This week Ofgen published its report following the commissioning of the accountancy firm BDO's independent analysis of the big 6 energy companies 2012 performance. BDO reported that disclosure was better than the previous year but that there was still need for more disclosure.
Ofgen seems determined to promote better information on profitability by improving transparency with a view to rebuilding consumers confidence and trust.
While there is no right or wrong profit margin as such, understanding fully the profits a company makes is important in building confidence and trust. The figures revealed that there had been a 17% increase in profits on average in the domestic supply market.
Being able to scrutinise the figures easily simply means that consumers can chose whether to change supplier and, probably more important in a market still essentially stitched up by the big 6, whether the margins are sufficient to attract new entrants who could possibly provide more competitive alternatives.
Transparency and fair treatment of stakeholders are essential in any market to build confidence, trust andsustainable value.
Wednesday 27 November 2013
Monday 25 November 2013
Paying less than the minimum wage, not unethical but unlawful
In today's media there is news that almost half of the private firms providing care for the elderly are paying less than the minimum wage to the care workers who give essential personal care to someone's mum or dad.This isn't just unfair treatment of employees but actually an illegal practice and reflects the general ethos of these "caring" companies, who also often operate on zero-hours contracts.
While Richard Preece, chairman of Allied Healthcare, announced last week that he intends to do away with these zero hours contracts, it is difficult to see how this limited gesture can improve the treatment of their ultimate customer, the frail, older person. Hopefully as the practices of these companies are more exposed by HMRC they will start to take their legal duties more seriously and respond both to the letter and spirit of the law for the benefit of our increasingly older population.
While Richard Preece, chairman of Allied Healthcare, announced last week that he intends to do away with these zero hours contracts, it is difficult to see how this limited gesture can improve the treatment of their ultimate customer, the frail, older person. Hopefully as the practices of these companies are more exposed by HMRC they will start to take their legal duties more seriously and respond both to the letter and spirit of the law for the benefit of our increasingly older population.
Friday 22 November 2013
How to avoid being "hodged", develop your own hodges.
Margaret Hodge chairs the Public Accounts Select Committee and she does a pretty fine job in holding leaders to account.
Apparently the leaders who have to face the Select Committee are now employing expensive media training consultants to help them to prepare answers to the searching questions members of the PAC may ask them. It looks like it is becoming a burgeoning industry.
When Margaret Hodge was asked about this in a BBC Radio 4 interview she simply stated that all that was required was "honesty, openness and directness" in the answers provided to the questions. The going only got tough when there was "obfuscation, waffling and dishonesty" i.e. evading being accountability.
The key to avoiding this kind of grilling or of being "hodged" is to promote transparency, honesty and integrity in both personal and organisational behaviours. Organisations could start to engender and encourage a challenging internal culture, developing their own "hodge" skills where asking and answering difficult questions and airing differences of opinion are encouraged before the impact of key decisions hit the market place. Margaret Hodge might then eventually be out of a job, saving even more public money, and we might have a band more confident business sector.
Apparently the leaders who have to face the Select Committee are now employing expensive media training consultants to help them to prepare answers to the searching questions members of the PAC may ask them. It looks like it is becoming a burgeoning industry.
When Margaret Hodge was asked about this in a BBC Radio 4 interview she simply stated that all that was required was "honesty, openness and directness" in the answers provided to the questions. The going only got tough when there was "obfuscation, waffling and dishonesty" i.e. evading being accountability.
The key to avoiding this kind of grilling or of being "hodged" is to promote transparency, honesty and integrity in both personal and organisational behaviours. Organisations could start to engender and encourage a challenging internal culture, developing their own "hodge" skills where asking and answering difficult questions and airing differences of opinion are encouraged before the impact of key decisions hit the market place. Margaret Hodge might then eventually be out of a job, saving even more public money, and we might have a band more confident business sector.
Wednesday 20 November 2013
Business models: do any engender better ethical behaviour?
As the Chairman of the Co-operative Group has now resigned because of his involvement in the appointment of the wayward Paul Flowers,a key question to be asked is whether the mutual movement is any better equipped to engender ethical values and behaviours?
In theory, it could be argued that this is the case. Mutuals are owned differently with often a broader focus on their stakeholders and do not have to concentrate solely on shareholder return and profits.In theory the stakeholder or stewardship models of business can adopt fairer and longer term approaches providing valuable competitive alternatives to customers.
However, as we have seen recently, these business models are no better if the people at the top of them have lost sight of organisational and individual values and beliefs. Reputational damage goes far beyond the individual and organisation impacting the whole sector as we have also seen.
As shareholders start to demand more ethical behaviours and focus, the mutuals may be given a run for their money and need to re-group to clearly demonstrate their differentiation in the market.
This might mean a complete overhaul at the top!.
In theory, it could be argued that this is the case. Mutuals are owned differently with often a broader focus on their stakeholders and do not have to concentrate solely on shareholder return and profits.In theory the stakeholder or stewardship models of business can adopt fairer and longer term approaches providing valuable competitive alternatives to customers.
However, as we have seen recently, these business models are no better if the people at the top of them have lost sight of organisational and individual values and beliefs. Reputational damage goes far beyond the individual and organisation impacting the whole sector as we have also seen.
As shareholders start to demand more ethical behaviours and focus, the mutuals may be given a run for their money and need to re-group to clearly demonstrate their differentiation in the market.
This might mean a complete overhaul at the top!.
Tuesday 19 November 2013
Real integrity
Just to follow on from yesterday's blog about individual and organisational integrity (as the news coverage of the Co-operative Bank's ex-chairman continues, and with it ongoing damage to the reputation of a bank whose whole market differentiation is/was ethics).
The "Real Integrity" Report mentioned yesterday also states " it is surely right to seek to influence the organisational environment so that the vast majority of people feel supported in making ethical choice, confident of their ability to do so, and motivated to act with integrity".
This is why the "tone from the top" is so important, to have leaders seen to have integrity, and why so much damage can be done to confidence and trust both outside and inside an organisation.
The "Real Integrity" Report mentioned yesterday also states " it is surely right to seek to influence the organisational environment so that the vast majority of people feel supported in making ethical choice, confident of their ability to do so, and motivated to act with integrity".
This is why the "tone from the top" is so important, to have leaders seen to have integrity, and why so much damage can be done to confidence and trust both outside and inside an organisation.
Monday 18 November 2013
Individual and organisational integrity
Over the weekend the media has covered the story of Paul Flowers, the ex-Chairman of the Co-operative Group, being filmed undertaking a "drug's deal". This is a fine example of the need, within everyday business ethics, for both the organisation and the individuals working within the organisation to have integrity and to adopt ethical behaviours. Without this, organisations' reputations can be seriously damaged.
In "The Real Integrity" research project undertaken by the IDEA Centre at Leeds University, the importance of individual and organisational integrity is emphasised. Two of the research's defined aspects of integrity include "wholeness of character" where individuals act and speak consistently and the organisation exhibits consistent behaviour and processes and "ethical values" where individuals act on the basis of ethical commitments and organisations have embedded ethical values.
The Flowers example just shows how difficult it is to instill individual ethical behaviours within an organisation without deep-rooted and on-going emphasis on the need for the values and behaviours to be everyday i.e. the basic and fundamental mindset of how business is conducted.
Thankfully Flowers is the ex-chairman.
In "The Real Integrity" research project undertaken by the IDEA Centre at Leeds University, the importance of individual and organisational integrity is emphasised. Two of the research's defined aspects of integrity include "wholeness of character" where individuals act and speak consistently and the organisation exhibits consistent behaviour and processes and "ethical values" where individuals act on the basis of ethical commitments and organisations have embedded ethical values.
The Flowers example just shows how difficult it is to instill individual ethical behaviours within an organisation without deep-rooted and on-going emphasis on the need for the values and behaviours to be everyday i.e. the basic and fundamental mindset of how business is conducted.
Thankfully Flowers is the ex-chairman.
Wednesday 13 November 2013
Big bonuses: gimmick, gesture or greed?
In Elephant Communication's market research entitled "Seeing the world through the consumer's eyes" respondents were asked the question "what would I do if I ran a financial services company for a day?". The results showed that the first changes consumers would make were:
In terms of getting it right for customers, it is pretty clear what the majority thought in this research. It would be interesting to see any research about the impact of big bonuses on building trust with stakeholders.If consumers perceive bonuses to be about greed, regardless of their link to performance, then a short-term gimmick/gesture does at least display some awareness of current issues. The key question though will be whether the top team's performance is every linked to such measures as openness,customer trust and fair treatment.
- Have UK-only call centres (66%)
- Make financial products simpler to understand (60%)
- Stop any big bonuses being given (60%)
In terms of getting it right for customers, it is pretty clear what the majority thought in this research. It would be interesting to see any research about the impact of big bonuses on building trust with stakeholders.If consumers perceive bonuses to be about greed, regardless of their link to performance, then a short-term gimmick/gesture does at least display some awareness of current issues. The key question though will be whether the top team's performance is every linked to such measures as openness,customer trust and fair treatment.
Tuesday 12 November 2013
Transparency is key: yet again
Apart from Ed Davey the Energy Minister today calling for the energy companies to "stop treating customers like cash cows," there is also a call for more transparency into the real cost of the green levy and its impact on pricing.
And the National Audit Office (NAO) is also calling for the private sector companies (e.g. Serco, G4 etc), on big contracts to the public sector, to be more transparent about their profits and performance. The NAO also wants the public sector to demand more from their suppliers ensuring they have such things as Whistleblowing policies in place before they are granted public sector money.
These examples show the importance of moving to more transparent and open business practices as a way of building trust with multiple stakeholders leading to better and more cost effective business relationships.
And the National Audit Office (NAO) is also calling for the private sector companies (e.g. Serco, G4 etc), on big contracts to the public sector, to be more transparent about their profits and performance. The NAO also wants the public sector to demand more from their suppliers ensuring they have such things as Whistleblowing policies in place before they are granted public sector money.
These examples show the importance of moving to more transparent and open business practices as a way of building trust with multiple stakeholders leading to better and more cost effective business relationships.
Wednesday 6 November 2013
Tone from the top: Ryanair's shareholders revolting
It's good to see that the shareholders of Ryanair have had a wake-up call and are starting to see that for long-term sustainable profits the fair treatment of customers is essential. The contempt, arrogance and machismo shown by CEO O'Leary for his customers has hopefully had its day.
Profits are set to dip for the first time in 5 years and the share price is making a dive south hitting the shareholders where it hurts most. To quote O'Leary they are now going to "stop unnecessarily pissing people off... [give] better customer service ....we're listening to you. We're responding to your needs".
This is a fine example of the need for shareholders to use their power and pressure to shape the businesses they have invested in for all stakeholders. Why? because it reduces reputational damage, reduces the costs of dealing with dissatisfied staff, customers, strategic partners etc etc builds trust and ultimately builds value.
Also good on easyJet for creating the competitive pressure and alternative "role model".
Profits are set to dip for the first time in 5 years and the share price is making a dive south hitting the shareholders where it hurts most. To quote O'Leary they are now going to "stop unnecessarily pissing people off... [give] better customer service ....we're listening to you. We're responding to your needs".
This is a fine example of the need for shareholders to use their power and pressure to shape the businesses they have invested in for all stakeholders. Why? because it reduces reputational damage, reduces the costs of dealing with dissatisfied staff, customers, strategic partners etc etc builds trust and ultimately builds value.
Also good on easyJet for creating the competitive pressure and alternative "role model".
Tuesday 5 November 2013
An easy way to contact the Chief Executive
Customers with genuine grievances or complaints about companies, which they find are not being addressed seriously or adequately by the relevant customer services teams, may often experience real difficulty getting through the "gate-keepers" to the top team. E mail addresses and phone numbers are frustratingly not public or easily available.
An organisation has set up a website to help facilitate the process to give customers access to the CEO. It can be found at www.ceoemail.com.
In today's connected world keeping secrets is just no longer possible. It would probably be much more effective for businesses to be actively more transparent so that customers' grievances and anger is dissipated rather than fuelled by deliberately obscuring the contact details they need. Make it easy to complain,address their needs and move on.
An organisation has set up a website to help facilitate the process to give customers access to the CEO. It can be found at www.ceoemail.com.
In today's connected world keeping secrets is just no longer possible. It would probably be much more effective for businesses to be actively more transparent so that customers' grievances and anger is dissipated rather than fuelled by deliberately obscuring the contact details they need. Make it easy to complain,address their needs and move on.
Monday 4 November 2013
Ethics: true point of value for the Co-operative Bank
On BBC 4 Today programme, the new CEO of the Co-operative Bank Euan Sutherland mentioned that ethics was one of two points of value for the Co-operative Bank (the other one was turnaround), when asked about why the venture capitalists were interested in investing a 70% stake in the company. The management team have ensured that their values and ethics are written into the Articles of the bank to protect its key point of differentiation. It will be interesting to see how all this plays out over the long term when the demands of a new and dominant stakeholder start to bite.
Sunday 3 November 2013
Supermarkets: just too big to care?
In this weekend's Guardian there is a feature about the pricing of wine at the major supermarkets. It is interesting because it demonstrates the whole grey area of what is ethical behaviour, ie the fine line between legal practice and what is acceptable to business, and what is acceptabale to customers.
mySupermarket.co.uk has compared the price of wine at major supermarkets over a period of time. It has shown that some of the "special offers" or "half-price" wines are not quite what they seem. To make these claims legally a retailer has to advertise the product at a higher price for a certain period of time before it can be advertised as discounted. And this is what the supermakets have been doing and will continue to do i.e.advertise a £5 wine for a certain period of time at £10, then discount to £5:50 say. Nothing illegal. But in terms of fair treatment of customers and transparency this has got to be dubious practice as consumers become increasingly confused by the complex pricing adopted and increasingly duped into so called "good deals" and "little bit extras".
Some may argue that this "clever" and competitive pricing is all fair game and what business, profitability and shareholder return is all about. But to have genuine customer focus (which will eventually translate into a more sustainable and profitable business) there really has to be a more ethical approach and commitment to treating customers fairly. Presumably the supermarkets are now just too big to care.
mySupermarket.co.uk has compared the price of wine at major supermarkets over a period of time. It has shown that some of the "special offers" or "half-price" wines are not quite what they seem. To make these claims legally a retailer has to advertise the product at a higher price for a certain period of time before it can be advertised as discounted. And this is what the supermakets have been doing and will continue to do i.e.advertise a £5 wine for a certain period of time at £10, then discount to £5:50 say. Nothing illegal. But in terms of fair treatment of customers and transparency this has got to be dubious practice as consumers become increasingly confused by the complex pricing adopted and increasingly duped into so called "good deals" and "little bit extras".
Some may argue that this "clever" and competitive pricing is all fair game and what business, profitability and shareholder return is all about. But to have genuine customer focus (which will eventually translate into a more sustainable and profitable business) there really has to be a more ethical approach and commitment to treating customers fairly. Presumably the supermarkets are now just too big to care.
Friday 1 November 2013
Tone from the top: collaboration and transparency
Hannah Jones, Nike's global head of sustainability and innovation is reported in the "Management Focus" magazine of Cranfield School of Management to have said " We believe that the innovations required to create the future won't come from a single source. Not from science. Not from technology. Not from governments. Not from business. But from all of us. We must harness the collective power of unconventional partnerships to dramatically redefine the way we thrive in the future.
Her boss, Nike CEO Mark Parker responded. "Our future depends on innovation,collaboration and transparency."
These statements show that one of the major international companies is now responding actively and creatively to sustainable solutions. They will be doing this because they believe it gives them competitive advantage. Competitive advantage is one one of the many business benefits of a commitment to ethical behaviours. Setting this kind of "tone from the top" with an emphasis on transparency (being open to your stakeholders) and collaboration, is a really good starting point for all organisations.
Her boss, Nike CEO Mark Parker responded. "Our future depends on innovation,collaboration and transparency."
These statements show that one of the major international companies is now responding actively and creatively to sustainable solutions. They will be doing this because they believe it gives them competitive advantage. Competitive advantage is one one of the many business benefits of a commitment to ethical behaviours. Setting this kind of "tone from the top" with an emphasis on transparency (being open to your stakeholders) and collaboration, is a really good starting point for all organisations.
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