an uncomfortable truth: bad businesses are just as successful as good ones

Many people argue that businesses should be ‘a force for good’ - adopting behaviours and practices that would be widely recognised as ‘good’: minimising environmental impact, being generous employers, supporting local community initiatives, and so on. But research from the US would seem to suggest that the correlation of doing good on the success of any business is…zero. In order words, it doesn’t matter how ‘good’ you are, ‘bad’ businesses are just as likely to prosper (and they’ll likely spend a lot less money in the process too).

Now, when I shared this research finding on twitter recently, lots of people responded with alarm, suggesting that the research must somehow be flawed, that it didn’t ask the right questions, or that it somehow doesn’t matter because it looked at US companies only.

I took a different perspective on the findings of this research: I used it as an opportunity to reflect on the way that I try to do business in an ethical and values-based approach, and if/how its worth the effort of my continuing to do so.

I know from surveying my clients that my business practices make no difference in their decision to award me contracts - my (professional) attractiveness is perceived through the lens of the quality of the service being offered, not the ethics of the enterprise offering them. However… I also know from the same surveys I undertake that clients tend to maintain the relationship with me because they like what they see and hear about me (which ‘doing good’ helps to re-enforce). And, as a micro-enterprise, knowing that I’m making a positive impact helps to assure me that I’m ‘living out’ the values I ascribe to, and so keep me motivated.

The real benefit from this research from the US is therefore perhaps an encouragement and reminder that we shouldn’t be ‘doing good’ in our businesses to make us more profitable and commercially successful, but to ensure that we remain honest with ourselves (both our strengths and our weaknesses), and we’re able to continue contributing to a generally shinier, fluffier, lovelier world for all of us.

Why pubs are the best place to grow your business

Most of you will already know that I offer support to enterprises, charities and individuals through a range of services and programmes (- my favourite of which is probably ‘beer mentoring’).

What many probably won’t  know is that I used to manage a loan fund for local co-operative enterprises, and am regularly invited to sit on panels to assess applications from start-up and growth businesses to decide whether they should be invested in.

As such I have a perhaps uncommon insight into financing issues as a business advisor, and find myself being asked to speak at various events on alternative sources of finance to the traditional high street bank for business start-up and growth. And it struck me recently that most of these alternatives might be best pursued not in an office, or over the internet, but in the pub as they’re all based around relationships and local knowledge, rather than institutions and ‘risk ratios‘:

• Angel Investors (think dragon’s den but without the scathing comments): people who are going to invest their money into you and your idea. They want to be assured that its not only your idea that’s a great one, but that you’re the best person to be leading on it - they want to get to know you. And what better why  to do that than over a drink?

• Loan stock (think interest only mortgages): this is where other people and businesses lend you their money with the expectation that you’ll pay them back at an agreed future date. These are effectively ‘private loans’ so you can choose where you discuss and agree them - and what more conducive environment could there be to negotiate terms than in a friendly pub?

• Community shares: where local people in a town or village all invest their own money in a common cause (usually buying the post office to keep it open, or installing a wind turbine to create free/cheap electricity for everyone). It can take a long time to knock on everyone’s door to make your pitch to them, so far better if there were a communal place where most of them are regularly assembled…pub?

All these ‘alternative’ forms of finance are based on people investing their own money (not someone elses') and as such there’s a different criteria that these investors are using: they’re interested in you, in building a relationship with you. And that’s something that’s hard to do in a posh office, but far easier over a drink… but they’ll still want to know about your business and be assured that they’re not going to be wasting their money, so you still need to know your numbers - however in a pub setting, you need to know them even more intimately than for a bank: a bank manager will expect you to have lots of notes with you, spreadsheets, etc. But in a pub, if you can’t give people an answer straight away off the top of your head, you’re sunk.

So, pub finance - perhaps a better alternative to the traditional high street bank? but it’ll demand that you know your businesses figures and detail inside out, and able to cite them more instantly than a bank manager would expect… On the up side, all your investors will be rooting for you and doing whatever they can to ensure your success (as its their money at stake!) and the interest you’re paying on the money is going back to other local people and fellow businesses, rather than in bonuses to  bankers…


UPDATE - 04.01.2013
my local paper, the Todmorden News has also just written an article based on this idea  - and in any of you are wondering, yes: I did buy my own pint!
http://www.todmordennews.co.uk/news/local/looking-to-grow-your-business-go-to-t-pub-1-5364076  

Why everyone needs Thomas the Tank Engine to help them manage their enterprise

I was recently invited to speak to a roomful of small business owners about the various options open to them to finance their ambitions for growth. One of my fellow panelists  John Daly stressed the importance of good robust financial management reporting. He argued that all enterprises needed sound financial reporting to support their success that should fulfill 3 specific criteria.

As I was listening, I realised that I knew these criteria already - not from any text book, or discussions with finance directors, but from one of my kids’ favourite TV shows: Thomas the Tank Engine. Thomas always introduced himself as being 3 things that made him the best and most successful engine on the island of Sodor: “I’m really useful, really reliable, and always right on time”: the same criteria that John argued that financial management needs to be: relevant, reliable, and regular.

So next time you think you see the Fat Controller at a business seminar, look again - it might be John Daly marshaling the trains; as for me - I’m off to watch TV with my boys to brush up on my management skills!

chase the money and don’t worry about keeping it legal – the new world of Charity Trustees...

I generally have a lot of admiration for Charity Trustees: people who are willing (and able) to commit their time and energy in pursuit of a dream of a supporting a better community, without expectation of reward or recognition of any type.

There will always be odd ‘rogues’ who see being part of a Charity’s governing body as a means to add a gloss to their career aspirations, but such people are usually the exception, and don’t usually stick around long enough to do too much damage...

However some recent research published by the Charity Commission suggests just how far Trustees of Charities are feeling compromised and pressured in a context of government cuts, recessionary pressures, and generally rubbish weather (2012 being one of the wettest on record!):

• last year, the biggest cause of complaints investigated by the commission (86%!) related to charities’ governance: how well (or not) they’re acting within their legal powers and rules, as well as those of the wider legislative framework that charities exist within. You’d therefore imagine that Governance and the law would be the area that most Board of Trustees are concerned with? Wrong – they list support with fundraising as being the most important thing. And 1/3 don’t offer new Trustees any support in understanding their role or responsibilities. http://www.charitycommission.gov.uk/RSS/News/pr_birth.aspx

 

• it also appears most charities are also recruiting new Trustees from within their own staff and volunteers (always highly risky owing to the heightened associated risk of conflicts of interest, amongst others...) . This means bad habits, mis-information and stagnation are all therefore likely becoming increasingly rife in charities as there’s little ‘fresh blood’ to challenge long-held assumptions that  may no longer hold true, or practices that need to be changed.

Is it any wonder then that charities’ reputations are increasingly under scrutiny and their reputation and place being questioned? Especially when a wealth of support exists for charities to recruit Trustees with little/no cost, and inductions for new Trustees can be structured very easily and cheaply using the materials freely available from the Charity Commission.

So what’s going wrong? Why aren't charities making the most of this (free) support? Why are bad practices emerging on such a large scale that risk damaging this sectors’ credibility? Could it be because the world they’re used to – the world where there were local funded advisors who would pro-actively keep them aware of issues, opportunities and risks through the likes of CVS’ is fast disappearing and they've not realised just how bad the fallout could/will be? Or more frighteningly, have charities always prioritised the money over compliance, and it’s only recently that we've noticed it due to more insightful research being undertaken and published?

Bah Humbug - why I won’t be celebrating Christmas…(as much as my employed counterparts)

Its that most magical time of the year again when everyone who’s fortunate enough to be in employment gets invited to ‘the works do’ - a chance to relax with colleagues and friends, reflect on the highs and lows of the year just passed, and generally make merry. A time to be encouraged and re-invigorated.

But not for me. Not because I’ve not been invited to others’ works do’s (‘cos I have, but have had to turn them all down owing to other clients needing me to support them fix problems when those parties are taking place - I’m afraid that for the time of life at the moment, the choice of earning money to pay bills always has to come first), but because as a sole trader, the tax office discriminates against me being able to have my own celebrations in the way that my employed counterparts can:

You see, the tax office allows for a spend of up to £150 per employee in respect of Christmas parties (so if your boss is saying they can’t afford anything more than limp sandwiches and  1 bottle of cheap plonk between 15 people, you can set them straight!). But this only applies to people who are in the employ of others - not those who are self-employed. Any celebratory costs I incur on behalf of myself and others I‘m fortunate enough to work with and might choose to partake of a mice pie and sherry with, I have to bear the full costs of at my personal expense after tax…

Given that the growth of the business population seems to be increasingly rooted in people like me: the self-employed, surely its time for HMRC to review these rules so we don’t have to miss out on the festivities that others are enjoying…?

But this is Christmas time - not a time to be melancholic and upset, but a time to try and spread goodwill: so to all my fellow sole traders, you can hopefully draw some moral comfort from this in that you’re not the only one to feel you’re missing out on the egg nog and turn under the mistletoe;

to everyone else-  warmest wishes of the season to you and your loved ones;

as for me - I’m off to seek what’s on special offer at my local off-license, find a limp sandwich and pull my cracker by myself…

are we all missing the real point of social franchising?

Social Franchising is seen by many as a Holy Grail or magic bullet to so many: depending who you speak with, it’s about:

• ·      scaling your enterprise for even greater impact (Unltd)
• ·   generating even greater impact in addressing social ills in society and communities throughout the country (various government policies and politicians)
• ·      the way to increase the number of successful social enterprises to ‘critical mass’ (Social Firms UK)

and lots of other reasons, all of which are broadly in keeping with the sentiment that social franchising is talked about as a growth strategy for existing social enterprises to achieve more of the good they deliver.

But I’m wondering if everyone’s missed a really obvious trick here, and actually missed the point of what social franchising is actually really doing in practice: it’s a way of fast-tracking the creation of consortia within the sector without all the time and energy usually needed.

There’s lots of interest in consortia for all sorts of reasons (easier to procure larger contracts, greater purchasing power, saving costs on shared back office functions, etc), but consortia development always begins with the assumption that there are a number of existing groups who identify some common shared interest.

And surely Social Franchising offers the same things as consortia: a larger scale of linked activities through which it might (amongst other things) collectively more easily procure larger contracts, share administrative functions to reduce overhead costs, greater purchasing power,.... The difference is that the consortia that emerge in this way would do so without the need for the usual time-consuming and costly negotiations that are otherwise needed. They would also emerge more in line with current real market trends and opportunities rather than simply because “it seems to be a good idea...?”

I for one would therefore like to see some dialogue happening between the various sector bodies that are currently encouraging and facilitating consortia and social franchises in completely separate ‘silos’ to each other. It may be that nothing comes of such chats, but it could perhaps unlock a new way of approaching both the development of consortia and how successful social enterprises look at how they franchise themselves...

how did I get here...?

I've always been a fan of Talking Heads, and in particular their Twilight-Zone inspired track 'Once in a lifetime'; and while the lyrics are largely concerned with an existential mid-life crisis, there's a line that always strikes me, where David Byrne says:

"and you may ask yourself - well, how did I get here?"

And maybe its because I've been listening to some old Talking Heads albums recently, or maybe because I'm approaching a certain age... but I am catching myself increasingly reflecting on how I've come to be living the life I am - I've never had any grand career ambitions or 'life goals', so its not always easy to look back to spot the markers along the path I've followed.

However, one thing I am certain of is that a lot of who I am and where I am today is because of other people who (with hindsight) have had influence over my thinking and choices made - sometimes by offering an opportunity for work or visit, and sometimes through challenge or encouragement. And mostly they didn't need to do the things they did that have contributed to who I am today, but with graciousness and goodwill they freely shared something of themselves and their time.

So I've decided I really should try and thank these people as I now go forward into whatever (mis)adventures await; but in keeping with my avoidance of career plans, it won't be in any formal or structured way. It'll be when I come across them at conferences or their name is suggested as 'someone I may know' by LinkedIn.

So watch out - I won't be publicly 'naming and shaming' you, but you may be approached by someone in the future who says 'thank you for that time 10 years ago when you...'. 

I think its perhaps a practice we should all perhaps try and do more of in not only better understanding ourselves, but also in encouraging others to keep on changing the world for the better one person at a time...