Tuesday, November 23, 2010

Bionic Powers

One of the most startling things about setting up a new business is the new awareness you develop around both costs and risks. It’s as though a bionic implant has been put in to alert you to where you might be paying too much – or where the risks of doing something are too high. An sensor goes off when something isn’t right.

Of course, there’s no implant, it’s the entrepreneur’s survival instinct kicking in. This is perhaps one of the biggest differences between entrepreneurial and established businesses. In the former, the person making the decisions has ‘skin in the game’. Financially. Emotionally. Reputationally.

In an established business, and I include mature social businesses here, the decision maker is normally one step removed from the consequences. She might hear the sensor going off, but instead ignores it. Or, more likely, leave it for someone else to worry about.

I have not attempted to hide the fact that my new business is 100% mine. There are a number of reasons for this. I do not want to be someone else’s plaything. I don’t want to deal with all the bullshit that comes with getting grants. But most of all, I didn’t want to insulate myself from that bionic sensor that you acquire when you have skin in the game. So when I needed money, I borrowed it.

Of course, not all entrepreneurs have skin in the game. Some, including some social entrepreneurs, will seek OPM (Other People’s Money) in the early stages. Often this is because they have nothing or can’t borrow.

However, my guess is that more of the OPM people fail, give up, get ripped off or don’t recognize risk as accurately as those who, from the start, use their own resources. Their bionic sensor is that bit duller than those with something of their own on the line.

This isn’t me having a go at anybody in particular. Success comes in many packages. Stelios, for example, used his Dad’s money at first. And social entrepreneurs are heroes of our society, whoever’s money they use. They are taking risks - period.

No, my point in writing this is to say that you are a better business person if you have skin in the game. A big financial commitment, in particular, switches on the bionic instinct that the salariat don’t use. My worry, if I have one, is that social entrepreneurs, because they are often using OPM, can lack this vital wiring for survival.

Wanna be a successful social entrepreneur? Go to the bank and take out a loan.

Thursday, November 18, 2010

An Open Letter to the Brothers

Dear Brothers (and Sisters, of course),

Social Enterprise. You clearly don't like it. You have tried very hard, up and down the land, to turn your members against it on the grounds that it is the same as privatisaiton. This isn't the case. Indeed given the chance to be part of an emerging social business or join, say, Serco, I suspect the differences would be very clear to see.

What puzzles me is why you're so against a way of doing things which is so close to the dreams of many of your founders back in the 19th century. The aspiration back them was for workers to have some control and ownership of the means of production, to have a voice and a say in the running of businesses. Compared to privatisation, social enterprise offers this in far greater amounts than either nationalisation or privatisation. There's little not to like from the trade-union worldview.

However I have overlooked something rather big haven't I? Yes, I have forgotten what you have, over time, morphed into from your better beginnings - as defenders of preferential terms and conditions for your members, regardless of how unsustainable these are and how much they cost the ordinary taxpayer. In fact, it's got to the point where you would rather have fewer jobs - an more unemployment - than jobs for all but lower wages and possibly shorter time for those in work (which is how the private sector got through its recession from 2008-10).

I used to be in a union. I was a shop-steward, believe it or not, as a 25 year old. I quit one day when I realised that the union didn't care about the service, just about the producer of the service. That didn't sit well with me because it was clear that the business had to change - and the workforce with it.

This isn't an argument against trade unionism (though I know it sounds like this). Unions are the hallmark of all successful societies. It is an argument against a particular type of trade unionism that is confrontational and ends up placing more power in the hands of managers than should be the place. Look at Germany where the unions sit on boards. That's what we need. Sharing, diversity and responsibility. A place at the table. A shared interest in the running of businesses. For me this is what social enterprise is about.

But instead all we hear is how it should all stay in the state. Poor.

From my piece in yesterday's Guardian

Last week, Cabinet Office minister Francis Maude said the government would encourage different forms of organisations for public sector staff taking over services, and more details are expected soon on the government's plans for new mutuals. By Christmas, we are likely to have seen the announcement of about 30 social enterprises from the public sector "pathfinder" programme, on top of the 30 or so organisations formed by NHS staff.

So this is a timely moment to examine the mutuals and social enterprises stepping out from the public sector.

Successful spinouts from the public sector tend to be led by outstanding individuals. It takes people who are willing to do two jobs at once (business as usual; plus, leading the divestment) and can see future benefits in terms of better, more flexible services, an engaged workforce and user community. They can recognise the hidden social and commercial value of a great business locked inside a large, cumbersome public body.

Mostly, spinouts involve quite big chunks of public business, many with a potential turnover of £20m or more. With some courageous exceptions, this is not a world of small teams of social workers making a go of it on their own. Within the current health and social care economy, the costs and risks stack up more comfortably if ventures are of a reasonable scale.

In addition, the spinouts are all relatively specialised. In areas such as mental health services, domiciliary services and community health services, specialism gives these new ventures a clarity of focus that, in time, will allow them to compete and expand into new places.

But how will these new social businesses fare in the world outside the public sector? That will depend particularly on how quickly they adjust to proper competition. While protected initially, these ventures will, within three years, be playing on a level field with other sectors.

My worry is that the public sector "deal" they step out with, including Tupe regulations on transferring staff and higher pensions costs, will remain unchallenged and these businesses, freighted with public sector culture and costs, will crash faced with cheaper competition in three years' time.

Another factor will be access to commercial capital and knowhow. This is lacking in most of the senior teams coming out of the public sector. They are, on the whole, passionate about clients, brilliant on operations, superb on practice/clinical governance issues, but lacking in capacity to understand the emerging shape of the market and to build investment cases around these. Filling this gap will be a major requirement.

Then there is the extent to which these new businesses can properly exploit the freedoms offered by no longer being part of a "big machine". There is hidden value to be extracted by being a smaller, leaner organisation. It means fewer meetings, leaner operations, improved absence and performance management, less bureaucracy, effective financial control and a healthier culture. The list could go on. But all these benefits depend on how quickly the managements of these ventures make the vital mental shift required from the skills required to succeed in the public sector to those necessary to win in business.

In developing these organisations, we must be grown up about reward. The people leading these businesses need to know that the personal and professional risk they are taking will be rewarded in time. So let's have open discussion on this.

There should be earlier help to establish the viability of particular social enterprise ideas. Rather than starting with a "right to request" we need to begin with the more hard-nosed question of what does and doesn't make commercial and operational sense.

For those seeking to step out of the public sector there has probably been no better time – but we must learn from those already out here and make it clear that survival will not be easy.


Tuesday, November 16, 2010

Guardian Social Enterprise Conference 2010

I hadn't had a whole day at a conference for ages so I decided to treat myself to the day ahead of chairing the final plenary.

Overall, good day. There were two big questions today. One was about how the social enterprise sector can work with the private sector. How can this work in practice? How can we overcome suspicion and work with each others' agendas to grow the pie? The other was about social enterprises emerging from the public sector. How will they get along? What will help them survive and thrive?

The big focus for the public sector part of the conversation was the 60 odd Right to Requests from the NHS. While only three are out, about 60 will become live in the coming two years. After that, Right to Request in its current form will be no more. No protected three year contract. Not necessarily transferable T & Cs - though we await more info on this. I asked Health Minister Andrew Lansley about the willingness of people to step out without a guaranteed contract to give them time to become competitive.

In my view this could put already hesitant people off. While I am all for any-willing-provider, the pragmatist in me realises that nascent public enterprises would get whacked in open competition on day one. They need a couple of years to get their act together. Without it I am worried the supply of the willing - already only trickle of 10% of the whole - will get cut off.

That said, life inside the public sector is no longer as comfortable as it was. The public sector pension is vulnerable and it is no longer a safe place. Escape has probably never looked more attractive. CEO of City Healthcare, Andrew Burnell, described his journey as one of liberation. Time spent spinning around paperwork and managing upward is now spent running his business.

As MD of Stepping Out, today felt heartening. There is realism and appetite. But a lot of questions. All of these new ventures will need rapid reform and investment if they are to compete. It has never been a more interesting time to be in social enterprise

Monday, November 15, 2010

Why People Don't Vote in Council Elections

This is my last blast on the recent local by-election. I wrote the other day about the stupidity of all of the parties fighting for second place and, in doing so, letting the Tory in with 28% of the vote. But the real scandal was how few people got this gentleman elected. Turnout was down to Burmese levels - about 8% of eligible voters chose this guy to be their Councillor.

This is perhaps the real talking point. Why is the figure so low? I venture three reasons. One is that the political parties are a closed-shop. They keep local politics mostly to themselves, ensuring normal folk don't get a look in. Come along as an Independent and they will shut you out, however good you are.

Secondly, people know in their hearts that local government in the UK has been secondary to what goes on in London. Thirdly, local government is just, well, dead boring really. We don't reach out or connect. We never do referenda. The public can come in and ask questions but have to endure long, read-out answers. Meetings occasionally rise to the challenge of an issue but often become like a amateur dramatics version of Westminster with mock braying and cheering, regardless of the complexity of the issues at hand.

Thirdly The Council is also stultifyingly homogenious. The elderly are seriously over-represented. Only a handful have proper jobs. There is not ONE black Councillor. Hardly anyone is under 40. There are quite a few women, granted, but hardly young ones. This has got worse, I am told, in recent elections.

The lesson of failing places is that challenge, diversity and plurality are the hallmarks of better society. You get better politics and better outcomes. While I love Suffolk, there is much to be concerned about. Our school attainment is mediocre, our economy not as strong as it could be, our future direction in the knowledge-based economy, I feel, unclear. Our Council, at senior and officer level isn't making a bad fist of addressing some of this - but it needs stronger institutions and better, more pluralistic representation, debate and challenge to make this place the best it can be.

Sunday, November 14, 2010


Just arrived back from our Remembrance Day event on Angel Hill in Bury St Edmunds. Hemmed in on four sides, this oblong 'grand-place' makes for an atmosphere. It felt like thousands were there, even though I dare say the numbers were in the high three figures. Bury is one of those places in England that does tradition very well. People here respect our armed forces and turn out to remember them - and applaud them as they paraded past us.

I was supposed to be there as part of the civic group, but I somehow struggled to put myself out there, marching along with the young people who have been taking bullets in Helmand, or indeed the ageing WW2 veterans in their blazers, medals and berets. I somehow felt better in the crowd.

I took my boy who loved the spectacle. Having your male child with you when you reflect on the experience of people only 15 years older than him who are walking in front of your eyes I found quite affecting. Yes, I thought, I could be here watching my own son marching by. I actually know someone locally on my patch who has two sons who have just completed a tour in Helmand. How quite she manages, having both out there I don't really know. The East Anglians have suffered as much as any regiment in Afghanistan and she probably has a sense of dread whenever the phone or doorbell rings.

I'll make no secret of it, I love the Army and the military. I respect their values and their approach to things. I admire their solidarity, their professionalism and their quality. In terms of pay, conditions and privations they put up with more than the rest of the public sector put together. But do they moan? Or go on strike? No, they get on with the job, as a matter of pride.

Although I am made of far too gooey stuff ever to have made it in the Forces, I see their values as part of how I seek to live.
I suspect this makes me look slightly absurd in the eyes of my mostly Guardianista readership but I know, in a crisis, who I would rather be stuck in a tricky spot alongside.

It wouldn't be a group of politicians for sure.

Saturday, November 13, 2010

A Step Backwards in Suffolk

Local party politics can be pretty dire. Here in Bury St Edmunds we've had a by-election for the County Council due to a Conservative standing down early. In his stead, they put up the former Tory Councillor who I, as a rookie newcomer, beat into third place in the neighbouring seat in 2009, a retired gentleman of unquestioned good character but, I think he would admit, not quite his younger self. In a sane political world, this chap should have lost. But he won, adding yet another Conservative male of advancing years to the Council's already limited gene-pool.

Now, the reason he won isn't because he got lots of votes. In fact he got just 28% of the poll. He narrowly beat a popular and capable local independent who got 27% - a man with a strong local track record who personally delivered 10,000 leaflets. Making up the rear were Labour, the Greens and us all with between 300 and 550 votes - or under 15% each.

Before the election, some of us were making the case for standing a couple of candidates down so to give the Independent - who was a clear front-man - a chance to beat the Tory. This made sense. In a Conservative-dominated county, the electoral arithmetic, under the FPTP system, guarantees big Tory majorities on all of our councils. Winning this one by tactical withdrawal might, we thought, set a healthy precedent. If we can collaborate in power at national level, surely we can do so at local level?

Well no, apparently not. All of the parties put people up in the mis-guided belief that not doing so makes them look weak or somehow, lowers their profile for the future. Noises are made about giving people a proper choice but it's really about not losing face and, in some cases, reflects low-feeder personal rivalries.

I sound hacked-off I know. If this stuff really, deeply mattered, I perhaps would be. Were the stakes that high, it would be worth a few hours of grumpiness. But it is, at the end the day, a by-election that alters very little here in Suffolk. My principal disappointment comes from the realisation it gives me that the Tories will probably run this place on their own forever and a day while the rest of us scrap for second place.

This wouldn't be so bad if our councils were vibrant, diverse, politically balanced places. But they're not. They are homogenous, incurious dead-zones, unrepresentative and non-plural. It's bad for politics and, ultimately bad for the people. Pluralism, diversity and challenge means better politics and sounder decision-making. This week's result felt like the opposite of this. A step backwards.

Thursday, November 11, 2010

To Match my Dad I will need to become a millionaire!

My Dad was a well-paid senior manager in a private company of about 50 people turning over £20m pa. He got made a Director just before the end, turned 65 this year and promptly retired. He's setting up in business again now but he doesn't need to. His company and state pensions will keep him comfortable for life, he has no mortgage on the Exec home he bought for 40 grand in the 80s and his three kids went through college for free. He has a second property (rented to my brother!) and loads of shares from the privatisations of the past. In other words, he's sorted.

For me to achieve the same level of care-freedom by 65 I have, I have calculated, to become a millionaire. For a start, my pension is worth about 25 grand - four more than the 21k I have paid in since I was 24 year old. My mortgage is just over a quarter of a million- nothing unusual there I find when speaking to friends. And my two (maybe three) kids will need 30k min each off me to help them through college.

So let's assume I need a pension-pot of say half a million (on a 5% yield this gives me 25k pa), I pay about 400k in mortgage payments over the next 25 years - including the interest and I spend 100k on my kids education - and I need a million quid.

For my Dad's generation, it was possible to have a decent career to know you could do all of the above pretty comfortably. For ours, to get to 65 and have all of those boxes ticked means one has to be earning extremely well - or succeed in business.
Or, of course, in the case of pensions, be in the public sector.

While we are getting wealthier as a society, the truth is that the wealth is unevenly distributed across generations. My Dad's generation bought then sold the cheap houses, enjoyed the stock market boom and free education. My own didn't. The next generation - my son and daughter's - have it even harder, I believe, judging by the position most 20 year olds even today are in.

My main irritation with the CSR - in addition to the Housing Benefit mess - is its failure to tax the affluent over 65s. Their Winter Fuel Allowances, free travel cards and state pensions are not needed by many. They can't quite believe their luck, the few I have talked to. But they are numerous - and they vote.

Sunday, November 7, 2010

Failing While Succeeding

This week the pace finally caught up with me. I woke up on Saturday morning feeling like the world was falling in around me. My heart pounded. My head teemed with frightened thoughts. I got up, took some breaths and took my usual therapy - a ten mile run. I was staying at my parents s it was fell-running on the West Pennine Moors, a National Trust site of bleak, rain-drenched beauty. Today it was drenched in sun, blue, bright, vivid. An hour and a half later I would like to say I arrived back glad again with my head straight- but I still felt pretty grim.

I had, of course, overdone it. A fourth 70 hour week on the trot had sent me into a pretty dark place from which I knew I would emerge but in the meantime would have to sit out. This failure to remember my own frailties, even in a period when business is, so to speak, booming, is a recurrent theme for me. Even in my 40's I seem as likely to run myself into the buffers as I did as a hungry 25 year old.

The day was softened by a trip to the Reebok Stadium to see my beloved Bolton thrash Spurs 4-2. My companion was the lovely Hannah Eyres of Keyfund who has close connection with the club and gets me into the posh seats. Hannah was, as always, as sunny as the day and I came away feeling a lot better than when I arrived.

Today has also been decompression-time. Out in the park there is a large pond. Just looking at it calms me down. It is full of massive carp that prowl just under the water like hostile U boats. We took our net and failed to capture anything, despite repeated baitings of bread.

At lunchtime today, for the first time in days, calm descended, I hope for a while. There is an art to life which I am slow to learn. It's about pacing, creating manageable demands and actually enjoying the ride. For 80% of the time, I feel in a good place. The other twenty can be pretty dire. At times, utterly so.

When deciding to set up a new business I knew the biggest risk I was taking was with my mental health, as much as my money. While I will always back myself in business-terms, I am not always sure my mental and emotional self will last the course. The scale of success to which I aspire is not matched by my constitution, which seems to throw me into the abyss if I am working more than 60 hours a week for any length of time.

I am discussing this because I don't think the demands and stresses of work are really discussed on blogs. We tend to focus on issues, our views and those we have met. The inner world we inhabit as entrerpreneurs, CEOs or whatever is never discussed. My own belief is that a lot of people skate on extremely thin ice. And that despite how 'sound' we all are now about mental health at work, those of us in leading roles tend to keep quiet about it, perchance we are seen by others as 'flaky' or weak.