Corporate governance

Nicely said Mr Musk

Published on: 17 Apr 2018

We’ve all been there haven’t we? Long boring meetings that don’t seem to be going anywhere.

Maybe you’ve tried to give the impression of being interested in what was being said but in reality the meeting wasn’t relevant for you and your mind was wandering to other more interesting things.

Well, if you’re not a great lover of excessive meetings then you are not alone. In fact, you share the thoughts of an incredibly successful and admired business person. Namely, Elon Musk.

Mr Musk’s current business interests include Tesla and SpaceX.

In the past he founded x.com which later became PayPal. Paypal was subsequently bought by eBay for $1.5 billion.

He currently has a net worth in excess of $20 billion.

But what does he think about meetings?

In an email to his staff that was leaked to the electrek website there were a few productivity recommendations:

In the words of Mr Musk, these include:

– Excessive meetings are the blight of big companies and almost always get worse over time. Please get of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.

– Also get rid of frequent meetings, unless you are dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved.

– Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value. It is not rude to leave, it is rude to make someone stay and waste their time.

– Don’t use acronyms or nonsense words for objects, software or processes at Tesla. In general, anything that requires an explanation inhibits communication. We don’t want people to have to memorize a glossary just to function at Tesla.

– Communication should travel via the shortest path necessary to get the job done, not through the “chain of command”. Any manager who attempts to enforce chain of command communication will soon find themselves working elsewhere.

– A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels. If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen. It must be ok for people to talk directly and just make the right thing happen.

– In general, always pick common sense as your guide. If following a “company rule” is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.

Nicely said Mr Musk.

More Change Please

Published on: 16 Mar 2018

Homelessness is a growing problem in a lot of countries but coffee company “Change Please” has come up with a brilliant business model that could help.

They’ve brought together the problem of homelessness with people’s love of coffee and have created a radically different coffee company that is now looking to expand around the globe.

Their whole focus is on helping people whilst at the same time providing an excellent cup of coffee to the end customer at a fair market price.

When it comes to suppliers, the coffee beans they use are from farms that support local communities. For example, one of their suppliers from Peru helps victims of domestic abuse and a supplier from Tanzania helps people injured by landmines.

Once the coffee beans arrive in the UK, the people who roast them and serve them are people who have been homeless and sleeping on the streets. They are trained as baristas and work at one of the company’s locations. They are paid the Living Wage of £10.20 per hour and are given help in terms of opening bank accounts and finding housing.

Whilst the big coffee chains such as Starbucks and Costa Coffee are discussing introducing recyclable cups, Change Please has beaten them to it as all of their cups are 100% recyclable.

All profits are being invested in helping reduce the level of homelessness.

Things are going well for the organisation and they are planning on expanding the number of locations they operate from in the UK. They are also in talks to open in Australia and America with the same ethos of helping homeless people get back on their feet via a well and truly ethical cup of coffee.

They have also signed agreements with 2 big supermarkets, Sainsburys and Ocado, to stock packets of Change Please coffee beans.

It’s a common sound on the streets of cities in the UK to hear people asking if you have any “Change please”. With this fantastic business model for a coffee company, hopefully it will soon be a common sight to see the request for “Change please” replaced by coffee outlets called “Change Please”.

How much do Big 4 partners get paid?

Published on: 28 Jan 2018

KPMG UK released their results last month for their most recent accounting period and they showed a fall of 10% in pay for the KPMG partners when compared to the previous year.

Although the firm’s revenue rose by 5% to £2.2 billion, it’s profit fell to £301 million.

The firm wrote off a number of technology investments.

KPMG, like the rest of the Big 4, have invested heavily in technology companies in an attempt to stay at the forefront of technology.

Unfortunately for KPMG, not all of their investments were successful. Bill Michael, the Chairman of KPMG, highlighted one investment that hadn’t done so well – KPMG had committed £3 million to Flexeye, a tech company that analyses large amounts of data and it hadn’t proved to be the wisest investment.

Whilst profits fell, it hasn’t all been bad news for KPMG as their audit practice grew by 10%.

Back to the average pay of the KPMG partners though and although their average pay fell by 10% I’m sure that the partners will still be able to afford to buy a sandwich for lunch.

The average pay for the KPMG partners was £519,000 each.

That’s not too bad is it?

But how does it compare with the average pay from the partners of the remaining Big 4.

The most recent reported results show the following average pay per partner:

Deloitte – £865,000

EY – £677,000

pwc – £652,000

It looks like Deloitte partners will be having the more expensive sandwiches for lunch.

How do you feel?

Published on: 04 Mar 2017

It’s an unfortunate fact of life that people get sick. In the winter months especially, there can be a lot of cold and flu bugs going around.

But what percentage of working hours do you think are lost to sickness?

The ONS (Office of National statistics) in the UK has just released details of the number of sick days in 2016. The number of hours lost to sickness as a percentage of working hours was 1.9% or to put it another way, about 137 million working days were lost due to illness in the UK last year.

This may sound a lot but of the number of sick days taken has fallen over the last few years. Last year the average number of sick days per worker was 4.3 whereas when records began in 1993 it was 7.2 days per worker.

It looks like the fall in sick days could be down to a number of factors.

The economic downturn in the late 2000’s arguably caused people to “struggle on” through an illness rather than risk losing their job. Companies are also more flexible nowadays when it comes to letting people work from home. If someone isn’t feeling 100%, a lot of employers will let them work from home and even if they are not up to full speed at least they will be doing some work.

The details also show that there’s a difference between the public sector and the private sector. The percentage absenteeism in the public sector is 2.9% compared to 1.7% in the private sector.

The most common reasons for missing work last year included minor illnesses such as colds (25%), musculoskeletal problems such as back ache (22%), mental health problems including stress and depression (11.5%), stomach upsets (6.6%) and headaches and migraines (3.4%).

Sam Allardyce and José Mourinho

Published on: 29 Sep 2016

As England’s football manager there are certain things that you should do and certain things that you shouldn’t do.

Winning a major tournament is a thing that you should do for example whilst looking to receive large amounts of money to advise people how to get around football transfer rules is something you shouldn’t do.

Alas for Sam Allardyce he did the latter and not the former and is now no longer the England football manager.

There are plenty of ways that football managers can make money in a legitimate and ethical way and maybe Mr Allardyce should have followed the example of the current Manchester United boss Jose Mourinho.

In addition to the £12 million wages Mr Mourinho receives from Manchester United he also does pretty well from various other activities.

Hublot watches, Adidas, Jaguar, BT Sport, Lipton Tea and EA Sports all pay a significant amount of money to Mr Mourinho to endorse their products. They see him as an internationally recognised figure with global appeal.

The latest big name to sign him up is Heineken. They reportedly will pay him £4 million for a 2-year deal to be Heineken’s global football ambassador.

That’s a pretty nice sum of money to receive and it got the accountant in me thinking about the financials from Heineken’s point of view. How many additional litres of beer would Heineken need to sell to cover the cost of appointing José Mourinho?

Heineken’s latest set of published accounts show revenue of €20.5 billion with an operating profit of €3.4 billion. In 2015 they sold 18.8 billion litres of beer. Ignoring various accounting items such as contribution and fixed costs it follows that each litre of beer generates approximately €1.09 of revenue and €0.18 of operating profit.

To cover the £4 million (approximately €4.6 million) cost of José the company would need to sell an additional 26 million litres of Heineken!

This clearly shows the challenges involved when an organisation is deciding whether or not to undertake any form of sponsorship or increasing brand awareness as it is virtually impossible to accurately place a financial value to the benefits achieved. The marketing guys would argue that the value is more than purely an increase in immediate sales revenue.

The fact is that it is extremely difficult to directly link an appointment of a brand ambassador to an increase in sales. There are numerous other items which can impact on the sales of a product. For example, a sudden heatwave would increase the amount of cold beer that is drunk and not even Jose Mourinho could claim to be able to impact the weather.

Back to Mr Allardyce though and whilst I doubt that many companies will be approaching him to sign him up as a brand ambassador, at least he can claim to be the only England manager who won all of the games where he was in charge (even if it was only for one game…)

What’s in a name?

Published on: 10 Mar 2016

The Indian car manufacturer Tata Motors, part of the Tata Group, one of India’s largest conglomerates recently skilfully averted what could have been a major international marketing mistake.

Tata motors, who also own the Land Rover and Jaguar brands, are about to launch a new small hatchback car. They debuted it at the recent 2016 Auto Expo as the Zica (short for Zippy Car) but following the rapidly spreading Zika virus which has infected over a million people in Latin America and which was declared an international health emergency, they decided to change the name to avoid any unwanted links between the two names.

The car will now be launched as the Tiago and the change was impressively dealt with by the company. They reacted quickly to the similarity and ran a competition via social media for the public to choose the new name. Over 30,000 names were put forward in the competition but Tiago was selected by the public as the winner.

However, if you look up the definition of Tiago in the Urban Dictionary the top two definitions are firstly, “Tiago is a great Portuguese king” and secondly “Tiago is a sex God who is…”.

I’m not sure the Tata marketing guys looked at the Urban Dictionary before agreeing to Tiago but in any case, if you see a man driving a Tiago then surely he’s either the Portuguese king or a sex God…

Would a good liar make a good accountant?

Published on: 21 Jan 2016

Do you have children? Have they ever told you a lie? Even a small teeny weeny lie?

Well, if they have then although you may not be particularly pleased with them, it may actually mean that they have good memories and excellent thinking skills.

Psychologists at the University of Sheffield tested 135 children and found that those children that lied performed much better than the honest children in the group.

The children in the study were aged between 6 and 7 years old and during the study they were given a trivia game. The answers to the trivia game were on the back of the card which they had been given. Initially, each child was in a room accompanied by one of the researchers but the researcher then left the child alone with the card with the answer on the back.

Before leaving the room the researcher told the children not to look at the answer but what the children didn’t know was that when they were alone in the room there were hidden cameras which were monitoring whether they would look at the answers on the back.

25% of the group subsequently cheated and looked at the answers on the back of their cards but claimed that they hadn’t cheated when the researcher returned to the room.

At a later stage, all of the children had to perform a separate memory test and the research found that the children who had lied performed significantly better than those children who didn’t lie.

Dr Tracy Alloway, project lead from the University of North Florida was also involved in the research and said that “this research shows that thought processes, specifically verbal working memory, are important to complex social interactions like lying because the children needed to juggle multiple pieces of information while keeping the researcher’s perspective in mind”.

This has got me thinking as a lot of the readers of this blog are accountants or studying to be accountants.

“Thought processes”, “verbal working memory”, “juggling multiple pieces of information” and “keeping other people’s perspective in mind” are all skills which many accountants need.

Does this mean that you would make a good accountant if you were a good liar when you were a child?

Whatever your answer is, I’m not sure I would believe you…

Let’s not run this up the flag pole…

Published on: 12 Jan 2016

Most of us have been there. Sat in a meeting when somebody decides to use “management speak” or “corporate jargon” to make something sound more impressive than it is.

You’ve probably heard of the phrase “think outside the box” but what about “let’s not boil the ocean”?

Michael Sugden, chief executive of the advertising agency VCCP, recently put together a list of the most irritating metaphors used in the corporate world.

He wrote in Marketing Magazine that the increased use of corporate jargon in recent years has resulted in meetings degenerating “into a quagmire of nonsensical verbal piffle”.

He put together his top 10 of the most annoying phrases and in reverse order the results are shown below.

Oh and in case you’re “not singing off the same hymn sheet” I’ve translated the “management speak” into English in the italics below the phrase.

10. Think outside the box
– come up with new ideas…

9. I may have a window for you
– I can see you on…

8. Content is king
–  first used by Bill Gates in 1996 to indicate that content would drive the success of the internet. It now appears to be used for random purposes in meetings…

7. Let’s not boil the ocean
– let’s not make this too complicated…

6. Level playing field
– keep things equal…

5. Let’s workshop this
– let’s spend far too long talking about this in a meeting…

4. Shift the dial
– to be honest I’m not 100% sure but possibly means talk about something else. Either way it sounds very dramatic in a meeting…

3. Let’s socialise this
– let’s talk about this…

2. Fail forward
– when something doesn’t work but we try to learn from it (if we still have a job after the error of course…)

1. Growth hacking
– again, I don’t think anyone is 100% sure what it means but it does sound very impressive…

So, there you go. A list of 10 phrases to [impress / annoy – delete according to how you feel about the phrases] your colleagues at meetings.

Don’t upset your web developer.

Published on: 03 Dec 2015

Cash flow can be a real challenge for businesses. Smaller ones especially can find it very tough to get paid on time and bigger organisations can sometimes dominate the relationship.

After all, if for example you’re an individual freelancer and are negotiating with a large company for work you will find it tough to get short settlement terms. Also, if the big company is late in paying it’s very difficult for the smaller party to “force payment”. Going to court for payment of a relatively small amount of money isn’t cost effective as the legal fees would far outweigh the money owed.

Reddit user absando is a freelance web designer and recently posted a great illustration of how he dealt with things when a big company “forgot” to pay him.

He posted that ‘I used to do freelance translating work a few years ago and I finished a 1,200 word technical manual for an Indian client that had good reviews on their industry profile. Normally payment for freelance transitions can range between 30 to 60 days, and under my contract they had 60 days to pay the amount.’

Straight away we can see that absando has a tough time as 60 days isn’t a particularly short payment term.

Things got worse for him though.

He continued explaining ‘Fast forward to the 65th day since I delivered the project and I didn’t hear anything from them. After multiple phone calls, e-mails and Skype messages, I received no word from the client so I decided to give up, write a negative review and move on.’

Whilst a lot of people in that situation would have had to write off the debt, absando was lucky.

Six months later the same company got in touch with him and obviously forgot that they hadn’t paid him last time. This time the project was for some web design work and he played it really well as rather than ask for the money he was owed, he kept quiet about it and got on with the project.

In a stroke of genius though he completed the project on time but didn’t send it all in. Instead, he changed the lock screen to the fine piece of artwork shown above.

He continued: “Surely enough a couple of hours from the deadline the translation company was frantically trying to reach me, sending emails and even trying to call my American number. They were freaking out because the project was due for their client on the very same day, and if they didn’t get it they’d lose their business with them.

I gladly responded, saying: ‘Hey remember that freelancer you stood up 6 months ago, yeah that’s me. I have your project ready to go, but you need to pay me for my previous work PLUS interest.”

Needless to say the cash was deposited into his account within 30 minutes.

Nice work!

Would you do this with your job?

Published on: 06 Nov 2015

If a company outsources jobs, in some situations it can be seen as good business practice but if an individual outsources his own job then what is that seen as?

Outsourcing is where a company gets another organisation to undertake a job or business function that would have previously been completed in-house. This is often done for cost saving reasons and an illustration of outsourcing would for example be getting another organisation to maintain your payroll.

I’ve never heard of an individual outsourcing his own job though but that has just changed.

Verison is one of the leading telecoms companies in the US and their security team provided details of a case study where an employee by the name of “Bob” who was a top developer had actually outsourced his own job to China without his employers knowing about it.

In other words, he had received his salary from his employers but had personally paid for somebody else to do his job at a cheaper rate without his employer knowing about it!

He was paid in excess of USD 100,000 for his job and yet he was paying a Chinese consulting firm less than 20% of that to do the job for him.

According to Verison a typical day for Bob was:

9:00 a.m. – Arrive and surf Reddit for a couple of hours. Watch cat videos (!!)
11:30 a.m. – Take lunch
1:00 p.m. – Ebay time.
2:00 – ish p.m Facebook updates – LinkedIn
4:30 p.m. – End of day update e-mail to management.
5:00 p.m. – Go home

Despite not actually doing any of the work himself his performance reviews were excellent and he had been regarded as the best developer in the building.

So, in summary – he was paid a pretty good salary and all he did was play around on the internet.

All his real work was outsourced by him to a Chinese company. He paid them whilst his employer paid him 5 times the amount that he had paid the Chinese company.

Bob has now lost his job but it does raise an interesting debate as when a company outsources it’s seen as a clever move but when an individual outsources their own job they end up losing that job.

Anyway, whilst you’re thinking of that particular point I’d like to mention that the next blog article will be written by a Chinese company but please don’t tell my employer.

Meanwhile I’m off to watch some cat videos…

The ExP Group