Posts

So, how would you feel? Re-assured or spied upon? It’s a good ethical question.

, , , , ,

We mentioned in a previous blog about Nike publicising their CSR (Corporate Social Responsibility) policies on their website.

Asda, Britain’s second biggest supermarket chain has gone one step further in being transparent with regard to their CSR policies.

In the past they have been criticized by some campaigners for the low wages and poor conditions that were present at some of their clothes manufacturing locations in Bangladesh. Their company website states that as part of their efforts to increase transparency it has now put in webcams at two if its clothing factories in Bangladesh.

This should help reassure customers that they are treating their suppliers ethically and are not employing them under “sweatshop conditions”. The webcam shows clothes being made and you can clearly see the conditions that are present.

The supermarket chain has said that it has also installed webcams at its head office and at an automated cow milking machine at one of their suppliers.

Press reports however have indicated that not everyone is happy with the webcams with some people arguing that it is a case of spying on the workers as opposed to proving how ethical and transparent the company is. Either way, it’s certainly a novel way to utilise technology.

I guess the question we should be asking ourselves though is how would we feel if we had a webcam looking at us at our workplace – would we feel reassured or spied upon?

There’s trouble brewing with PESTEL

, , ,

Last week the UK chancellor unveiled his budget. The general consensus seems to be that it wasn’t a particularly exciting budget with the chancellor playing safe on most things.

What has caught the public eye though is the announcement that duty on cider (an apple based alcoholic drink) would increase by 10% above inflation. This would add approximately 5p to a litre bottle of cider. This has upset the cider drinkers and thousands have joined facebook groups hoping to get the decision reversed.

We mentioned the C&C group in a previous blog about spreadsheets. The C&C group own the Magners cider brand which is one of the best known cider brands in the UK.

The change in duty imposed by the chancellor is a classic case of how the “P” (Political) in PESTEL can impact on a company. Magners has reacted quickly to this though by launching  a press campaign saying that they will cover the increase in duty and will not increase their prices.

The C&C group may meet the “P” again soon though as there is discussion about the Scottish government introducing minimum unit pricing for alcohol in order to try to curb the health problems involving alcohol that are present in Scotland. The C&C group dominates the Scottish lager market with the brand Tennents.

So, if somebody asks you what is the link between cider, lager and PESTEL you now know the answer.

CIMA results and performance with a smile…

First of all congratulations to all CIMA students that received their exam results yesterday and were successful. Your hard work paid off so very well done! We’ve heard from a number of you that were successful and those are always the best type of emails to receive from students!

If your results weren’t as expected though and you didn’t pass then better luck next time.

Various papers have performance management within the syllabus. A rather unusual method of managing performance was recently reported by the press.

Japan’s Keihin Express Railway Co., in an effort to promote a friendlier customer service, has implemented something called “smile scanners” at its stations to assess the smiles of their employees!

Employees have to look into a camera every day and have their smiles scored by a computer that analyses their facial features and gives feedback. The quality of the smile is reportedly rated on a scale ranging from 100 to zero.

Is it effective? Can the scanner distinguish between an artificial and a genuine smile? The jury is still out.

While we at ExP love technology, we’re not sure we would submit to such assessment, at least not before our morning coffee!

Remember the short term and long term

,

One item that people should be aware of is that management accounting and financial management are similar to the extent that they are both concerned with resource usage. But there are differences.

I was lucky enough to have recently flown on the new Airbus A380 super jumbo and that got me thinking about some of the financial management issues that Airbus face. Designing and producing the A380 must have been a phenomenal exercise and a real testament to man’s engineering skills. It’s capable of carrying over 800 passengers and has a range of nearly 15,000 km. It’s a fantastic machine.

But what has this all got to do with the difference between management accounting and financial management? One difference is that management accounting tends to deal in short-term timescales whereas financial management is generally more concerned with the longer term. Whilst the longer term is generally considered to be more than one year be aware that certain industries and companies have a distinctly longer “long-term”.

From inception to delivery the A380 took nearly 10 years and the long term view taken by Airbus is certainly longer than some businesses in for example the IT or fashion industries. Some of the businesses in these industries have distinctly shorter “long-terms”.

Anyway, despite the millions spent on design and development of the A380 there was one disappointing thing about my flight and that was I fell asleep during the film and missed the ending…

RBS directors threaten to resign

, ,

In terms of examples of risk management and corporate governance, UK based banking group Royal Bank of Scotland (RBS) just gives and gives.  It’s an unfolding story that continues to grow.

RBS was a big success story in the last decade, showing very fast growth and taking over bigger banks such as Nat West.  Its considerable returns appear to have been won, rather predictably, by taking a high level of risk.  Previous blog entries have mused on the wisdom of having fired their risk manager.

The banking group was saved from collapse by receiving vast emergency support from the UK government.  This was controversial but almost everybody agrees that it was necessary in order to avoid a collapse of the entire banking system.  Such a collapse would certainly have made the recession very much worse.

The British public thus became an involuntary shareholder in RBS.  Indeed, the UK government now holds a controlling interest in RBS, though it’s been keen to avoid interfering much in the management of the bank.

The image of bankers in the UK at the moment is very tarnished. Most people who have an opinion on senior bank staff have an unfavourable opinion; often seeing them as people who were over-rewarded for taking excessive risks.  Many resent having to bail out a bank ruined by unwise risk management.

So it came as a surprise to many when the directors of RBS said that they intended giving bonuses and pay increases to many staff last week.  This provoked anger from the government and outrage from the public. The RBS board stated that they would resign if they weren’t allowed to pay the bonuses, as failing to pay people well would result in loss of talented staff.

It has to be questioned whether the board have ever studied stakeholder management and the Mendelow matrix. With 70% of the ordinary shares, the government is a key player; the views of the public must be respected.  If that means the synchronised departure of the board of RBS, so be it.  Bankers’ salaries and bonuses have been in an inflationary spiral in recent years and some bank must be the first to bring their salaries into the realm of sustainable expenses.

It will be interesting to see if the directors follow through on their threat, back down or are even removed from office by the shareholders (ie the government).  Whatever the outcome, their credibility is arguably much tarnished.

When is a non-executive not a non-executive? Ask Stelios!

You may have heard of easyJet. You may have flown with easyJet. You may be Stelios, in which case the public thinks that you own easyJet, but you actually only own a minority interest. The public also thinks that you’re the CEO, but actually you’re not even an executive director.

What you do own, if you happen to be Sir Stelios Haji-Ioannou is approximately 66 million easyJet shares and the easyJet brand, which you licence to easyJet.

Sir Stelios is the public face of a company that he founded and grew to a state of financial health where it could buy its most bitter rival, list on the London Stock Exchange and generally grow up rather quickly.  He resigned as an executive director in 2003, becoming a non-executive.

In 2008/09, he had a major difference of opinion with the executive directors over the strategy of the company.  Having been outvoted, Sir Stelios (a non-executive director, remember) sought to increase his equity ownership of the company again to a level where he could appoint some favoured nominees of his own as executive directors; thus giving him (a non-executive director) effective control once again.

Sir Stelios was naturally acting in the best interests of the company as he saw them. The Tyson report lists four duties of a non-executive director (see our ExPress notes if these don’t trip off your tongue! /expand/14-p1_professional_accountant.html) These include scrutinising executives, but not sacking them if they disagree.

It all makes it easier to see why the UK Combined Code requires that non-executives should be paid a basic salary only and have no shares or share options in the company, as well as requiring you to wait at least five years outside the company if you’d previously been a senior executive there!

Iceland, Computers and PESTEL Analysis

, ,

One of my best ever trips was when I visited Iceland. It is a fantastic country with some great people and some truly dramatic scenery. There are also some very large whales and some very cute puffins!

Their financial crisis has been in the headlines over the last year or so but there was an interesting piece of news that was recently reported. Iceland has a year round cool climate and chilled fresh water. At the same time the number of computer servers that are needed around the world to store the ever increasing amount of data that the world is generating is growing rapidly.

A key component of data storage is to keep the servers cool. With Iceland’s below average temperatures it means that the cost of cooling servers is significantly less than in other countries with average or above average temperatures. Some businesses are now putting the cool Icelandic climate and the increasing server storage demands together and data parks are being designed and built in Iceland.

The cool temperatures and developed business environment in Iceland make it an ideal place for such a scheme to work.

Now, back to the exams. What exactly does this news have to do with exam? Given the exam is just around the corner I’m hopeful that I don’t need to explain what PESTEL analysis is and I’ll leave it up to you to decide which out of P, E, S, T, E and L the cool climate of Iceland relates to!

Not-for-profit organisations face several challenges.

,

I had to recently go into hospital for a minor operation on my knee. The nurses and doctors were fantastic there and thankfully everything is now fine with my knee.

The hospital I was in was a classic not-for-profit (NFP) organization and during my time there it really made me appreciate the challenges that NFPs face when setting objectives.

Hospitals have a significant number of stakeholders with a high level of interest. Patients like me are stakeholders with an obvious high level of interest in matters. Other local individuals who are not patients are also interested in case at some stage they need to use the hospital. The doctors, nurses and admin staff are also stakeholders with a keen interest in the activities and the government is another stakeholder interested in the hospital.

In summary, NFPs are different from most other organizations when it comes to stakeholders in that there tends to be a wider range of stakeholders with a high interest in a NFP organization than compared with other organizations.

Another issue that occurred to me during my stay was that there are a number of objectives that the hospital needs to balance. Two obvious ones are the quality of care given to a patient when he’s in the hospital versus treating more patients.

A final area I thought about was the classic finance term of Cost Benefit Analysis. Costs within hospitals are easy to measure but the benefits can be inherently difficult to measure. For example, how would they measure the benefit of reducing the waiting time for a knee operation by one month or 6 months?

You are not necessarily expected to be able to provide all the answers to the challenges of running a hospital in the exam but it is important to have an understanding of the challenges that a NFP organization faces when running its business.