Business Bloop Award

Act of monumental stupidity

2011-05-30T04:22:00.000-07:00

Gosh, now here is a real candidate for the Business Bloop Award!

Presenting the second most powerful woman in the world (shame on you Forbes magazine), the one, the only (I hope), Irene Rosenfeld, chief executive of Kraft, a food company.

Having told British MPs that talking to them would be "A waste of her time", she has been rightly pilloried in the UK Press.

That, in the long term, may return to haunt her, but it isn't the real story. The real story is the insight this provides into the way in which this woman's "ignorant or arrogant" (I quote The Times, below and title) approach is going to reduce shareholder value in the long term. If Warren Buffet has his radar switched on, and if he has Kraft holdings he should sell, NOW, or otherwise avoid. Why?

Here is a quote from The Times, Ian King, 28th May 2011 -

Two months ago, to coincide with the latest Select Committee hearing, The Times prepared a detailed investigation into Kraft’s stewardship. With the co-operation of some of Mrs Rosenfeld’s leading lieutenants, we revealed that more than 120 of Cadbury’s top 160 executives had left since the takeover.
Many of them said that Kraft was a hidebound, bureaucratic company that reminded them of Cadbury a decade earlier.
That culture, along with the management departures, is now starting to have an impact on Cadbury’s performance. Kraft’s latest figures revealed that Cadbury’s sales have shrunk in all key regions aside from some emerging markets where the business ought to be performing much better. Kraft has proved to be as lousy a custodian of Cadbury as many people feared it would.

Very simply, Kraft is exhibiting exactly the results we have long predicted in this Excellence Quartet series of blogs for any such takeover where a company with low Comparative Competitive Strength (but substantial financial mass) sets out to acquire companies with greater Competitive Strength in the naive belief that it will strengthen its own position. There are two, almost inevitable, results.

First, the Lowest Common Denominator effect - the acquirer rarely understands what has made its target outperfom its own figures, so instead of learning, it applies its own (usually lower) managerial, operational and quality standards so that performance within the newly acquired business quickly slumps to its own level of capability. Kraft have done this in record time.

Second, the Market Quality Dilution - the acquirer soon finds that profitability is not what it had expected (see the first effect), especially when the loan cost of the acquisition is loaded onto the target's balance sheet, and then does the only thing it knows how to do, it cuts delivered quality, value for money, to its customers. That has already started, and soon Cadbury's market share will start to plummet.

So, Irene, you qualify for the Business Bloop Award three times -

First, the wrong acquisition for the wrong reason - trying to conceal the really weak Comparitive Competitive Strength of Kraft by "cooking the balance sheet" through opportunistic M&A. You aren't the first "leader" to use this ploy to distract attention from the lack of internal competence within a business, but like other super arrogant CEO's, e.g. Fred Goodwin, there will be tears before bedtime

Second, you have missed an enormous opportunity to learn how to raise the Comparative Competitive Strength for the whole of Kraft, and that in the long term, will seal its eventual doom as it is slowly yet inevitably eaten alive by its competition.

Third, by behaving in such a really silly way with British MPs, you have drawn attention to yourself, rather than Kraft - and the more people look, the more they will see.

There is a famous song about "Irene" - but I won't be seeing her in my dreams, she really is a nightmare.

Business Bloop Award is brought to you by Steve Goodman and Tony Ericson partners in Achievement Coaching Internationa l where we help businesses to learn different thinking to enable different actions that deliver the different results thatMake a Big Difference.. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions to those obtained by conventional thinking and techniques. You can read the other three blogs at "Exceeding Expectations", "You're having a laugh ... seriously?" and "Capitalism or ... Common Sense".

Bloop Award - 2009 Winner Reaps the Whirlwind

2011-05-07T07:16:00.000-07:00

In April 2009 we awarded Bloop of the Month to National Express for the shambles it made both failing to run the East Coast line as a viable business, and then on its messy expulsion. We asked whether there had been a triumph of ego over competence and whether anyone had attempted to properly assess the Competitive Strength of the business before or during the debacle.

Well, it is “Told You So” time again – from The Times on 6^th May 2011

Yesterday National Express admitted that it may not have a future in the railways.

The admission by the company’s chief executive follows the recent failure of National Express to make the Department for Transport shortlist for a new East Anglia franchise, the London Liverpool Street-based operation that it currently operates.

The East Anglia rejection means that National Express has only one train franchise left — the smaller c2c commuter service between London’s Fenchurch Street and Southend. ………..

Questioned on the comments made in a statement to the London Stock Exchange, Mr Finch told The Times: “This is a reflection of the reality. Not so long ago this company had nine rail franchises. It will soon be left with one.”

Mr Finch conceded that the failure to upgrade its management systems to the EFQM European benchmarking standard (my bold emphasis) demanded by the DfT meant that National Express had effectively “disqualified itself” from retaining the East Anglia franchise. “We scored badly on the DfT’s management modelling. Others scored better,” he said.

As we repeatedly point out in our Excellence Quartet blogs, it is a fact, proven by the most robust research, that companies that win Excellence Awards massively outperform the average in every financial dimension. These awards encompass not just operational competence but also management and staff commitment, attitudes, behaviours and values. Modern business leaders are beginning to understand the real significance and impact these “intangible” human factors have on the potential survival and prosperity of their business.

Recently they have come under pressure from a major "activist" shareholder, Elliott Management, who have accused the board of "lacking drive and ambition". We don't believe this is the real problem. What is totally clear that the current management of National Express are as uninformed as their predecessors since they point to this massive loss of business opportunity and shareholder value – not being able to run your core business is an enormous and truly shocking failure, make no mistake – as being down to a “Compliance Failure”! They are demonstrating that they see EFQM scoring merely as “some form of benchmarking” – rather than a fundamental understanding of the most powerful value adding way to run a business. This shows that they cannot even spell the word “Quality” let alone understand its commercial value. For any business leadership in 2011, such ignorance is almost as astounding as believing that Elvis is Alive.

National Express is a business that we had thought could be rated as Comfortable, at best. It is now clear from its leadership attitudes, behaviours and values that its Comparative Competitive Strength is at the bottom end of Constricted – the gateway to The Abyss. Any potential investor will need to be very cautious indeed – if the same attitudes, behaviours and values permeate the organisation this is a very high risk environment.

So we award our first business Bloop Award of 2011 to National Express – the company that can demonstrate, right from the very Top, that it really does not understand the significance of Quality.

If you have not yet found out why Quality matters, read more of our blogs (the links are in the right hand column) or contact us at Business Breakthrough Coaching.

(Click here to read the 2009 article)

Business Bloop Award is brought to you by Steve Goodman and Tony Ericson partners in Achievement Coaching Internationa l where we help businesses to learn different thinking to enabledifferent actions that deliver the different results that Make a Big Difference.. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions to those obtained by conventional thinking and techniques. You can read the other three blogs at "Exceeding Expectations", "You're having a laugh ... seriously?" and "Capitalism or ... Common Sense".

Why did you do that?

2010-11-03T03:29:00.001-07:00

Those of you who have been reading the business news this week will be able to guess who the latest Business Bloop award goes to. Yes it's Serco for their incredibly crass and doomed attempt to screw rebates out of their suppliers as a means of offsetting potential loss of margin resulting from renegotiation of their contracts with the government.

Not only was this bound to rebound on them in the form of damning PR, but anyone with half a brain should have worked out that this would seriously embarrass and consequently upset their main customer - the government. And so it has proved with Serco now having to publicly apologise and withdraw the demands. We are not going to add further to what has already been written and said about this. What we are more interested in is why did this happen and what lessons can the rest of us learn?

What is even more perplexing it that it is Serco that should do this. They have shown themselves to be an innovative and resourceful business with an ability to handle change successfully. This has been the foundation of their growth and success. Their Chief Executive, Christopher Hyman is a religious man who has incorporated his beliefs into the Serco ethos since becoming CEO six years ago. Attempting to screw your suppliers in this bullying and unimaginative way is more the behaviour of a uncaring business that has run out of ideas. So why should they decide to do something that is on the face of it completely out of character?

This is a phenomenon that can even affect organisations that have hitherto been regarded as outstanding examples of excellence. Just at the point when it appears a business can do no wrong, it goes and does just that. Being excellent is no guarantee of staying excellent. This happened at Toyota where of all things their product quality failed with consequences that we all know about. What appears to happen is that they lose touch with what it is that has enabled them to achieve their previously high standards, in particular how the way they think and behave has been such a vital factor.

This can be a consequence of growth that has involved a substantial expansion of the workforce at all levels. This brings in different thinking and behaviour which weakens the core ethos of the organisation. It also diminishes the conscious awareness amongst the leadership of the importance of this for its ongoing success.

However it is caused what happens is that a business that was previously in an "excellent" condition slips into a "comfortable" condition. Assumptions about still being excellent (Toyota) or making out of character decisions (Serco) are characteristic of this weakening in the Competitive Strength condition

The consequences are significant. If you have got a really good reputation to lose then when you lose it the damage can be enormous and potentially fatal even for the very best. Serco's shares dropping 27% is just one manifestation of this. Serco's leadership needs to look very hard to find the root cause that produced this disastrous and totally out of character decision. It is not something that can be easily reversed once the cultural change has taken hold. The rest of us need to learn the lesson from Serco's and Toyota's experience.

Business Bloop Award is brought to you by Steve Goodman and Tony Ericson of Business Breakthrough Coaching. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions to those obtained by conventional thinking and techniques. You can read the other three blogs at "Exceeding Expectations," "You're having a laugh ... seriously?" and "Capitalism or ... Common Sense".

The accountant that went bust

2010-07-06T07:32:00.000-07:00

When considering candidates for our next Business Bloop Award our attention has been drawn to the recent article in the Daily Telegraph by Philip Aldrick and Hella Ebrahimi on Vantis, the accountancy firm that actually managed to go bust. We are grateful for the insights this provides.

Whilst it is not unknown for accountants, lawyers and the like to fail it is rare and actually difficult to do. “In this business you should be able to make money and cover your costs. If you are not managing that you are making some pretty fundamental mistakes” (quote from Chief Exec of a rival accountancy firm).

Vantis was the creation of accountant Paul Jackson notable for his heavy moustache and long curly hair. You would have thought this was enough warning in itself for anyone not to get involved. In 2002 he merged 4 small accountancy firms, floated them on Aim for £26.6m and installed himself as Chief Exec. Over 5 years he expanded rapidly by buying up small regional firms and rebranding them as Vantis. At the same time however working capital and costs rose driving up debt to peak at 54m in 2008.

To actually end up with working capital, costs and debts rising when your strategy is to buy up and consolidate other businesses shows that this business was never under any sort of control nor was there any plan for it to be so. The expansion and Jackson’s claim that this would create a lucrative opportunity to sell advisory services alongside traditional accounting work was all the strategy consisted of.

The only real “consolidation” was the rebranding. It is expected that many of the small firms bought by Vantis will now be bought by their managements, with up to 90% of staff retained. In other words they will revert to the small regional firms they had been and in reality still are. The processes needed to grow and manage an accounting and advisory business, as opposed to a loose collection of accounting practices, were inadequate or non-existent.

So it is POOR PROCESS once again producing the inevitable poor and in this case disastrous result. Vantis’ “aggressive” tax advice to the rich and famous resulting in two major HMRC investigations and their appointment and subsequent removal as liquidator of Stanford International Bank are simply symptoms of underlying inadequate processes. And all of this stems directly from the deep seated managerial and behavioural values of the leadership of the business.

So you may think we are going to give our Business Bloop Award to Mr. Jackson and Vantis; not so. Instead we are awarding it to the banks that lent them the money, which include RBS and Lloyds and who will be lucky if they recover £1 in £5! When will these people learn how to assess lending propositions not on WHAT the money is for and WHAT the security appears to be, but on HOW the purpose for which the loan is made will be achieved and HOW the risks are to be managed? Not sometime soon I’m afraid, unless somebody somewhere in a bank reads this blog and thinks “maybe there is another way”.

For more on process thinking go to :http://www.changeworld.co.uk/gettingresults.html

Business Bloop of the Month Award is brought to you by Steve Goodman & Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at“Exceeding Expectations", "You're having a laugh ... Seriously?, "Capitalism or ... Common Sense .

Prudential - wins Bloop Award Stars!

2010-05-28T01:27:00.000-07:00

Well I never! Not in all my days!

Who might have imagined that, within 18 days of winning our illustrious award, the unbelievably highly paid Mr Thiam, together with his team of the finest intellects in The City, would have managed to pull off not one but two more howlers.

On the 25th May, it was reported that AIA’s chief executive, Mark Wilson, had told friends and industry executives that he intended to quit if the deal completed. Press reports said Mr Wilson would leave because the combination of AIA and the Pru’s Asian business was “unworkable”. Two senior executives, AIA’s finance director, Steve Roder, and its legal head, Peter Cashin, have already quit the company. So Mr Thiam plans to spend billions of other peoples' money, and to put at risk the funds for which he already holds the stewardship responsibility (how close is that to his attention, we wonder?), to acquire a business from which the leadership and local operational management knowledge will be absent. So here is someone else, as well as the FSA, that Mr Thiam has failed to persuade to come on side. This is definitely worth our first ever award of a Bloop Star.

But, hardly have we put the newspaper down, when we learn that a significant number of the shareholders have expressed serious reservations about the financial feasibility of the proposed acquisition - and there is now doubt as to whether Mr Thiam will be able to get the 75% shareholder support he must win to go ahead. The usual excuses are being trotted out by the financial analyst experts (who had clustered around, hands out for their millions of commissions, to help Mr Thiam concoct the offer) - the markets have changed, the economy, blah, blah - ignoring the fundamental lack of resilience within the proposed deal. Now, say the experts, the price to AIA must be reduced, so the US Government must lean on the AIA management to accept a lower price, and then the deal will be OK again. Now we have yet another group, as well as the FSA and the AIA management, that Mr Thiam has failed to persuade to come on side. This is definitely worth our first ever award of a Bloop Star SQUARED.

It appears that this whole deal is so flimsy and fragile that the smallest unexpected external variation is enough to put it at risk. And if the construction process is so lacking in basic robustness, what confidence can anyone have in the resulting structure? Dodgy builder equals shoddy house. The comparisons with the RBS grab for ABN Amro catastrophe, and (has anyone spotted this even more scary similarity?) the Lloyds TSB/HBOS wrap up, are compelling. Any Comparative Competitive Strength advantage (see our related blogs here too) for this venture is not visible - precisely the opposite seems probable. This is an origami house built of tissue paper - what will happen when the first shower falls?

So the Business Bloop Star and Star SQUARED awards go to Tidjane Thiam and the lesson to the rest of us is:

POOR PROCESS ALWAYS PRODUCES POOR RESULTS

For more on process thinking go to :http://www.changeworld.co.uk/gettingresults.html

Prudential – what went wrong with the rights.

2010-05-10T01:37:00.000-07:00

Our Business Bloop award this month goes to Tidjane Thiam Chief Executive of Prudential for his most recent “dropped ball incident” in his proposed takeover of AIA.

The deal is one of the biggest ever ($35.5bn) coupled with a record rights issue ($21bn). At 6.00pm on May 6^th Thiam squeezed one of the largest (and most expensive!) group of senior execs, advisors, lawyers and bankers into the Pru’s boardroom in the history of the game of sardines to set the price for the issue.

Then came the bombshell. At 7.30pm the FSA called saying they needed at least another 24 hours to clear the Pru’s plans for the capital it must hold to safeguard it against market shocks. For a further 3 hours Thiam and his Chairman tried to persuade the FSA to back down (what should you do when in a hole?). By 10.00pm with the FSA still not budging they took the only decision they could to abandon the rights issue and prospectus.

So as bloops go this was a mega and very public one. It has not only jeopardised the whole deal but it may be the end of Thiam’s career. Much has and will be said and written about what went wrong – is Thiam really up to making this deal work – did they really listen to the FSA’s concerns – surely they could see that a big cross border deal like this would go under the microscope – why such a tight timetable for such an enormous and high risk undertaking? All are valid questions but they do not answer the only question that matters. Why did it all go wrong?

The answer is - and you will only read this here – POOR PROCESS. Poor process will always deliver a poor result, except when it delivers a disastrous result.

Thiam’s proposal to buy AIA was a game breaking, bold and audacious idea. But that’s all it was, an idea, just one step beyond not having thought of it at all. To turn an idea, however good, into an effective reality that delivers the results you want needs a robust and sound process and this is what Thiam did not have.

He failed to assess his own and the Pru’s current reality in relation to the idea and consequently made poor decisions about how to take it forward. The tight timetable is just one example. Consequently planning was inadequate which in turn meant that who they needed on board, what they would want and how they could be persuaded was largely overlooked.

But why the poor process? The answer and again, you will only read this here, is that it stems directly from the deep seated managerial and behavioural values of the leadership of the business. These are always the main determinant of outcomes for any organisation. Thiam’s focus was and still is almost entirely on the idea and on driving it forward. This skewed the process around this one element and created a flawed process. This was compounded by the personal prestige and massive financial rewards involved. With all those juicy fees and commissions on offer which of the many advisors involved was going to tell Thiam he was getting it wrong?

So by the time he got to implementation disaster was pretty much built in and it was just a question of which wheel fell of first and when. Fortunately for the Pru’s shareholders it fell off before they stumped up $21bn.

So where does it go from here? Thiam and his colleagues are telling investors that the deal is still on but unless something changes expect more disasters, before and after. One factor that might concentrate minds is that if the Pru does not complete by August 31^st it must pay AIA $104m per month until it is. Plenty of time yet, well we shall see.

So the Business Bloop award goes to Tidjane Thiam and the lesson to the rest of us is:

POOR PROCESS ALWAYS PRODUCES POOR RESULTS

For more on process thinking go to : http://www.changeworld.co.uk/gettingresults.html

Business Bloop of the Month Award is brought to you by Steve Goodman & Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at “Exceeding Expectations", "You're having a laugh ... Seriously?, "Capitalism or ... Common Sense .

June's Business Bloop Award

2009-07-09T01:21:00.000-07:00

It is some time since we have awarded Business Bloop of the month. This is not due to shortage of candidates, but because we have been very busy on the launch of our new business Achievement Coaching International. To find out more about this go to the website http://www.achievementcoachinginternational.com/ .

One candidate is Total Oil who nearly won the award earlier this year. For the second time this year their contractors at their Lindsey Oil refinery provoked a wild cat strike. (one is unfortunate but two sounds like carelessness) The project is 6 months behind schedule with 100 million euros of additional costs. Under pressure from Total the contractors effectively caved in to the strikers, thus demonstrating that illegal strike action can still be an effective weapon in an industrial dispute. So there is now the potential for the UK’s industrial relations clock to go back 25 years. Quite an achievement all round when you think about it.

However even this has been eclipsed by the joint efforts of National Express and the Department for Transport (DfT) to bring about the collapse of the East Coast rail franchise. Having significantly outbid competitors in 2007 with a pledge to pay the government £1.4bn to run the service till 2015, National Express’ assumptions of 9 – 10% annual passenger growth have been shattered by the recession. After 5 months talks with the DfT recently broke down and National Express announced they would cease funding its East Coast subsidiary later this year.

This prompted the Transport Minister Lord Adonis to announce a temporary nationalisation of the line, and mutter darkly about stripping National Express of its other two franchises. Under the cross-default rules if an operator walks away from one franchise, it risks losing its others. So having risked a knock out bid to win the East Coast franchise, National Express may now be threatened with losing the whole of their rail business. Not too good for a company capitalised at just £428m, facing £460m debt refinancing next year and with predators, notably First Group, circling.

National Express insists that Lord Adonis has no legal powers to strip them of their other two franchises. In Dad’s Army the catch phrase was “Don’t Panic!” – in this case it’s “Let’s Pannick!” – as National Express have appointed Lord Pannick QC to advise them. We wonder just how confident they really are!

The key question though is how did National Express get into this position and is there a lesson for the rest of us? The easy answer is that they bid too much for the franchise and several commentators and competitors said so at the time. However a study of the motivations and decisions of two people get you nearer the root cause. These two people are Richard Bowker, until recently Chief Executive of National Express, and Lord Adonis himself.

Bowker arrived at National Express via Virgin Trains and the Strategic Rail Authority (where ironically he had taken the Southeast franchise off Connex). He had played a big part in designing the franchising contracts. Who could be better qualified to lead National Express and grow its rail business? Unfortunately National Express promptly lost two of its existing franchises on renewal, Midland Mainline and Central Trains. At two nil down, far from taking the rail business forward, Bowker appeared to be taking it rapidly backwards and was understandably desperate for a deal. Hence the bid for the East Coast line had a strong flavour of Win At All Costs about it.

Was Bowker just unlucky? With passenger numbers growing at 11% p.a. at the time of the bid without the recession it might have all worked. Our question is, did he consider the Competitive Strength of the National Express business when assessing the risks of his bid?

Competitive Strength is about understanding:

how capable a business is compared to those that want to beat it AND

how capable it is of mitigating the impact of those forces out there that can cause it to be beaten

Our own assessment of National Express’ Competitive Strength is that it was Comfortable at best and the losing of two franchises indicates that it was deteriorating towards Constrained. In this condition the company was very vulnerable to The Abyss “those forces out there that can cause it to be beaten” and so it has proved to be. Bowker therefore, through a combination of either ignoring or not understanding the company’s Competitive Strength condition and his own need to shore up his personal reputation and position, took risks with shareholders’ money that had not been fully and thoroughly assessed.

Equally the government, by ignoring or not understanding the same factors accepted the highest bid which, predictably in our view, has turned out to be the highest risk for the taxpayer. Lord Adonis has stated that he will not renegotiate a franchise “on principle” because then other train operators would seek to do the same. This sounds like sense on the face of it, though he if he has not been “renegotiating“, what has the DfT been talking to National Express about since February? Also, according to Lord Adonis, out of the 16 franchises, the only one in trouble is the East Coast.

Lord Adonis’ hard line has gone down well with elements of Old Labour and any new Secretary of State will find it hard to resist playing to the political gallery. He invited himself on to BBC’s Today programme to announce the temporary nationalisation. That may be good for Lord Adonis but is it good for the taxpayer? Probably not. Franchise contracts come with a revenue sharing or revenue support mechanisms to prevent excessive profiteering or failure. In reality, unless the passenger growth figures in National Express’ bid were maintained throughout the contract, it was very unlikely they would have paid the government anything like £1.4bn. In fact it has been calculated that the actual sum at stake in the present circumstance is £150 - £200m.

So it is not about the numbers at all and it is not about luck. The root cause of all this is the way the personal agendas of two powerful individuals became the dominant influence in decision making. The Business Bloop Award is for decisions that contain an “oops” factor that leads to unwelcome consequences. National Express has already experienced some of these, with more to come, at significant cost to their shareholders. Lord Adonis’ “on principle” stand on renegotiation has already effectively bounced the taxpayer into revenue support on the East Coast through the temporary nationalisation. He has no hope of re-assigning the franchise at a decent price. There is more bad news to come for the taxpayer.

So we award June’s Business Bloop of the Month jointly to Richard Bowker and Lord Adonis for reminding us to beware of clever people whose decisions are mostly about demonstrating how clever they are, without consideration for the people they are really accountable to.

Business Bloop of the Month Award is brought to you by Steve Goodman & Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. Each blog has a new article each month using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at - Exceeding Expectations - You're having a laugh ... seriously - Capitalism or ... Common Sense .

February's Business Bloop Award

2009-03-03T02:34:00.000-08:00

There were a number of candidates for February’s award. First we thought it might go to Total Oil. This company “lost sight” of the contracts it awarded for work on its facility in Lincolnshire and ended up with a boatload of Italian workers unable to start work whilst a series of wildcat strikes and blockades were mounted by disgruntled British workers. Total’s oversight managed to offend its local community, spark off wildcat strikes at other companies’ facilities and drop the Prime Minister in the hole he had dug for himself with his “British jobs for British workers” grandstanding. However when you are in a business with the difficult public image and relationship problems of the oil business, all three of these are constituencies you want on your side, rather than hating your guts!

However along came British Gas, who could probably qualify for the award every month. On this occasion they lost an appeal to strike out a claim from a lady wrongly threatened over gas bills. Lisa Ferguson changed her supplier from British Gas in May 2006, but still received bills followed by letters threatening to cut off her supply, start legal proceedings and report her to credit agencies. Ms Ferguson is now suing British Gas for unlawful harassment, claiming damages for distress, anxiety and financial loss. British Gas unsuccessfully attempted to strike out the claim before it reached trial. Their argument was, wait for it, that the letters were computer generated and Ms Ferguson should not have treated the letters as seriously as if they had come from a person. Those of you who buy your energy from British Gas might wonder if, since your bills are computer generated, you no longer need to treat them seriously?

However both these howlers were eclipsed by the England and Wales Cricket Board. As we all know they had signed a £70m sponsorship with “Sir” Allen Stanford who is now being investigated for alleged fraud and other possible criminal charges. This has not just been a blow to the finances, but it is seriously detrimental to the image and reputation of English Cricket. Not many sponsors are now likely to be queuing up to replace Stanford.

Much has been written about what the ECB should have done and should do, especially its Chairman Giles Clarke. However there is one lesson for us all in this which has not been picked up so far. It is often said, but much less often practised, that what really matters in business are people and relationships. Get this right and the money will generally work just fine as well. In the case of Stanford he had already been rejected by the Indian and South African boards and now it turns out, also by the ICC, as “not someone we can do business with”.

The lesson to learn from focusing first on the people and relationships is especially relevant when the money issues are “urgent/desperate” as they were in this case. Had the ECB, and in particular Giles Clarke and the Chief Exec David Collier, done their due diligence first and thoroughly on the man, and only then on his money, it is likely that they, like the other cricket boards, would have rejected any deal with Stanford.

But they didn’t. Therefore February’s Business Bloop Award goes to Giles Clarke and the England & Wales Cricket Board, with our gratitude for the lesson we can all learn from this, even if the ECB does not look like it has learnt anything. “If you always do what you always did, you will only get what you always got.” They just did, again by re-electing the failed – “Too much change all at once, not a good thing, don’t you know”!

Business Bloop of the Month Award is brought to you by Steve Goodman & Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. Each blog has a new article each month using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at Exceeding Expectations, You're having a laugh ... Seriously? and Capitalism or ... Common Sense .

January's Business Bloop

2009-01-12T06:11:00.000-08:00

We thought we would have to wait till the end of January before making our first award. However we are confident that this story will not be beaten and are awarding January’s Business Bloop of the Month to the Manor Restaurant, Waddeson Manor near Aylesbury.

This is described as offering fine dining and some of the best Rothschild wines amid the splendour of a 19th century stately home. However when the Fletcher family went for a treat they were disappointed with their meal. Marilyn Fletcher wrote to complain about poor food and slow service that had cost £127 for four. She described the food as “not much better than a school dinner”. She was astonished by the reply.

Simon Offen, the catering manager sent her an e-mail to say that he disputed her version of events after he had “watched and listened with interest to the video recording of her table”. Mrs. Fletcher may or may not be the customer from hell but she was understandably concerned that the meal had been recorded on CCTV and said that her family found it “disturbing” and felt “outrage at the invasion of our privacy”.

Now there is plenty of research on customer complaints and their consequences if not handled effectively. A satisfied customer is likely to tell no more than five people but dissatisfied customer will tell 10 or 12. Furthermore only around 1 in 10 dissatisfied customers will tell the service/product provider of their dissatisfaction. Also a complaint that is handled effectively will invariably turn a dissatisfied customer into a satisfied customer and advocate of your service/product. Finally, when it comes to judging the value of a service or product, extensive research has established that this is “whatever the customer perceives it to be”.

We do not know whether or not Mr. Offen is aware of any of this. However by using the CCTV and telling Mrs. Fletcher that “It is quite clear that whatever we do you will not be happy with us” and alleging her attitude was tainted by “a vindictiveness which belies the spirit of Christmas”, he appears to have provoked her to express her dissatisfaction to rather more than 12 people. We read the story in this weekend’s Sunday Telegraph which means she has now told over 635,000, the circulation of the Sunday Telegraph!

This is quite an achievement, a 52m% increase on the norm! This comes just after Christopher Rodrigues, Chairman of VisitBritain, warned that 50,000 jobs could be lost this year as a result of the recession and poor service would be responsible for some of them. “Poor value for money and poor service costs jobs and will cost more jobs in a recession," he said.

So we have no hesitation in awarding January’s Business Bloop Award to Simon Offen and Waddesdon Manor, with our gratitude for the lesson we can all learn from this.

Business Bloop blog is brought to you by Steve Goodman & Tony Ericson of ChangeWORLD. For more and less serious information and comment go to our Exceeding Expectations & You're having laugh .... seriously? blogs and the ChangeWORLD website