Which is more important to you – the first or last bag?

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It never ceases to amaze me. You’re at an airport, you check-in and then wave goodbye to your luggage. When you arrive at your destination you expect your luggage to arrive on the luggage carousel at the same time you.

I met an old friend last week who was telling me about a situation he faced a few years ago when working on a project at an airport.

The aim of the project was to improve the business process of unloading the bags from the plane and getting them onto the luggage carousel.

This is something we take for granted but the logistics involved are not always that simple and passengers can quickly get frustrated if they don’t get their luggage within a few minutes.

One of the Key Performance Indicators (KPI’s) in place to measure the efficiency of the process was the time it took to get the first piece of luggage from the plane to the luggage carousel.

Now whilst this may sound like a sensible KPI, it was also used to determine the bonus that the luggage handlers would get (the quicker the luggage was delivered the higher the bonus).

Unfortunately for the management of the airport it was also open to abuse.

It may seem obvious now but what was happening was that the baggage handlers were getting the fittest member of their team to literally grab a bag from the hold of the plane and run to the carousel so that the time between landing and the “first luggage on the carousel” was minimal.

Meanwhile, all of the remaining pieces of luggage would be unloaded at a much slower pace.

The end result was happy baggage handlers but unhappy passengers!

Needless to say management soon identified this and the KPI was changed so that it was now the time taken to unload the last bag rather than the first bag that was important.

Would Michael Porter sleep in this bed?

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Michael Porter is arguably the world’s most famous management theorist. His theories such as the 5 forces model and Value Chain Analysis are key parts of the syllabus for several ACCA and CIMA papers.

His generic strategy approach of “differentiation” and “cost leadership” has been around for a number of years and whilst there is a clear argument that a significant proportion of companies are nowadays trying to combine both approaches by aiming to differentiate the product or service whilst at the same time focusing on cost reduction, there is one particular segment of the hotel market that almost certainly has to differentiate to survive.

The boutique hotel segment inherently struggles to compete with the big national and international chains of hotels on the cost leadership approach (these bigger hotel chains will have significant economies of scale for example).

Instead, they will need to be “different” in terms of for example location or “friendliness”.

When it comes to differentiation, the aptly named Jumbo Stay Hotel will be hard to beat for people that are keen on airlines.

Located on a disused runway at Stockholm Arlanda airport, the Hotel is in fact an old Jumbo jet that that has been converted into a luxury hotel. The Jumbo Jet hotel has 27 bedrooms with 76 beds but the best room has to be cockpit which has now been made into a luxury suite with panoramic views of the airport.

The upper deck of the plane which used to house business class passengers is now a cafe serving fresh food and drinks.

We’ve blogged before about Ryan Air’s cost leadership approach to their flights and it’s nice to see a differentiation approach to another part of the airline industry.

Is this the new face of Ernst & Young?

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I guess we’ve all done it at some time or another.

We’ve woken up one morning and due to too much work (or too much drink…) you look in the mirror and think “oh dear” (or some similar but slightly stronger words).

Well step forward Mr Ed Moyse and Mr Ross Harper who when they looked in the mirror recently saw the Ernst & Young logo staring back at them.

Now this wasn’t a drunken night out at an EY party that went wrong. No, it was a deliberate move.

The two entrepreneurial university students were thinking of ways to reduce the student debt that they had built up when they came up with the idea of using their faces as mobile advertising screens.

They set up their website – buymyface.com – and are selling their “advertising board” faces for one year.

One of their first clients was EY who paid them to display the EY logo on their faces during a skiing trip to the Alps so that EY could advertise to potential new recruits.

The idea seems to have caught on and according to their website as of today they have raised £34,000 from selling their unusual advertising boards.

Their going rate for a day’s advertising on their faces has also increased since they started their business.  They are now charging £600 for a day’s advertising.

EY seem to be so impressed with them that they have now become the main sponsor of the website.

Does this mean that at some stage in the future your accountants “uniform” of dark suit and white shirt will be accompanied by the corporate logo painted on your face?

Not the best way to start a presentation…

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The IT guys I’ve met in my career have all been very nice people. Admittedly they all seem to be slightly mad and do tend to talk in a strange language with lots of mentions of “coding this and coding that”.

To be fair though they all probably think I’m slightly mad when I talk to fellow finance people in my strange language about “SOCI this and SOFP that”.

If you talk to your IT colleagues though one thing that they tend to take very seriously is the level of security.

Now whilst there are lots of higher level security precautions present such as firewalls and anti-virus programmes there are also some more simple precautions that you should take.

Memory sticks (or USB or flash drives as they are sometime known) can all contain confidential documents and most memory sticks are not password protected.

It pays to double check what’s on the memory stick you’re carrying around with you in case it contains confidential documents and you lose it.

In a similar vein it’s always worth checking what other files are on your flash drive if you’re about to make a presentation.

Unfortunately for Father Martin McVeigh, a Catholic priest in Northern Ireland, he didn’t check what other files were on the flash drive he was going to use when he recently did a presentation to some parents of children at a local primary school.

According to media reports, whilst loading up his presentation for the parents, Father McVeigh inadvertently showed a slideshow of indecent pornographic images onto a screen.

The x-rated slideshow was on the memory stick that Father McVeigh had put into the computer to load up his intended presentation.

Father McVeigh was understandably a bit shocked at seeing the naked pictures on the screen (although to be fair probably not as shocked as the parents in the audience were) and according to the BBC website he was “visibly shaken” and “bolted out of the room”.

He later stated that he didn’t know how the images got onto the memory stick.

And the morale of the story?

Well, I guess that IT security is not just the higher level technical areas but also the more simple areas such as making sure you know what else is on your memory stick…

Everyone’s present but the class is empty…

KPIs (Key Performance Indicators) are ways of measuring Critical Success Factors in a business (Critical Success Factors are in effect items which an organisation has to get right in order to survive).

Could a t-shirt be part of a KPI though?

It’s not just commercial companies that need to focus on KPIs. Not for profit organisations should also be using them.

Schools are good examples of where KPIs should be used. Measures such as classroom utilisation and exam success should be monitored.

There’s also the subject of looking at the percentage of students that decide to take unauthorised absence from school (or to use a quant old English term, they decide to “bunk off school” and miss lessons).

A city in Brazil has just identified a novel approach to let parents know if their children are missing classes.

Approximately 20,000 students in the Brazilian city of Vitoria de Conquista have just started wearing T-shirts with a built in chip. This chip links with a receiver in class and if the student isn’t where he or she should be a message is sent to the parents to let them know the student isn’t in class.

This sounds very much like a high tech version of “clocking on and clocking off” which can be found at certain workplaces around the world where workers have to record their arrival and departure times.

Only time will tell if the chip enabled t-shirts will be a success and the relevant KPIs for the schools will improve.

Personally I somehow think that some entrepreneurial school-kid may start charging a fee for looking after t-shirts in class. He may well be found sitting in the classroom with a big pile of t-shirts next to him but no classmates…

How much paid holiday should you get?
Here’s an interesting question – if you were asked whether you wanted more paid holiday or not, what would you say?
The standard amount of paid holiday in most European countries is 4 weeks.
Over in Switzerland though there was a national referendum recently which amongst other things asked people to vote on increasing the minimum amount of paid holidays from 4 weeks to 6 weeks a year.
Now, let’s just pause there and think about this.
Be honest. If somebody said to you “Do you want 6 weeks paid holiday instead of 4?” what would you say?
My feeling is that there may be a fair few of you out there who would vote for the 6 weeks holiday.
Now holidays are important and are needed to enable people to “wind down” and “recharge their batteries” after working hard but businesses in Switzerland warned against increasing the holiday entitlement.
They mentioned that having more weeks of paid vacation would in effect increase the labour costs for businesses (they would be paying the same amount as before but for lower productivity).
This increased labour cost could put the economy at risk. Putting it another way, an increase to 6 weeks paid holiday could result in people losing their jobs and having in effect a 52 week “unpaid holiday”.
The votes were counted and two-thirds of the voters rejected the proposal to increase the amount of holiday and the minimum stays at 4 weeks.
Now go and grab two colleagues and ask them if they would want an extra 2 weeks holiday.
If you’re in Switzerland then only one of the three of you will be saying yes.

How much paid holiday should you get?

Here’s an interesting question – if you were asked whether you wanted more paid holiday or not, what would you say?

The standard amount of paid holiday in most European countries is 4 weeks.

Over in Switzerland though there was a national referendum recently which amongst other things asked people to vote on increasing the minimum amount of paid holidays from 4 weeks to 6 weeks a year.

Now, let’s just pause there and think about this.

Be honest. If somebody said to you “Do you want 6 weeks paid holiday instead of 4?” what would you say?

My feeling is that there may be a fair few of you out there who would vote for the 6 weeks holiday.

Now holidays are important and are needed to enable people to “wind down” and “recharge their batteries” after working hard but businesses in Switzerland warned against increasing the holiday entitlement.

They mentioned that having more weeks of paid vacation would in effect increase the labour costs for businesses (they would be paying the same amount as before but for lower productivity).

This increased labour cost could put the economy at risk. Putting it another way, an increase to 6 weeks paid holiday could result in people losing their jobs and having in effect a 52 week “unpaid holiday”.

The votes were counted and two-thirds of the voters rejected the proposal to increase the amount of holiday and the minimum stays at 4 weeks.

Now go and grab two colleagues and ask them if they would want an extra 2 weeks holiday.

If you’re in Switzerland then only one of the three of you will be saying yes.

How would you start the biggest advertising agency in the world?

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What have the Olympics, The European Football Championships and the American presidential elections got in common?

Well, if you’re WPP, the world’s largest advertising and marketing group then they are all hopefully going to make it a bumper year for profits.

The WPP Group make a fascinating case study.

On Thursday they released their results for 2011 and they were pretty spectacular.

Pre tax profits in 2011 were 18% higher than the previous year and broke the £1 billion mark for the first time. Revenue also increased by a healthy 5% to exceed the £10 billion level.

2012 is also expected to be a good year for them as “high spending advertising events” such as the Olympics and the US presidential race are all taking place this year. 2013 could be more of a challenge for the company though as there aren’t any of these big spend events on the horizon.

So, WPP are the largest advertising group in the world in terms of revenue and they’ve got an interesting history.

The name WPP originates from “Wire and Plastic Products” which was a UK manufacturer of wire baskets and was nothing to do with advertising.

Back in the 1980s a gentleman by the name of Martin Sorrel (now Sir Martin Sorrel,) who was previously the Finance Director of advertising agency Saatchi & Saatchi, was looking for a listed company to use as a vehicle through which to build a worldwide marketing services company.

He invested in the “Wire and Plastics Products” company but had no intention of owning a wire basket manufacturing company.

No, instead he used it as a vehicle to buy up companies in the advertising field to create a global powerhouse in terms of advertising groups

As the picture above shows, there are numerous brands within the current WPP group and these include some of the world’s largest firms in the areas of advertising such as JWT, Ogilvy Group and Young & Rubicam.

So, there you go. Buy a company that makes wire baskets and you could end up running the largest advertising agency group in the world.

Liverpool win after an own goal by Adidas.

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Forget about the rivalry on the pitch between Manchester United and Liverpool. Forget about Luis Suarez refusing to shake hands with Patrice Evra at the game on Saturday.

No, the key question is who has got the biggest kit sponsorship deal in the world.

Manchester United’s kit is sponsored by Nike and until recently it was the largest kit sponsorship deal in the world. Liverpool however has just announced a new kit sponsorship deal which exceeds the Nike deal and makes it the biggest football shirt sponsorship deal in the world.

Liverpool’s kit used to be sponsored by Adidas but Adidas lost out in the new bid for sponsorship to American Sports Group Warrior Sports (who own the New Balance sports brand).

Adidas felt that Liverpool’s form over the last few years in the English Premier League hadn’t been that good and as a result didn’t bid as much for the sponsorship deal.

Warrior Sports though seem to have taken the view that Liverpool is a global brand as opposed to merely an English football club.

Liverpool FC has immense brand power overseas. Especially in Asia and the sales of their replica shirts are estimated to be nearly 900,000 a year.

There’s also an interesting observation in that their main sponsor of the shirt (as opposed to the kit supplier) is Standard Chartered.

The Standard Chartered bank isn’t present in the UK and therefore the bank’s sponsorship of the Liverpool shirt clearly isn’t aimed at the UK market but rather at the Asian, African and Middle Eastern markets where Liverpool have a strong following and Standard Chartered have a strong presence.

So, well done Warrior Sports for seeing the global appeal of the Liverpool brand.

As for Adidas, have they just kicked the ball into their own net?

Is the internet more important to you than being with your partner?

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With the start of a new year it’s often a time when people start thinking about new beginnings and even changing their job.

So what would you look for in a new job and what things are important for you?

An interesting study by Cisco shows that it’s not just salary that is important and for the younger generation that have been brought up with tech gadgets like Smartphones and social media sites such as Facebook there are certain things that are more important than extra cash in your pay packet.

Cisco’s Connected World Technology Report surveyed nearly 3,000 young professionals and college students aged from 18 to 30 in 14 countries and there were some interesting findings for any companies that are looking at the remuneration package that they should be offering new recruits.

The study identified that 33% of “college students and young employees under the age of 30 said that they would prioritize social media freedom, device flexibility, and work mobility over salary in accepting a job offer, indicating that the expectations and priorities of the next generation of the world’s workforce are not solely tied to money”.

So money isn’t everything in a remuneration package and in fact 45% of young employees said “they would accept a lower-paying job that had more flexibility with regard to device choice, social media access, and mobility than a higher-paying job with less flexibility”.

Whilst the report identified changes which could impact on staff recruitment there were also some more “personal findings”.

It found for example that 33% believed the “Internet is a fundamental resource for the human race – as important as air, water, food and shelter”.

Now, call me old fashioned but whilst the internet certainly is important, I personally feel the long term impact is slightly different when comparing your internet going down for two hours with for example your air supply being turned off for 2 hours.

In terms of the future of the human race there was also a slightly concerning finding where it was identified that “40% of college students aged 18 to 23 thought the internet was more important to them than dating or going out with friends”.

KPMG are into underwear and Deloitte are into shoes…

It’s a sign of the times but two of the UK’s highest profile high street shopping chains are in financial trouble.

La Senza, the luxury women’s underwear shop, has reportedly called in KPMG to help restructure the business.

Whilst some of the less professional male readers amongst you may well suggest that the first thing they should do is to undertake a reasonableness review of the lingerie brochures, the chances are that KPMG’s consulting work with La Senza will involve a lot more.

It’s possible that the retail chain will either get additional investment or perhaps more likely close a number of shops or even put the company into administration (this is where a company is controlled by an administrator who is independent from the directors and in effect decides for example whether the company can become a going concern again or whether it should be broken up or even liquidated)

Is it really a surprise though that the bottom has fallen out of the luxury underwear market?

With the onset of the recession many people are buying less luxurious underwear or simply making do with what they’ve got.

With the emergence of internet shopping there’s also the fact that the cost structure of these “bricks and mortar businesses” is significantly higher than retailers selling over the internet.

In simple terms, revenue is down but costs are still high. The end result is that a formerly profitable company has turned into a loss making business and La Senza is at risk of going bust.

Deloitte meanwhile have been appointed as Administrators of the shoe shop chain Barratts.

Barratts has nearly 200 shops in the UK and according to press reports Deloitte are said to be “working closely with suppliers to ensure the business has the best possible platform to secure a sale, preserve jobs and generate as much value as possible for all creditors.”

Whilst it’s not good news for the employees of La Senza and Barrats, I’ve got a feeling that unfortunately there will probably be more retail companies facing trouble on the high street in the near future.