revolution is here, have no doubt. And Apple PC's, in the face of the PC decline, are growing at 27% per annum in terms of shipments and revenue. Yet you can't get a bean of discount for love nor money on these expensive products.

Why are companies now paying top dollar for Apple when they are forcing PC vendors to crumble? Simple, the PC market never has really been about price. If you want capability to do a job, people are prepared to pay. The Sony Vaio is touted as the pinnacle of PC's in terms of graphics and portability but have you seen the Apple Mac Air? There's no real comparison.

But Apple is an island in the world of computing dominated by Microsoft so corporates will never buy, will they? Oh, but they will. Microsoft Office for Mac is vastly superior to the PC version and it's half the price. You can now get it as a client for MS Office 365. If you want full PC compatibility then for £67 you run Parallels virtual machine and then port all your MS licences across, automatically by wifi - Apple does it for you.

Of course, I don't think Apple will dominate the corporate market but I think the PC has had its day in the current form. The way in which companies invest in software will change as the Cloud drives prices down and multiple devices will be used to run the same piece of software with files sourced from one spot for all.

This is not a world described by PCs or Microsoft and so either these companies will have to adapt or get left behind. Apple may not win the end battle but they have shown that end or client devices can be anything going forward and users are defining what is paid for them against the corporate mandates. 

Steve Jobs said it before he died, we are in the post-PC era and you don't have to look far to see executives and consumers using the same devices running lots of software that has been suppressed for years by the narrow minded view of the world by mammoth software companies.

2012 will be a year of innovation and the year that the PC market accelerated its decline at the cost of new devices. Apple will get a share but look out for more innovative products and lots of great software at affordable prices. 

If Apple has done this one thing, then it has put value back into the valueless object that was once a PC.