Trouble Down Under – and what it can teach us


Monday March 26th

I’ve been writing the blog for nearly eight years now, and for the first time ever I’m going to split it into two halves: a game of two halves you might say as, not for the first time, I’m using sport as an analogy for business.

Almost no-one reading the blog – at least in the UK – can fail to be aware of the current controversy surrounding the Australian cricket team. But for those of you in Europe and the US, let me briefly summarise.

Australia are currently playing a test series in South Africa: to describe it as acrimonious is an understatement. At the weekend the series stood at 1-1, with the third test being played in Cape Town. South Africa were ahead in the game and batting in their second innings – at which point Cameron Bancroft, the newest member of the Australian team, reached into the pocket of his cricket flannels. TV cameras around the ground filmed him looking remarkably guilty as he paid the ball some extravagant attention (with sandpaper, as it later turned out).

I won’t go into the intricacies of swing bowling. Bancroft was tampering with the ball to give his team an unfair advantage. But this wasn’t the action of a lone player: this was a plot hatched by the senior members of the team: “the leadership group” as they were described.

Australian captain Steve Smith and Bancroft quickly admitted their cheating – and confessed that at the very least, the captain and David Warner, the vice-captain, had encouraged Bancroft to tamper with the ball.

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…And that’s why I’m splitting the blog in two. The Australian Cricket Board are to hold an immediate enquiry. Prime Minister Malcolm Turnbull has expressed his outrage. Perhaps most tellingly, veteran Aussie cricket commentator Jim Maxwell has been virtually reduced to tears on air.

At this point, what would a business do? Two of your senior executives have admitted cheating. They have damaged your worldwide reputation. They’ve brought into question your previous successes which – quite naturally – people are saying were gained through cheating. And to cap it all, they got a junior member of the company to do their dirty work.

But hang on. Both the executives have a worldwide reputation. One of them is perhaps your best performer for 50 years. Dismissing them will seriously weaken your company: there are simply no ready-made replacements.

No business that wanted – or deserved – to be taken seriously would hesitate. Smith and Warner would be instantly dismissed. Bancroft would be given a savage reprimand but he’d keep his job. And then the questions would start. If the two execs were conspiring, was the director they report to aware of it? Given their close working relationship he must have been aware of what they were planning. So how high up the organisation does the rot go?

That is exactly where Cricket Australia now find themselves. Many of us have been in the close atmosphere of a dressing room at some stage in our lives: if a plot was being hatched, everyone in the team would have been aware of it. I find it inconceivable that the coach, Darren Lehmann, didn’t know. So how does the Board react to the cheating? And make no mistake, it is cheating every bit as much as an athlete taking steroids is cheating.

Thursday April 5th

So now we know: all three players were sent home from South Africa. Smith and Warner have been banned for a year, Bancroft for nine months. Coach Darren Lehmann was found not to have known anything – but has resigned anyway.

Both Smith and Warner have now performed the modern act of contrition – the tearful press conference – and have accepted their bans. Warner accepts that he is unlikely to ever play for Australia again. I’m not so sure – he’s only 31 and 12 months from now will still be one of the best opening batsmen in the world. Steve Smith is only 28 and will unquestionably be back in the team. Will he be captain again? I wouldn’t bet against it.

We can all argue about the length of the ban. As Michael Vaughan posted on Twitter, you suspect that Mr Lawyer and Mr QC were involved, and it is telling that neither player has sought to challenge their ban. And the dust seems to have settled remarkably quickly…

Are there any business lessons we can learn from Sandpapergate? I think there are two – and one lesson we can learn from Cricket Australia (not a sentence I thought I’d ever write) is the importance of acting decisively.

I’ve written previously about corporate cock-ups – United Airlines and Ryanair spring to mind – and one thing that unquestionably made the situation worse for the companies was that they firstly tried to defend that they’d done, and then they dithered. Even when they clearly didn’t have a leg to stand on, neither company would apologise with good grace. So Cricket Australia have acted swiftly, the players have accepted the bans and the focus of attention turns elsewhere.

The second lesson is that pressure makes you do stupid things. What on earth were Smith and Warner thinking? A disgraced businessman can disappear into the wilderness for a while and come back with a different company. Steve Smith cannot disappear and come back playing for Pakistan.

There is pressure in business every bit as much as there is pressure in sport – and just as in sport, it can lead to stupid decisions. For the entrepreneur, that pressure very often comes from loneliness – from having no-one to speak to about the stresses of running your own business. That is one of TAB’s great strengths: you are never alone. There is always someone there to speak to, always a friend who will allow you to release the pressure – and who will occasionally say, “Hang on, sport. That may not be the best decision you’ve ever made…”

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Carillion: Incompetence on an Industrial Scale


Well, I’ve been through the post three times – yes, home and work. Checked my e-mails. Facebook, obviously… And it’s not arrived. Clearly an administrative oversight. Can’t get the staff I expect. So for yet another year I won’t be going to the World Economic Forum, the annual meeting of the great and good in the Swiss resort of Davos.

But tempting as it is to write about it instead – to spend the next 800 words with Theresa May, Donald Trump and Elton John’s speech on ‘5 Leadership Lessons from my Darkest Hours’ the real story right now is the collapse of Carillion.

Carillion

Like all big companies, Carillion had a strap line: ‘Making tomorrow a better place.’ As everyone now knows, the company went into liquidation last Monday with debts of £1.5bn and a pension shortfall of at least £600m – so for Carillion, there is no tomorrow. For the handful of hedge fund managers who made millions out of betting against the company tomorrow may not be a better place but it will certainly be a richer place.

But for the thousands of Carillion staff, and many, many small businesses, tomorrow looks anything but a better place. I have absolute sympathy for every single member of Carillion’s staff – with the exception of the directors – but in this article I want to concentrate on the 30,000 small businesses that will be impacted by Carillion’s collapse.

Carillion was created in July 1999 by a demerger from Tarmac (which was originally founded in 1903). With the Governments of David Cameron and Theresa May continuing the Blair/Brown practice of using the private sector as the supplier of services to the public sector, Carillion was effectively the Government’s ‘go-to’ contractor.

And yet there was plenty of hard – and anecdotal – evidence that the company was in deep trouble. In 2017 it issued three profit warnings: there was also plenty of gossip.

I have not previously used the comments column of the Daily Mail as a source, but two replies to a recent piece on Carillion are worth repeating:

Carillion have been shaky for ages. We were asked if we would undertake a multimillion pound project [for them] as a sub-contractor. Based on some reliable info we said no – thankfully, or their crash and non-payment would have taken us down too.

[They] have been using ‘dodgy’ business practices for years. Undercutting on quotes to the point where competitors know the figure is unsustainable. Writing that piece Mail City Editor Alex Brummer called Carillion a ‘giant Ponzi scheme…’

Effectively Carillion was using the cash flow from their latest contract to paper over the cracks – or fill the black hole, choose your metaphor – from the previous contract. Ultimately – like Mr Ponzi’s investment scheme – that was unsustainable.

Did anyone pay attention to the profit warnings and the dark mutterings? Yes, the hedge funds did. Carillion was ‘the most heavily bet-against company on the stock market’ and the hedge funds will apparently profit to the tune of £300m from the company’s collapse.

Sadly, Her Majesty’s Government did not pay any attention. Despite the profit warnings and the gossip the Government continued to award contracts to Carillion. For example, a week after the first profits warning the Department of Transport announced that Carillion would partner another construction company on a £1.4bn contract as part of HS2.

There was another profits warning in September of last year – swiftly followed by another key infrastructure contract, awarded at a time when Carillion’s CEO and finance director were both leaving. The Government may not be to blame for Carillion’s collapse but it has left senior ministers looking at best naïve and at worst incompetent.

It has also left them with the lot of explaining to do to the owners of small businesses. ‘It’s got 450 Government contracts, the company must be alright’ is a not unreasonable deduction to make.

But now one industry group estimates that up to 30,000 firms are owed money by Carillion, with the firm having spent £952m with local suppliers in 2016. Clearly many small companies will face uncertain futures and/or will need to consider laying off staff to reduce costs. Carillion may have employed 20,000 people in the UK but the 30,000 firms owed money will have employed considerably more. There are real fears of a ‘domino effect’ among smaller companies, with liquidators PricewaterhouseCoopers saying they will not pay any bills for goods or services supplied before the liquidation date of Monday January 15th. Carillion’s creditors have already been warned in court documents that they are likely to receive less than 1p for every pound owed to them.

Bluntly, that is a disgraceful state of affairs. I am trying to keep calm about this but Carillion captures so much of what is wrong with British business – and which the Government could so easily put right. It’s not just the continuing award of contracts, there is also the small matter of Carillion’s terms of business – 120 days.

I’ve used this line before but it bears repeating. When the boys were little they’d occasionally do something and we’d say, “No, you can’t do that. It is just plain wrong.”

That’s how I feel about 120 day payment terms. It is just plain wrong. At best it is asking small business to finance big business and at worst it is pure and simple exploitation. ‘Do the work in January, send the invoice at the end of that month and we’ll pay you at the end of May.’

Back in September 2016 I took Liam Fox – the Secretary of State for International Trade – to task for his description of small business owners: ‘fat, lazy and off to play golf.’ No, Mr Fox, they are anything but ‘fat, lazy and off to play golf.’ They are trying to plug a hole in their cash flow that your Government could fix with one simple piece of legislation. And some of them are wondering how they’re going to save the business they’ve built from the effects of a corporate crash: one that could have been avoided by a Government with an ounce of business acumen.

Some of the smaller companies affected by the debacle will be TAB members. Carillion will unquestionably be one of the problems brought to future Board meetings.

But amid the rubble there is a silver lining – and that silver lining is the meetings of The Alternative Board, and the accumulated wisdom of your colleagues round the table. ‘We’re thinking of signing a contract with X’ is a phrase I’ve heard any number of times. And on a few occasions I’ve also heard that intake of breath and seen the slow shake of the head – the one the garage mechanic used when you asked if your first car could be fixed – and every time it has proved invaluable.

You’ll never be able to take out insurance against the greed of big business and the incompetence of the Government, but your colleagues around the TAB table are the next best thing.

Negotiating with Friends: How we got it Right


Negotiation is very rarely about the short term. It’s an area where you really need to think ‘win/win’ because nine times out ten you’re going to have an ongoing relationship with the person across the table. So don’t set out to ‘screw’ someone: in the long run that attitude is unlikely to be profitable.

That was what I said last week when I was discussing the general principles of negotiation. ‘Think win/win. Nine times out of ten you’re going to have an ongoing relationship.’ But that becomes even more true when you’re negotiating with a friend – as I did when I bought TAB UK from Paul Dickinson and Jo Clarkson.

“Never do business with a friend,” is an old business maxim – and it’s probably saved a lot of friendships – but sometimes doing business with friends and, ultimately, negotiating with them is inevitable.

“Loan oft loses both itself and friendship,” said Polonius, giving advice to his son Laertes before he set sail for France. Well negotiation can do exactly the same: the negotiations can flounder and the friendship can be ruined. Worse still, the negotiations can apparently ‘succeed.’ And then one party gradually realises he’s been ripped off: that he’s been taken advantage of by someone he previously considered a friend. Not any more…

The negotiations to buy TAB UK were long and complex: there were two people involved on both sides, plus accountants, bankers, lawyers – and our respective families.

As Mags and I sat across the table from Paul and Jo I had four priorities:

  • I wanted to buy the UK franchise for The Alternative Board: I’d talked it over with Dav – at length – and I absolutely believed it was the right thing for me, and for my family
  • But like any business deal, I wanted to buy it at the right price
  • I wanted to make sure the negotiations did nothing to damage TAB UK going forward
  • And I wanted to retain the friendship of two people I liked, respected and valued greatly as business colleagues and confidantes.

So how did we set out to achieve that? There were three key rules that guided us through the negotiations and which protected and strengthened our friendship.

  • First and foremost, we set the stage. Both sides were absolutely open about what they wanted to achieve in the negotiations. We constantly asked ourselves a simple question: ‘Is this fair to you? Is it fair to us? And is it in the best long-term interests of TAB UK?’ That question was, if you like, the mission statement of the negotiations
  • …Which inevitably brings me to one of Stephen Covey’s ‘7 Habits.’ “Seek first to understand, then to be understood.” There was a real willingness to see the other side’s point of view. If you do find yourself negotiating with a friend it’s vital to see the negotiations from both sides of the table
  • So there was plenty of goodwill on both sides. But even with all that goodwill, there were bumps in the road: that was inevitable with such complex negotiations. The key was to look ahead and anticipate problems, to be open about setbacks and to clear up any misunderstandings as quickly as possible.

The net result? A very successful negotiation and both sides happy with the outcome. Was it easy? No, but then readers of this blog don’t need telling that few things that are worthwhile are easy. Ultimately, I’m absolutely delighted with the outcome – I’m equally delighted that Paul and Jo will be friends for life.

As it’s Easter, let me finish on a slightly lighter note – and a warning, if you’re planning to spend four days in the garden…

When I’m writing these posts I always – irrespective of how well I know the subject – check with Google, just to see if the Harvard Business Review or one of the entrepreneur magazines has a different perspective. And I’m increasingly astonished at how few words I need to type in before Google guesses what I’m after.

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Or I was – until this morning. How do you negotiate with I tapped in. Before I could add a friend, Google completed the sentence for me. How do you negotiate with a Sim eating plant? Seriously? That’s the most popular query about negotiation?

Well, fair enough. I always preach the value of knowing and researching your market…

So for those of you whose Easter might otherwise be ruined by the death of your carefully-nurtured Sims, I present perhaps the most useful advice ever offered on this blog. (Warning: the video contains violent scenes which some readers might find distressing. It also contains a teenage son doing nothing while his father is eaten by a tomato plant…)

Nice Guys Finish First


On Monday I had the idea for this week’s post. As you’ll see from the title, it was ‘Nice Guys Finish First.’ And then came Tuesday, and President Elect Donald J. Trump. Very clearly, not a case of a nice guy finishing first…

But while this isn’t a politics blog and I’m not going to stray into the respective merits of the two candidates, let me draw just one business lesson from the campaign. For all the speeches and all the appearances with celebrities, I simply cannot pinpoint Hillary Clinton’s central message.

Contrast that with ‘Make America Great Again’ or – if you want a Democratic equivalent – ‘Yes we can’ in 2008. Define your market, ladies and gentlemen, and give them a simple message.

I thought both candidates were unimpressive: as one commentator put it, Trump was simply “the imperfect candidate” who had “the perfect message.” But it wasn’t their qualities that depressed me, as much as the tone of the debate. Like our referendum – and the rancour that continues after it – the presidential contest was bitter, divisive and, at times, downright nasty.

Does it have to be that way? In politics, maybe it does. Maybe social media means that a murky business will inevitably get ever murkier.

Will business go the same way? There’ll be plenty of wannabee Donald Trumps waking up this morning – although I do like the story that he’d have been even richer if he’d simply invested in index funds

Nevertheless, the popular stereotype remains the ruthless entrepreneur: the man best portrayed by Gordon Gekko in Wall Street, where nice guys finish last and lunch is for wimps.

But as I look round the TAB boardroom table I don’t see Gordon Gekko – or Donald Trump. You might argue that it’s self-selecting: that I wouldn’t want to work with people like that and they wouldn’t want to work with me. But I think it goes deeper than that.

When I first started this blog I jotted down a few notes on how I wanted to come across. I’ve written about the list before but it bears repeating:

Nice guy – loves his family – knowledgeable about business – could help you – good experience working with him

I wonder now if I was subconsciously defining the clients I wanted. As I look round a TAB table what do I see?

Interesting people who are interested in others – who have ethics and values – who want to grow and who want to help others grow – who respect others – who want to know themselves better – and who are, without exception, ‘nice guys’

…And despite having what our archetypal entrepreneur would see as dreadful handicaps – respect and time for other people, ethics and values – the people I see are all successful. They’ve all finished – or are on their way to finishing – first.

Clearly, ‘first’ means different things to different people. But there is one common thread running through the definitions of ‘first’ around a TAB table.

‘First’ is long term.

It’s about developing and nurturing relationships and helping other people along the way. It’s also about people trusting you: and the only way to guarantee that will happen is to treat people well and to deliver on your promises.

In short, the best way to finish first in the long term is to be a ‘nice guy.’

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So as I look at the nastiness in politics, I’m desperately hoping it doesn’t spill over into business. I absolutely hope we’re not inspiring a generation of children with the message that the best way to win is to unleash a barrage of hostility via social media and then refuse to accept the result if it has the temerity to go against you.

There are two reasons for this: firstly business is going to be a much less welcoming place. Secondly – and rather more importantly – there are going to be far more failed businesses.

Success – as the old saying goes – is a journey, not a destination. And on that journey we all need to work with other people and develop long term relationships. In short, we all need to be nice guys…

I’m Lazy, I’m Fat and I’m off to Play Golf


The UK trade deficit shrank in July, down to £4.5bn from £5.6bn the previous month. The services sector rebounded sharply as the Purchasing Managers’ Index jumped to 52.9 from a seven year low of 47.4 in July. The construction sector is showing signs of recovery – but the British Chambers of Commerce has cut its forecast for UK growth this year, reducing it from 2.2% in March to 1.8%, citing uncertainty over the Brexit negotiations.

In short there’s been the usual mixture of good and bad economic news over the past couple of weeks. There hasn’t been the immediate post-Brexit apocalypse some commentators had predicted, but the negotiations to leave the EU have barely begun. None of us – including the negotiators – have much idea what the talks over the next two years will bring.

But none of this has stopped Liam Fox, the MP for North Somerset, current Secretary of State for International Trade and quite recently, possible successor to David Cameron.

Last week Liam Fox made his feelings known on British businessmen. The country, he declared, was “too lazy and too fat” with businessmen preferring golf on a Friday afternoon to trying to boost the country’s prosperity.

This country is not the free-trading nation it once was. We have become too lazy and too fat on our successes in previous generations. Companies who could contribute to our national prosperity – but choose not to because it might be too difficult or too time-consuming or because they can’t play golf on a Friday afternoon – we’ve got to say to them that if you want to share in the prosperity of our country you have a duty to contribute to the prosperity of our country.

Richard Reed, co-founder of Innocent Drinks, said that Mr Fox had “never done a day’s business in his life.” I suspect that several members of TAB York would respond in significantly stronger terms…

Of course the comments are nonsense. Of course they’re insulting to the overwhelming majority of people running SMEs – and worryingly they show an International Trade Minister alarmingly out of touch with… well, trade. But there are possibly even more important considerations than that.

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I’m not fat (said he, squeezing into the suit he got married in 18 years ago) and I hope no-one considers me lazy. I did, however, play golf on Thursday and I make no apology for that.

Since this blog started – more than six years ago now – I’ve repeatedly stressed the need for time away from work. ‘Work hard, play hard’ might be a cliché, but it stops burnout, keeps you fresh and, importantly, gives you a broader perspective on life.

I remember reading about Denis Healey criticising Margaret Thatcher for having no ‘hinterland:’ no breadth of knowledge of art, culture, literature or science.

You might argue that ‘hinterland’ isn’t important for business success: that a laser-like focus on your goal will get you there.

I wonder… As the worlds of technology and business continue to change ever more rapidly, then knowing about – and learning from – seemingly unconnected disciplines will, I think, become increasingly important.

Just as importantly, hinterland – and the associated work/life balance – is a lot of fun. Which brings me back to Master Fox and our politicians: when was the last time you saw one on a golf course? Too many of our politicians – other than the obligatory August photo op in Cornwall – don’t seem to have any concept of work/life balance: and our political life is poorer for it.

Rather than criticising people running businesses, perhaps our politicians could learn from them – not least in being able to take planned, productive time off. If I see someone who never takes time off then I see someone who’s heading for trouble. You only have to look across to the US to see the latest example of a seemingly ‘indestructible’ politician showing herself to be all too vulnerable.

So I’ll continue to encourage the members of TAB York to work hard and play harder. The idea that any of them opt to do less than their best is simply wrong: the moral obligation they feel to their businesses, their staff, their customers – and the work ethic that flows from that – is something I’m honoured to see on a daily basis.

The Only Way is Ethics


The long arm of coincidence as the saying goes. Or if it doesn’t, it should do. One day last week I read this article on the BBC business site: Trust Me, I’m a Chief Executive.

The premise is simple. Chief executives are a cynical, hard-bitten lot. By the time they’ve climbed the greasy pole and reached the top, all the humour, warmth and humanity has been knocked out of them. Or they’ve been forced to abandon it…

And then along comes Julian Warowioff and his company, Lemonaid. In many ways this takes me back to my recent blog about Howies T-shirts. There’s an ethos, a set of values which underpins Lemonaid – changing the world, drop by drop, as the company says.

As you’ll see if you visit the site, Lemonaid’s ingredients are all ethically sourced with the fairest of Fair Trade ingredients. And for every bottle that’s purchased, Lemonaid donates 5p to charity: so far, they’ve raised more than £560,000 for a variety of development projects. No wonder – as the BBC reports – that Julian Warowioff’s eyes start to fill with tears when he describes what his company does.

Contrast that with the speech from Mark Carney, Governor of the Bank of England, at the Mansion House this week. “The age of irresponsibility” is over he declared, heralding what looks like a much more American-style approach to market rigging – and other practices that most of us would describe with a stronger word than ‘irresponsibility.’ In future, declared Carney, “Individuals will be held to account.” Good, because so far there doesn’t seem to have been an underlying set of values in the City – apart from one – and you and I have been paying for it.

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Those two ethical extremes reminded me of conversation I’d had with one of the members of TAB York; someone I respect hugely, who’s built a business she can be justifiably proud of. Moreover, it’s a business with a real sense of beliefs and values. That’s where the coincidence came in: the two articles neatly framed the conversation we’d had.

“I think I need to sack one of my managers,” she’d said.

“I thought his numbers were really good?”

“They are. The best we’ve ever had. But…”

The ‘but’ was a big ‘but.’ The good results – and they were outstanding – were being obtained with a ‘sell at all costs’ attitude. The manager was undermining the other teams in the organisation. His business ethics ran directly counter to the business ethics of my TAB member. The results were stellar: but the price the business would pay in the long term was too high.

“So there’s only one decision you can take.”

“I know. Well, I’d known before you came in, Ed. I just needed to hear someone else say it.”

As I say, she’s built a business she can be proud of – just as I’m proud of the success of all the members of TAB York. And one of the things that gives me most pleasure is seeing that success achieved without resorting to ‘the age of irresponsibility:’ to seeing success that has far more to do with the ethical values of Lemonaid than it has to do with rigging the markets.

If results and sales are all that matter to you, you’re probably not a member of TAB York. In fact, you’re probably not even reading this blog. Of course results are important, but they’re not the only thing that is important – and that will be more and more evident in the years ahead. Clients and consumers will increasingly be drawn to companies like Lemonaid that have a strong set of ethics underpinning the company. They’ll be drawn to companies that believe in something – and are not afraid to say so.

Enjoy your weekend. And I’d better finish with an apology. ‘The Only Way is Ethics.’ I know: nearly 250 blog posts and it’s the worst title by a long way. I’m sorry, something came over me. I couldn’t resist it…