IT’S THE great paradox of the information age: companies – indeed, organisations of all kinds – are drowning in customer data but starved of useful knowledge. The consequence, says John Orsmond of Data Vantage, a database specialist, ‘is corporate amnesia on a grand scale’.

Every customer contact generates data. But the more companies fall over themselves to invest in contact centres and accompanying customer relationship management (CRM) and other expensive and complex database ‘solutions’ to collect and store it, the less they seem to have in the way of ‘answers’. ‘Companies are forever forgetting what’s happened many times before,’ Orsmond says.

Despite the hype of the computer vendors, most companies are forgetting rather than learning organisations. While the amount spent per customer on CRM goes up, the yield on their data assets goes inexorably down. Never in the history of commerce has so much been known about so little, to such small effect.

In fact, the effect is not just negligible, it is negative. Instead of being an ‘enabler’ (like ‘solution’, a word that should make managers pull a gun on anyone who utters it) IT has become a disabler, a screen that effectively distances consumer from company. Think of the on-hold music, the interactive voice response (‘press one for…’), the codes and passwords you have to negotiate before actually being able to talk to anyone.

These are barriers. ‘Behind all the data, customers are becoming invisible – and more and more alienated,’ Orsmond says.

Because of these failings, companies are unable to make even the most elementary distinctions between callers and types of call. One glaring gap is that all the measures and responses are geared to the company’s idea of the existing buyer. It’s as if the non-buyer didn’t exist.

As a result, ‘there’s no whole-market view,’ complains Orsmond. If, for example, the IT is driven by orders rather than, say, marketing, it won’t allow call-centre agents to spend the extra few seconds finding out about callers who might have made a purchase but in the end didn’t.

Look no further for the reason why call centres, which ought to be the eyes and ears of the company, are so often barriers rather than contributors to corporate knowledge.

The consequence of patchy integration, badly designed measures and poor processes is that there is a yawning gap between company and customer expectations.

‘There’s huge undetected customer dissatisfaction and very large concealed defection in all sectors,’ Orsmond says. Financial services are particularly bad. As evidence: telemarketing results are plummeting, as are customer- satisfaction levels all over the spectrum. Meanwhile, call-centre traffic – aka complaints – is going through the roof (necessitating the building of more call centres, thus negating the cost-cutting rationale for these establishments in the first place).

Perhaps equally interesting is the take-off of online transactions. According to Interactive Media in Retail Group, UK online retail sales growth is now 40 times that of bricks-and-mortar retailers – e-tail was 36 per cent up year-on-year in May at pounds 1.5 billion, while the physical high street is at its lowest since 1947. This, remember, is before the July bombs.

The significance of internet shopping, of course, is that a half-decent website makes it easy, or less hard, for customers to ‘pull’ the service they require, which, at least in the case of relatively simple products, is a substantial improvement on what is otherwise on offer.

The success of eBay in providing a market place not only for individuals but also, increasingly, for companies to sell their wares direct to consumers, is eloquent testimony to the same thing.

At Warwick Business School, Professor Harry Scarbrough, director of a research programme on business knowledge, notes that companies can hardly be surprised if customers feel alienated: ‘They want you to be data, because it’s more cost-effective. They don’t want you to be a person. For vast numbers of people, they want to commoditise service: that’s been the banks’ strategy, for example, for the past 20 years.’

The snag comes when, as now, people begin to revolt against the simplistic versions of human behaviour on the IT model. ‘When people fall through the net, when the data doesn’t match the dataset incorporated in the software, they can bounce around the system for ages,’ Scarbrough says.

The error is to think that these problems can be resolved at the same level they were created – by throwing yet more computer power at it. But it’s a systems, rather than IT system, issue. Put simply, it’s the wrong kind of data.

Most service industries are in much the same situation as manufacturing before the shakeout of the 1980s, Orsmond believes. The early service adopters of the new technology then on offer simply applied it to the old processes.

Just as manufacturing had done so earlier, services (particularly financial services) proudly reinvented themselves as mass-producers, driven by economies of scale, specialised production factories and standard products. That’s a good description of most modern call centres. They may be selling mortgages or mobile phone contracts rather than the Model T, but the logic is exactly the same: ‘You can have any model so long as it’s what we want to sell you and it takes no more than two minutes to explain and close.’

With technology plunging in price and soaring in capability, it is all too easy, says Orsmond, for firms to persuade themselves that what they need is ‘go-faster boxes and pipes, forgetting that there are all kinds of switches, taps and gauges between them, with people opening and shutting off the flow.’

The result is still the same old data leaks, explosions and blockages in short, confusion and complexity and little clean knowledge. Instead, the greatest value will come from a system with the shortest pipes and smallest number of moving parts, through which data can flow quickly and without hindrance to create real knowledge that people can act on. As Orsmond points out, this is often actually cheaper, requiring little in the way of capital expenditure, and the results drop straight to the bottom line.

So far, the underlying effect of IT in service industries has been to depersonalise the relationship between company and customer almost completely – the customer as data, in Scarbrough’s terms.

The key question is whether it can also be used to swing the pendulum back. Consumers are crying out for dealings that treat them as people, and there is growing evidence, says Orsmond, that they will reward companies that make the effort to do so. But just 12 per cent of UK companies are currently able to recognise even the most basic differences between them, so ‘you could say that there’s 80 or 90 per cent headroom for improvement.’

The Observer, 14 August 2005

THERE’S a new book out called Everything Bad is Good for You. With management it’s the other way round. Everything conventionally regarded as good is actually toxic.

Not enough people are aware that almost everything treated as axiomatic in today’s management is intellectually shaky and riddled with contradictions and practical difficulty. Things that we accept as inevitable aren’t inevitable at all in time, they will come to be seen as part of a primitive and finally destructive paradigm that was only held together for so long by unquestioned assumptions and the resigned (but wrong) acceptance that there is no alternative.

Start at the very top, with corporate governance. Current prescriptions, based on threadbare agency theory, are increasingly undermined by academic research. For instance, according to two new studies presented to the Academy of Management annual meeting last week, heavy use of stock options, still the main component of CEO pay for many companies, significantly increases the chances of poor strategic management and financial misrepresentation. In plain English: options give CEOs incentives to do dodgy deals and cheat. For all its box-ticking, America’s Sarbanes-Oxley Act on financial disclosure does not address the issue of these underlying incentives, and is itself a contributor to the problem rather than the solution.

In fact, bits are falling off the official edifice wherever you look. Another Academy of Management paper knocks on the head the idea that multiple directorships are necessarily bad on the contrary: multiple directors turn out to be more diligent, and for the largest firms they are linked to slightly better shareholder returns. As in previous years, Booz Allen Hamilton’s 2005 CEO succession survey shows that companies with combined CEO-chairmen deliver measurably better returns than those where the roles are separated. Booz Allen also suggests that insider CEOs are at least as good as outsiders and European firms are sacking poor performers too quickly: ‘In 2004, CEOs removed for poor performance were in office for a median tenure of two and a half years, an astonishingly and counterproductively brief of time.’

But then, whether at the top of or lower down the organisation, performance management in most organisations is a nightmare. Because performance measurement is dependent on other people and the system, it is nearly impossible to establish one that is fair and accurate in any case, because the measures are attached to budgets or activity rather than work itself, they usually measure the wrong things.

Naturally, that also means that appraisal, as conducted by 99 per cent of organisations, is similarly dishonest, counterproductive and coercive, particularly when connected to pay. On the other hand, where measures are attached to the work and throw light on the purpose, the need for ‘appraisal’ as such dissolves. Appraisal and performance management are locked in place by the annual budget, another on the list of bad management masquerading as good. Every single organisation in the world grumbles about the budget – GE’s Jack Welch called it the bane of corporate life – but very few are trying to do anything about it. The problem with the budget is that it is a target, and, like all targets it is subject to Goodhart’s Law – the moment it is used to manage by, it is worthless as a measure because it sets up powerful incentives for people to cheat.

The havoc caused in the brutalised and punch-drunk public sector by the abuse of targets and specifications is incalculable (although this column has done its best) the harm that it does to private companies is often glossed over. In the private, as in the public, sector, managing by the numbers drives up costs, ruins service and demoralises those who do the work.

In relations with the outside world, we all know by now that most – say 70 per cent – of acquisitions fail to deliver the expected benefits. Yet companies continue to indulge their wishful thinking. A similar picture is emerging with out sourcing. In a Deloitte Consulting study, 70 per cent of respondents had had ‘significant negative experiences’ with outsourcing, and one in four were bringing services back in-house. Researcher Gartner found that 80 per cent of outsourcing projects failed to save money, the savings on transactions (cheaper calls or contacts) being more than outweighed by the defection of dissatisfied customers and other hidden costs.

I could go on, in general and in detail: customer relationship management and other IT-intensive ‘solutions’ to the wrong questions interactive voice response sales promotions. corporate social responsibility… Why is so much that managers do a waste of time, if not worse? And why do they still persist in trying to make it work? To Answer the second question first: because we’re locked in. Precisely because we all know things don’t work, a whole ecology of improvers – consultants, IT vendors, outsourcers and peddlers of tools of all descriptions – has grown up with a promise to make it better. Everyone has a vested interest in the setup, even business schools producing the research that discredits it.

The reason that none of these things work, and never will, is that they are being put to the service of a clapped-out model. The paradox of today’s capitalism is that we’re still trying to manage it by central planning. Managers at any corporate headquarters or ministry in Whitehall would have been quite at home in the Soviet ministry of planning. They estimate what the market will be, allocate resources and schedule production to match the estimate.

Most of the toxic techniques are attempts to make the predictions and scheduling work better or to mitigate the model’s disadvantages. This they can often do at the margin, but at ever-increasing cost, so that now more and more management effort goes into managing the overhead, and less and less into the real work.

This is like painting go-faster stripes on a Trabant, a fruitless, bootless exercise if ever there was one. It’s also why, ironically, the management exhortation of last resort – work harder! – actually makes things worse. As the original quality guru W Edwards Deming caustically put it: ‘Having lost sight of our goals, we redoubled our efforts.’

The Observer, 7 August 2005

LIKE IT or not, companies increasingly inhabit a deal economy. Put baser motives like ego and self-aggrandisement to one side impatience, competition for investor attention and the globalising world economy are reasons why many chief executives these days feel compelled to pay as much attention to mergers, acquisitions and divestments as to products, services and customers.

With investors breathing down their necks, many CEOs find organic growth too snail-like to impress – particularly where turnarounds are concerned. Couple investors’ shrinking attention span with the need to react quickly to changing conditions, add in ready access to global capital and the attractive targets (and hungry rivals) emerging in new economies such as India and China, and it’s hardly surprising transactions are the newest field of strategic competition.

Last year, says a new report from Ernst & Young, corporate transactions totalled more than $1.5 trillion in deal value, $700m of that in Europe. No less than 88 per cent of European and 96 per cent of US companies studied were planning a merger or acquisition in the next two years, and only slightly fewer had divestment projects in the pipeline. Transactions of all kinds, sums up the report, ‘are an ever-increasing part of the way corporations do business, expand, and adapt to changing circumstances’.

In turn, the growing strategic importance of the deal has consequences for the way firms are managed. In the past, transactions would have been handled by the finance director or chief financial officer (CFO). Today, as a result of the Sarbanes-Oxley Act and ever-beadier investor scrutiny, the finance department is increasingly tied up with compliance and reporting. A separate specialist function, sometimes reporting to the finance director but more often directly to the CEO, is growing up to handle the transaction side of strategy: the corporate dealmaker (there’s even a new magazine of that name) or chief development officer (CDO)

The corporate development function had its origins in the internet era, when every company in search of a business model was desperately looking to make alliances and deals. Now that feeding frenzy has died down, the emerging function is striving to articulate a role, and the attributes needed to carry it out, for a world in which transactions have become as much part of mainstream strategy as a new-product launch or branding. Indeed, charting the evolving CDO role is what the EY report – ‘Corporate Development Office European Study Findings 2005’ – is all about.

The overriding concern noted by EY is the need for greater professionalism. Externally, the imperative is to face up to mounting competition for the best deals from increasingly aggressive and streetwise private-equity (PE) funds. PE is not only ubiquitous – there are now more than 7,000 groups active worldwide, EY reckons – it also enjoys some inbuilt advantages. With their lower cost of capital, shorter time horizons, and greater dealmaking experience (that is all they do), PE funds can often pay more and react faster than company rivals.

None of this is lost on canny venture capitalists and other investors, who are becoming adept at playing off PE funds, trade buyers and even initial public offerings against each other to push sale prices higher. Last year PE funds accounted for 15 per cent of global mergers and acquisitions activity, rising to 22 per cent in the UK and 37 per cent in Germany.

Eventually, like all bandwagons, the PE phenomenon will hit the buffers, either overreaching itself like the corporate raiders of the 1980s or competing its own advantage away. But for the moment, competition from this source is steadily intensifying. At a recent CDO gathering in London, half the participants admitted losing a deal to private-equity rivals in the past year.

Meanwhile, an ominous new precedent is the SunGard deal, in which three large PE groups are combining to take the US IT security firm private for a total of more than $11bn. Dave Read, global vice chair of transaction advisory services at EY, notes that as PE firms start to hunt in packs they are even more formidable competitors: ‘They have access to large quantities of reasonably priced capital, can move quickly and don’t generally have to worry about the difficulties of integrating businesses. Transactions are their core skills.’

But it’s not enough for corporate dealmakers to match private-equity counterparts for speed and opportunism. Investors are putting increasing pressure on companies to improve on the estimated 70 per cent of mergers and takeovers that fail to live up to projections: as well as doing deals, corporate dealmakers need to make them work.

Badly targeted and badly executed transactions can have a dramatic effect on corporate performance, Read points out. ‘CDOs are taking greater end-to-end responsibility for transactions and their outcomes,’ he says. ‘Not only are CDOs today responsible for originating, assessing and managing deals, they are also becoming more involved in integration, corporate strategy and risk management. In effect, CDOs are the new CEOs of transactions.’

The pressures on the role are compounded by the need to look abroad for growth opportunities. While most of Europe (especially) is stuck in the economic doldrums, emerging economies led by China and India are expanding too exuberantly to be ignored. Some CDOs also contrast favourably the increasing ease of doing business in such countries with growing regulatory, compliance and liability issues at home. For many large companies, dipping a toe in foreign waters is a matter of when, not if – with all the legal and cultural baggage that entails.

Businesses have always felt the need to reshape their portfolios from time to time. What is different now is the need to do so at speed, worldwide and in competition not just with traditional industry rivals but with well capitalised finance groups worldwide. In short, the ability to do deals well is becoming a source of strategic advantage, just as inability is a strategic handicap.

But although ‘corporate development’ will involve some management innovation – managing virtual teams, measuring transaction success, developing working relations with the board and other stakeholders – ultimately it won’t do to get carried too far away from the basics. Most deals still fall down because no one has thought who will manage the merged operation or how the success of an entity in one context can be fully preserved in another. As one CDO quoted by the EY report noted wistfully: ‘Financial capital is easier to deploy than human capital.’

The Observer, 31 July 2005

AS WE have all known since we won the right to host the 2012 Olympics, 300 languages are spoken in London. It’s just a pity the natives can only manage one.

The British are Europe’s language dunces – less willing and able to express themselves in a foreign language than Hungarians, Poles, Turks and Bulgarians, let alone Dutch and Swedes. Luxembourgers are eight times as likely to speak another language as the natives of the world’s most cosmopolitan city. Merde , even the French are twice as good at it as we are.

Does this matter? After all, the reason everyone else is better is the same reason we’re so bad: everyone has to speak English. Combined with a booming economy, English, as Simon Kuper perceptively noted in the Financial Times last Saturday, rather than the English, is why London has become such a vibrant city. English is the language of the internet, of science, of business. Indirectly, it was English wot won London the Olympics. Yet the victory of English is both exaggerated and a two-edged sword. Paradoxically, only 6 per cent of the world’s population are native English speakers, and 75 per cent speak no English at all. Meanwhile, for monolinguists, English is a one-way membrane that all too often filters out the rest of the world. London’s rich linguistic medley passes through, and is connected by, English but since the English don’t speak different languages, cosmopolitanism is in London but not really of it. That impervious membrane means native speakers are unconscious of many of the linguistic enclaves, or ghettoes, that exist on the other side. You can’t understand the culture without knowing the language. Now, above all, what once sounded like a joyous babel can take on a more sinister ring.

The filter’s debilitating effects are everywhere. It means we’re most susceptible to American economic and management ideas than European ones. For individuals, where everyone else is multilingual, monolinguists, even where the language is English, are a card short of a full hand. Thus, foreign footballers have profited hugely from the English game (and graced it at least equally with their intelligence and articulateness), but not vice versa. How many British footballers are fluent in French or Spanish?

While European students queue to do exchanges with UK universities, there are few takers the other way round. They are getting fewer still. Language studies are falling off a cliff. CILT, the National Centre for Languages, says that in 2001-2, just 11,000 undergraduates started courses in French, 4,500 in German and 455 in Chinese. Seventy per cent of language students are women. Few men have any foreign language skills when they start work. In some multinationals, UK managers are effectively barred from advancement because of their lack of language skills.

The hidden consequences affect the whole economy. As CILT director Isabella Moore says, the adage ‘you can buy in your own language, but you must sell in the language of your customer’, is graphically illustrated in the UK’s export figures. In Anglophone countries such as the US, Australia, Ireland and India, the UK sells more than it buys. For non-Anglophone trading partners (among them Germany, France, Belgium, Italy and Spain), which together account for 72 per cent of UK exports, the reverse is the case. But what would you expect when 80 per cent of export managers cannot trade in another language and the proportion of executives able to negotiate outside their mother tongue is half the European average? UK firms manage simultaneously to be least likely to use the customer’s language, most complacent about the need to do so and least aware of language issues overall.

The result, charges CILT, is that the pattern of UK international trade reflects one-eyed linguistic competence rather than market opportunity. ‘The approach of UK businesses is distorted by the need to avoid markets where English speakers are not likely to be found, ‘ it says. So, for instance, UK trade with Denmark (population 5 million, 79 per cent of whom speak English) equals that for the whole of central and Latin America (population nearly 400 million).

Lack of linguistic intelligence, as it might be called, affects even communication in English, supposedly our trump card. Economically, the use of English by other nations translates into increased competition. In that kind of competition, idiomatic, colourful English that makes no concession to foreigners is no advantage – in fact, the reverse. CILT quotes the case of Korean Airlines, which reportedly chose a French supplier for its flight simulators because its ‘offshore’ international English was more comprehensible and clearer than that of the UK competitor.

Apart from blimpish ignorance, government policies and targets must take a share of the blame. Ludicrously, languages are no longer compulsory for post-14 year olds, and schools take every opportunity quietly to drop them. Languages are seen as difficult, so to keep their exam figures up schools would rather students took almost anything else. For all the rhetoric, there will be no improvement while these perverse incentives exert their hidden tyranny.

The polymath and critic George Steiner once observed that while you could see with one eye, two eyes gave you perspective. It’s the same with language. What the monolingual blithely ignore is that a second language is essential to pick up the particularities in their own cultures as well as that of others. Where the one-eyed are king, it’s not surprising how often we fail to see what’s under our own noses.

The Observer, 24 July 2005

AS MANAGEMENT challenges go, they don’t come much tougher.

Here’s a firm at the centre of an industry that is one of the toughest in the world. As if that wasn’t enough, domestically it has come to symbolise gangster capitalism. The company itself is an amalgam of two erstwhile rivals that have been bought and sold on several times in the last few years, each time stripped of a little more of any saleable assets that remained.

In a capital-intensive industry, its vast plants are ancient, decrepit and polluting. Manning levels are four times higher than the industry best, nine times in the case of managers. The 65,000 or so employees (no one knows the exact number) are not just demoralised and cynical – 15 per cent are actively mutinous, bent on theft and sabotage. Oh yes, and your language doesn’t have a word for ‘performance’.

Welcome to Rusal, Russia’s largest aluminium producer.

That was the situation that greeted the new management team when the company, the third largest aluminium firm in the world, was formed in 2000 from a merger brokered by two of Russia’s billionaire ‘oligarchs’, Roman Abramovich, of Chelsea Football Club fame, and the only slightly less rich, although not so well known, Oleg Deripaska, 36, the current chairman and 75 per cent owner.

In the Soviet era, the company’s four giant smelters (including the two biggest in the world) had been ‘township-forming’ enterprises – all-embracing company towns set up near energy sources in the middle of Siberia, to which inhabitants and their families had to be imported. Now they found themselves bearing their onerous Soviet heritage in a post-Soviet environment, bereft of the most rudimentary equipment to steer by.

‘People had had no contact with the outside world,’ says Victoria Petrova, 39, the firm’s human resources director. ‘There was everything to learn.’ Could the company with its historic legacy compete in world markets? How to make profits, invest, structure how to change the attitudes of fatalism, nepotism and reliance on others that ran through the organisation.

Confronted by a situation of such direness, the young management team responded by drawing up a strategy that went boldly to the opposite extreme. By 2013, they decreed, Rusal would be the largest and most profitable aluminium producer in the world (as the company is private, current profit figures are not available). It would double aluminium production from 2.7 to 5 million tonnes a year, make itself a top-three producer in terms of capital efficiency, improve its environmental performance – and turn itself into a Russian employer of choice.

None of this could happen without a human capital programme, which for once, although with some irony in the circumstances, deserves to be called revolutionary. One of the first challenges, says Petrova, was to isolate a minority of the workforce bent on bringing the firm down. The angriest, she says, were a group of thirty- to forty-somethings who had completed their education and training in the Soviet era and had a lifetime’s expectations laid out before them. ‘Suddenly it was all taken away from them. The result was total cynicism.’

To counter their baleful influence, Rusal looked to a group of loyalists, a ‘golden reserve’, who (despite the history) were prepared to give the company a chance and put themselves forward as the new managers. Instead of the hoped-for 300, 700 people applied. Of those chosen, around 20 per cent a year are now coming through a specially- designed training programme and becoming managers.

It’s hard to exaggerate, Petrova says, just how far attitudes needed to change. Like all large Soviet enterprises, the companies had been run in rigid top-down fashion. Managers gave orders and employees carried them out (slowly, to make the work last as long as possible). People management in the western sense was completely new. ‘Everything was centrally administered, down to where people took their vacations.’

The first year of performance management, says Petrova with feeling, was ‘a nightmare’. For a start there is no word in Russian for performance and no concept of discussing alternatives or taking responsibility – only orders.

The idea of bonuses according to the firm’s performance caused bewilderment and consternation. Once it did sink in, however, performance appraisal turned out to be ‘very interesting’, according to Petrova. It unleashed a flood of discussion about how to reach the company’s goals, something that had never happened before.

Because there were no preconceptions, she says, employees came up with extremely inventive and interesting ideas. By the second year, people had stopped ringing the human resources department to ask it to arrange their holidays and instead were inquiring about likely bonus levels.

A further breakthrough was the drawing up of a code of ethics. When the first version was posted for consultation, there were 18,000 suggestions and comments. The outcome is a notably clear and down-to-earth statement, one of the first among Russian companies of the post-Soviet era.

The cumulative outcome of these and other human resources initiatives – including monthly communication meetings, newsletters, Russia’s first e-learning programme and awards – are now feeding through in earnest. Productivity per employee has almost doubled, from 75 tonnes in 2001 to 137 tonnes in 2004. Safety and environmental performance are improving. And having proved to itself that it possesses the resilience to survive, Rusal is now looking ahead with increasing confidence to the future.

To meet its goals, says Petrova, Rusal must modernise its colossal existing smelters, build new ones and acquire other companies. But all that depends on being able to develop and attract the right people. So the company has nailed its future to developing labour conditions that are the best in Russia, expanding career opportunities and training, and building a social package that almost rivals that of the Soviet period.

Petrova concedes that Rusal still has much to prove. You can’t turn a derelict Siberian smelter into the winner of a best-kept village competition overnight. And as with all large-scale Russian enterprise, politics looms large. But provided it can steer clear of top-level controversy, the changes made on the ground give it the best possible chance of keeping its destiny where it never was in the past – in its own hands.

The Observer, 10 July 2005

THE best reality show on air over the past month, at least in any meaningful sense of the term, has not been Big Brother or Celebrity Love Island. It has been Radio 4’s The Workaday World , presented by Sir Bill Morris.

Over four programmes, a beautifully constructed montage of voices has provided a sustained discourse on what it means to work today, yanking the focus away from the abstract platitudes of management-speak to the daily realities of the job for real people: hospital porters and bankers, window cleaners and musicians, call-centre workers, partners in law firms and the first woman lighterman on the Thames.

Part of the pleasure is authenticity and immediacy: the voices of real people talking about individual issues, radio at its best. But an essential part of The Workaday World ‘s appeal is Morris’s sympathetic linking narration.

Morris, general secretary of the TGWU until 2003, says he never anticipated the level of response and is characteristically modest about his part in the series’ genesis. The approach to present the programmes came out of the blue, he says, and despite being used to the spotlight at the T&G he had misgivings about doing radio, and these were only allayed with the final result.

In fact, it was an inspired choice. Morris says with a grin that he has no intention of starting another career – ‘retirement is pretty fulfilling too’, not to mention cricket – but he’s a natural, at once instantly recognisable and distinctive, but also completely representative. Like a good pianist accompanying a singer, his unobtrusive commentary inflects the whole performance, so that the arresting individual stories are unified by his lifetime’s observation of work, 20 years of that from the vantage point of a full-time union official.

The series is good at drawing out the paradoxes of work: the fact that statistically most people still do nine-to-five jobs with tenure, yet work intensification means that the indices for burn-out and insecurity are going off the scale the rhetoric of teamwork alongside the Darwinian struggle for individual survival the deeply schizoid effects of technology. George Cox, previously of the Institute of Directors, notes that time after time we can see what technology does, but hopelessly misjudge what it means. A banker reflects: ‘Computers don’t make work more productive, just more busy.’

One of the strongest themes in the series is the idea of work holding meaning. This has little to do with status or pay. In one juxtaposition, two people talk on either side of a plate-glass window in Canary Wharf. On one side is a high-flying banker, on the other a window cleaner (or ‘vision technician’, as he ironically refers to himself). But it’s the banker who feels alienated (‘Sometimes I feel I’m in a sweatshop’) and unsure of her contribution the window cleaner surer of his worth and more confident of giving his best: ‘My side of the glass is greener.’

Meaning depends on being able to see the big picture. Morris tells the story of the gardener at Nasa who, on being asked by the visiting president what his job is, replies: ‘Putting a man on the moon’. This is a very Morris story. He thinks that too many people are preoccupied with the next job at the expense of getting the full meaning from the present one. If more people were allowed to see the context of their work, he says, the world would be a happier, less frustrated place – and the jobs would be done better.

Morris’s own career is a remarkable illustration of his own precepts. He describes himself as ‘incredibly lucky’, but most people would say he’s just got back what he put in. He says the T&G job was so fulfilling he would have done it even if it wasn’t paid – even the earlier years in the motor industry. Now, 50 years after arriving in Birmingham as an immigrant from Jamaica, he is a director of the Bank of England, among a clutch of other public appointments. He describes his job thus: ‘We help to set interest rates. Not directly, of course, that’s the MPC’s job. But we have a statutory job to oversee the MPC. It’s extraordinarily interesting. Interest rates touch the lives of every individual in the country. Attending court and understanding the analytical stuff is one of the most satisfying contributions to public policy that anyone could make.’

Morris admits that his view of work is a romantic one. Yet he is well aware of its dark side, too. One programme dealt with the miseries and inhumanities of work, and here too the micro-narratives poignantly illustrate how little, under the soothing HR platitudes, work has really changed. Individuals are still brutally sacked and exploited. Call centre workers speak of the tyranny of targets, being monitored when they go to the toilet, of being treated not as people but as extensions of their VDU. One worker comments sadly: ‘I’m not as nice a person as when I started here.’

Noting the indignities, Morris regrets one large omission in the stories told by the programmes. ‘Not a single one of these unhappy people mentions a trade union or joining one,’ he laments. ‘For me, that raises fundamental questions about the position of the unions in today’s economy. The issues have multiplied, but people no longer see unions as a recourse or as advocates. There’s been no fightback over the abuses in the call centres, no fightback over Rover and Jaguar, or over pensions. There’s a huge amount of rethinking to do.’

The unions’ mistake, he believes, was to focus too narrowly on their members and the pay packet, surrendering the right to speak for the whole community. The collapse of communities around mining, steelmaking and shipbuilding and the failure to make inroads in the technology industries has hit the movement with a double whammy – or a treble one, since the individualisation of work is now so complete that ‘the only thing call centre workers have in common is that they are all equally abused’.

The unions still have a part to play, Morris insists, this time in speaking for the invisible and silent workforce – the twilight shift, the cleaners, carriers and shelf-stackers that actually make the new, 24/7 economy work. In this respect also, the fundamentals of work have not changed. Another series, perhaps?

The Observer, 3 July 2005

SHOULD we fear for the future of business in Europe? Yes, was the gloomy response of 70 per cent of a pan- European group of journalists gathered at a seminar hosted by Unisys in the south of France last weekend.

Even the Mediterranean sun failed to dispel the gloom cast by the shambles in Brussels the week before, and the lack of political direction that was felt to have caused it. More shock and awe was generated by the extraordinary figures emerging from China and India – where labour costs are 50 US cents and 70 US cents an hour compared with $21.30 in the US and $30.50 in Sweden, and predictions by Shell and Goldman Sachs that by 2050 China would be the dominant economy in the world, with India number three. Deepening the depression was general agreement that Europeans were too attached to their lifestyle, too complacent and too sleepy to bother to compete.

True, all these seem like grounds for concern. Yet they all have a reverse side. This writer still found himself in the minority of optimists, agreeing (more shock horror) with a top French civil servant that the self-flagellation was overdone. European companies hold their fate in their hands (see sidebar). They are not at the mercy of Brussels, any more than of blind economic forces. Companies have will and ingenuity they form strategies and build resources to maximise strengths, and invent advantages out of difficulties. Despite the scare stories, Europe has satisfactory numbers of engineers and scientists. It’s not short of capital, or ideas. It just needs to make better use of them.

Although Brussels can make a small contribution here, that’s fundamentally a job for management, not for politicians. It is companies and individuals that will, or won’t, make Europe a successful economy – in fact, success can only be achieved at company level, not by financial engineering (which is what much outsourcing is) or by acquisitions, but by more effectively creating goods and services that customers want to buy.

The customer, in fact, was strangely missing from most of the Unisys debates, which were all about the supply side – cost, regulation, competition – rather than demand. This, of course, accurately mirrors what happens in companies, which despite their protestations are overwhelmingly organised for the convenience of production rather than the convenience of the customer.

Yet this is a mistake, and the biggest European opportunity. One of Europe’s best assets is demanding customers – the French of food, Germans of cars, Scandinavians of furniture and mobile phones, Italians of clothes and shoes, Britons of, er, garden tools and TV shows. Satisfy them and you can satisfy anyone.

Alas, as we know, European customers are far from satisfied. Three out of four UK garages provide shoddy service, complaints about mobile phones and airlines are going through the roof, and don’t get me started on call centres again. One speaker noted that companies were becoming ‘unreachable’, elaborating with a cartoon showing one businessman saying to another: ‘The new automated ordering system has really speeded up our business. We’re losing customers faster than ever before.’ Quite so. In short, customer service stinks.

European companies can’t compete on cost alone. If they do, they’re doomed: as hopeless a bet as a British winner at Wimbledon. Nothing Brussels does can alter that. But equally nothing prevents firms from quitting the bumpy playing field that is cost, and choosing another, quality of customer service, that better suits their historical attributes.

Focusing on customers does another thing. In his presentation to the seminar, Unisys CEO Joe McGrath underlined the need for companies to ditch their command-and-control style of management and move to something more collaborative and co-operative.

This is nothing to do with being nice to people (Unisys is a US company). It’s to do with effectiveness. At a time when the marketplace is changing by the hour, the world is way too complicated for a company to be run by one person from the top. In a traditional, hierarchical, top-down company, as Jack Welch memorably put it, people ‘have their face toward the CEO and their ass toward the customer’, which is neither comfortable nor sensible.

Most companies, of course, whatever they may say about customers and employees, adopt just that posture. They are still command-and-control empires. In fact, the paradox, the dirty little secret of late western capitalism, is that its most important institution is the last redoubt of central planning.

As with Soviet Russia, such empires are so freighted with bureaucracy that they can scarcely move. A slide at the seminar quoted Jeff Immelt, General Electric’s CEO, saying that 40 per cent of the group (widely considered one of the most leanly managed in the world, remember) now consists of administration, finance and backroom functions.

Immelt wants to reduce that by 75 per cent in three years, and that can only be done by turning the company to face the customer, and distributing leadership. That’s what European companies should be looking at and emulating, rather than throwing up their hands in despair, demanding protection from Brussels and looking resentfully at India and China.

The late Sumantra Ghoshal once wrote that third-generation managers were running second-generation organisations with first-generation management. Developing a third-generation management model, one that works by harnessing ingenuity and loyalty rather than compliance, that enhances humanity rather than driving it into the ground, is both consistent with Europe’s past and its best hope for the future. It’s also achievable and is a DIY grand vision which owes nothing to Brussels.

The Observer, 26 June 2005

CARBON trading is suddenly all the rage. As with number 10 buses, you wait for years, and all at once emissions trading markets are springing up all over the place. Three have come on stream in Europe since the beginning of 2005, and another three will start up in the next few months. Around them, a whole ecology of traders, consultancies, start-ups, newsletters and websites has come into being. Carbon trading is now an industry in its own right.

There have been false dawns – and wildly optimistic estimates of trading volumes – about emissions trading in the past. So will it be different this time? Hopefully not, is the answer. When the Kyoto treaty was signed in 1997, among the mechanisms it put forward to help developed economies reduce emissions cost-effectively was an international emissions trading scheme (ETS).

Under a ‘cap-and-trade’ arrangement, nations and companies are allotted fixed carbon allowances, which they can trade: buying, in the case of heavy emitters that can’t cut pollution quickly enough to meet their target selling, in the case of those that have surplus to their needs. In theory, the market mechanism rewards good behaviour, ensuring that improvements in emissions performance will be made at lowest cost and in the long term encouraging polluters to mend their ways.

When the Kyoto protocol came into effect last year, following Russia’s ratification, it ended years of uncertainty. ‘Ratification largely addressed the issue of political risk, and there has been an upsurge in interest from the investment community as a result,’ says Graham Meeks, director of policy research at Climate Change Capital, a merchant bank specialising in clean energy.

One upshot has been the establishment of the world’s first mandatory multinational carbon market, the EU ETS, which came into being this year. So far, volumes traded in Europe are small – around 500,000 tonnes a day, according to market analyst Point Carbon, most of which goes through brokers rather than the infant exchanges. The fledgling European Climate Exchange market, for instance, took 33 days to reach a total of 2 million tonnes. Even the larger figure is a drop in the ocean compared with the billions of tonnes of CO 2 the world pumps into the atmosphere every year, half of it through factory chimneys.

Predictions that one day carbon could be the most heavily traded commodity of all may be overdone. But from small beginnings, the totals are increasing fast. Today’s daily totals are the equivalent of a month’s trades in the pre-market phases last year.

Under Kyoto phase one, which runs to 2007, the EU is issuing permits for 2.2 billion tonnes a year. For the moment, says Point Carbon’s Bjarne Schieldrop, only a few companies have dipped a toe in the market. Small buyers and sellers are fewer and farther between.

However, that may be about to change. At around euros 20, double the price at the beginning of the year, the carbon price is certain to tempt more sellers. Banks and other financial institutions are gearing up to start trading, both as aggregators for small companies and as speculators in their own right. In the longer term, other countries, such as Norway, Switzerland, Canada and Japan, are thinking of linking with the European system. Despite President George Bush’s well-known hostility to all things Kyoto, even some American states, including Governor Schwarzenegger’s California, are considering the merits of the market. In this context, Point Carbon’s predictions of a 10 billion tonne, euros 200bn a year market hardly seem extreme.

So carbon trading may well thrive as a business. But will it succeed in its underlying mission – to cut emissions globally? Opinion is generally positive. ‘If it is underpinned by strict regulation it has the potential to be a good system,’ says Bryony Worthington, senior climate adviser for Friends of the Earth. ‘It corrects the situation where it’s cheaper to do the bad thing, and it rewards those that do good: a neat combination of stick and carrot.’

Optimists point to some encouraging precedents. Chicago’s market in sulphur dioxide has helped to cut US sulphur emissions from 18 million to 9 million tonnes since 1995. Meanwhile, the UK’s experimental Emissions Trading Scheme, now in its fourth year, has received an upbeat assessment from the National Audit Office. Globally, the scheme’s voluntary participants have overachieved their annual targets.

Also positive is the example of BP. Spurred by Kyoto, and breaking ranks with the rest of the industry, the oil giant introduced its own trading scheme for group companies in 1998, in effect the world’s first global ETS. In three years it reduced emissions by a fifth, nine years ahead of schedule. It also saved $650m in the process, in return for just $20m in outlay – an effective riposte to the standard industry whinge that tackling car bon will cost jobs and put companies out of business.

In the longer term, for firms to go beyond tactical manoeuvres – such as switching from carbon-intensive coal to carbon-light gas and buying permits – to substantial measures such as investing in energy-saving technology will require some further conditions.

At the moment, cautions Climate Change Capital’s Meeks, the market is simply not liquid or mature enough for lenders or companies to be sure the current market price for carbon is the underlying, long-term one. ‘Governments shouldn’t put too much reliance on current incentives,’ he warns.

That raises another issue. Phase two of the European ETS, guidelines for which will be discussed next year, lasts only until 2012 – far too short a time horizon for billion-dollar investment in power plant and other capital equipment. An A-list group of global businesses (among them Ford, Toyota, BA and BP) urged the G8 last week to put in place a long-term market mechanism similar to the EU scheme that would give them greater certainty about the future, pledging investment in return.

The third consideration is getting the caps right. If polluters are simply given the carbon rights to their existing emissions, to the extent that they can pass price rises on to customers or make easy tactical emissions savings, they are sitting on a potential windfall. In The Guardian recently, George Monbiot complained that in its present form, ‘carbon trading… rewards the polluting companies most responsible for the problem’.

This must not be allowed to happen, agrees FoE’s Worthington: ‘The market needs to be short.’ Many observers believe that because of frantic national lobbying, this time round the allocations have been too loose. As a matter of urgency, FoE wants to see proper regulation and a global ‘carbon inspectorate’, much like the nuclear variety, to ensure the markets are kept honest.

On the other hand, she is clear that bringing CO 2 on to company books is a crucial symbolic and practical advance. For once, companies agree. It turns climate change from an environmental issue to a business one – and, as BP’s Lord Browne remarked of his company’s successful trading experiment, a manageable one at that.

The costs of tackling climate change, he concluded, ‘are clearly lower than many fear’. The market makes it business’s business to prove it.

The Observer, 26 June 2005

BRITAIN, according to Napoleon, is a nation of shopkeepers, but are we falling out of love with our most prominent shops? The supermarket chains have been getting a bad press recently. A report by the New Economics Foundation has accused them (among others) of turning Britain’s high streets into clones. Consumers are starting to notice the lack of local produce and the disappearance of small local shops.

Reflecting more direct customer discontent, some of the chains – in fact all of them apart from Tesco and Waitrose – are in financial trouble for one reason or another (in striking contrast to the banks, for example, which are all raking in record profits). And despite repeated acquittals by the Office of Fair Trading, there are persistent rumblings from suppliers about exploitation and abusive tactics used by the retailers’ purchasing departments.

So far, the groups seem unwilling to see a pattern. Sure, customers punish retailers that run out of blueberries or baked beans. But that hardly dents the dominance over the shopping scene that they have built up over many years, economically, socially and managerially.

Economically, the retail chains are officially deemed to be ‘a good thing’. Their tight control over prices is credited with helping to keep inflation in check, and, despite the mutterings, the verdict of the competition authorities is that although smaller shopkeepers have lost out, competition between the chains is keeping choice wide enough for consumers to benefit overall.

Socially, the supermarkets can justifiably claim to have transformed British consuming habits, driving ever-longer shopping hours, including Sundays, and changing British food shoppers from the most staid to some of the most enthusiastically eclectic in the world.

Managerially, too, the supermarkets have much to boast about. A big supermarket is a marvel of logistics and management discipline – for its supply chain and people management as well as its financial results, Tesco, in particular, is consistently one of the UK’s most admired companies.

So should Tesco be worried by the grumbles? The answer is: yes, it should. And for evidence, it needs to look at one of the few things it doesn’t stock in its stores – aerospace parts.

In a fascinating study of the aerospace industry in the Academy of Management Executive earlier this year, two US professors, Christian Rossetti and Thomas Choi, describe the ‘dark side’ of supplier relationships: just what happens when powerful, well regarded businesses at the top of the food chain (as it were) are so focused on short-term profits that they fail to read the signs of supplier and customer discontent.

Briefly, what happened was this: under pressure from cash-strapped airlines to cut their prices, aerospace manufacturers in the 1990s decided to adopt ‘strategic sourcing’. Copied from the Japanese, strategic sourcing means reducing supplier numbers and concentrating orders on a favoured few close partners, with the dual aim of cutting management costs and achieving economies of scale.

All so progressive – except that the manufacturers only adopted half the prescription. Overlooking the fact that long-term relationships can only work in conditions of honesty and trust, having reduced supplier numbers they proceeded to squeeze the survivors for price and play them just as opportunistically as before.

The result was counter-productive to a degree that no one could have predicted. To survive, the suppliers started bypassing the manufacturers and, first surreptitiously, then openly, selling parts direct to airline customers. The airlines, which had long resented the high prices manufacturers charged for spares, were delighted. The manufacturers, whose profits largely derived from this quarter, had inadvertently created competitors for the most lucrative part of their market.

It got worse. By lowering maintenance costs, suppliers effectively lengthened the economic lifecycle of the aircraft the manufacturers sold, damaging their profitability again. As they grew in confidence, suppliers became potent competitors, beating manufacturers hands down not only on price but also in speed of response and quality.

Rationalisation went so far that some suppliers became monopolies, reversing the previous relationship of power. Where rationalisation was accompanied by outsourcing (which was often), the manufacturer often suffered a debilitating loss of knowledge, again weakening its position often it found that switching suppliers could now cost more in recreating lost knowledge than the saving gained from the move.

Overall, the professors describe the result as a ‘debacle’. By their own behaviour, huge airframe and engine manufacturers allowed suppliers, largely small companies traditionally regarded as being at their mercy, to turn the tables, ‘with widespread and broad implications for the industry’.

Supermarkets aren’t the same as aircraft manufacturers. But the authors note that they believe similar forces are at work. And you can see parallels, in both the tactics used (forced annual price reductions, extended payment terms, forced inventory levels, not to mention listing and promotion fees specific to the retail industry) and the consequences.

The latter are, so far, small in scale. But what are the farmers’ markets and websites which sell everything from herbs to speciality breeds of meat but a kind of disintermediation – an alliance of customers and small suppliers to cut out the bully in the middle? Importantly, this is a trend that the supermarkets should expect to continue. After all, it is they that have helped to create a more discerning customer. They should hardly be surprised if now that we have got over the excitement of quantity – Thai fish sauce, basil and year-round mangoes at every street corner – we now want quality: better meat, more organics, less salt, sugar and fat., and more local supply.

No business model lasts for ever, as food and retail companies illustrate to remarkable effect. McDonald’s, Woolworths, Marks & Spencer, Sainsbury’s and more recently Morrisons and Asda have all run foul of changing customer taste. Could it happen to Tesco? That seems far-fetched. But the lesson of aerospace is that the moment of greatest market power is potentially also the moment of greatest vulnerability.

The Observer, 19 June 2005

THE UK public sector will fork out euros 21 billion (£14bn) on IT this year, according to Kable, which researches government spending on computers. That is almost a quarter of the entire EU spend and some 40 per cent higher than the total for France or Germany, although some smaller countries match the UK in terms of spending per head or as a ratio of GDP.

Is that a matter for rejoicing or disquiet? You would not expect Ian Watmore, the government’s chief information officer and head of e-government, to say the latter before his appointment last September, he was managing director of UK Accenture, which spends its time selling IT services to large organisations, of which the government is just one.

But that’s the point. Relaxed, confident and informal, Watmore, 50, is every inch not the traditional civil servant, and every inch what the government would like the ‘new’ civil servant to be: professional, private-sector trained, able to fuse the discourses of the market and service delivery into the same apparently ideology-free language of efficiency and value for money.

Thus he downplays the differences between working in the public and private sectors. ‘The differences are overhyped,’ he says. ‘In any big organisation there are a few roles that need to operate across boundaries. My job is to try to influence people across the structures of Whitehall to work together in the joint interest.’

Beyond that, it is also to ‘professionalise’ government IT. This is a key point. The government is banking heavily on IT, both to transform public services and to deliver £12.5bn in efficiency gains. And, as the Kable figures show, it is spending far more on external support such as consultancy and outsourcing compar- atively than, say, France and Germany, and far more than it did itself 10 years ago. Predictably, Watmore makes no apologies for the emphasis on outsourcing: ‘I don’t believe, in general, that government should employ people to do work the marketplace does better, and that’s increasingly the case for IT worldwide. You can’t turn the clock back – government IT is in the hands of the market.’

However, he concedes there are implementation issues. There is much evidence that many, perhaps most, outsourcing deals fail to live up fully to expectations or are not flexible enough to adapt to changing circumstances – unless they are very well managed.

‘Where the government has neglected things is that it didn’t think it needed strong IT professionals to handle the implementation side,’ Watmore acknowledges. That capability inside government is very variable, he adds, and not always in the right place.

The agenda, then, ‘is to build up the IT profession in government, so that you have people who can manage change enabled by IT from strategy to implementation. If you do that, you can get the best out of the marketplace. If you don’t, the marketplace will not give you what you want, or costs will go up.’ This is what the second wave of outsourcing, largely driven by the Gershon efficiency agenda, is all about.

To guide it, Watmore has convened a ‘CIO Council’ – a group of 30 government and wider public-sector IT executives charged with drawing up a government-wide strategy for how IT can deli- ver the government’s business requirements. This means ‘identifying customer needs, linking them with the political and social agenda, and joining up behind that’. (Among other items discussed by the council is the setting up of an IT academy to establish common skills standards for the estimated 30,000 IT workers in the public sector.)

Watmore insists that at any one time there are hundreds of service-related IT projects on the go, most of them progressing well?: ‘But impressions are driven by the big-ticket items – the Child Support Agency, the NHS, identity cards and defence infrastructure. What the media and parliament mean when they say government does it badly is that it does big projects badly. Actually, I think it does pretty well, given the size.’

Big projects, he says, really are harder, partly because of sheer size, using databases six to 10 times greater than the largest in the private sector. At the same time, the real prize is not so much in discrete initiatives as in joining them up. That increases the number of dimensions the arguments have to be won on, and also the stakes.

It is also the case, paradoxically, that although the IT may be necessary to capture the benefits of improvement, it is not in itself the important thing. The important thing is to improve the processes in the first place.

This is particularly true of the NHS, where a hugely complicated infrastructure combined with gross underinvestment for decades means that an awful lot of change is going on at once.

At heart, says Watmore, the NHS programme, as in many of the other big projects, is as much about transforming the way it manages itself as about the IT as such – but when things go wrong, it’s the technology which is invariably blamed. Although there was an unwelcome reminder last week of the pitfalls when one of the regional NHS IT consortia sacked a software supplier, Watmore is encouraged by recent signs: ‘We’ve implemented enough real stuff on the ground to sense that it’s doable. Now that the medical and professional community have something to use, they’re beginning to talk positively about it.’

When Watmore’s contract runs out in August 2008, he would like to leave his successor with a situation ‘where IT is seen as a help to government rather than a hindrance, as now’. In other words, where high spending on IT is unequivocally a matter for rejoicing.

We are not there yet and some sceptics would argue that until ministers modify their one-dimensional, specification-driven approach to performance management in the public sector, the necessary prior process improvement will never happen.

Watmore, however, is an optimist. ‘It’s a fantastically interesting time,’ he says. ‘We have new energy and a new parliamentary cycle. The groundwork has been done. And I’m working with some brilliant people: not good – really good. For once, the stars are in alignment.’

The Observer, 12 June 2005