Month: December 2015

Whisper it, but in 1958 Monty got it right about China

Q The Chinese president has just visited the UK and David Cameron has made a big deal about how trade with China will be a driver of the UK economy. Are we putting too many eggs in one basket?

A In 1958, Field Marshall Montgomery visited Oundle, where I was a 15 year old schoolboy.

He made a big impression.

I remember seeing him on the touch line, watching the 1st XV and I was next to him in the tuck shop while he queued to buy a portion of chips. I also remember him addressing the whole school when, after a dramatic pause, he told us, with his distinctive delivery, “The future of the world lies in China”.

Nearly sixty years later it seems that Monty was right. He would certainly have approved of David Cameron creating such a positive dialogue although I suspect he would have been amazed to find that an important part of our energy supply is to be built using French and Chinese capital.

With much of our other energy sources being under German and Spanish ownership, I wonder whether it is wise to allow any more of this vital part of the economy to be in foreign hands.

The state visit has had such a high profile it certainly seems that Xi Jinping is David Cameron’s new best friend, but it is unfair to suggest that he is putting all his eggs in a Chinese basket.

This new source of capital might seem an ideal way to fund future infrastructure projects but as growing businesses discover when they are backed by venture capitalists, their new partners see life from a different perspective, talk a different language and the financial support can bring some onerous obligations.

As he found following his recent budget George Osborne must be wary of unintended consequences.

Q I see you have just published a book on your 50 high street heroes. Why don’t more women feature in your list?

A In my early days at Timpson the most senior women were Miss Creasey who ran the typing pool and Doris Ferguson our welfare officer. After a big battle they were allowed to use the junior executives’ dining room.

Although no women got anywhere near the Board Room, unless they were taking notes or serving tea, looking back it is clear that women had a much bigger influence on our success than most men realised. Secretaries subtly saved their boss from silly mistakes, the girls in accounts kept an eagle eye on the detail and the shop assistants, most of whom were women, were the people who ultimately made the money.

I can now reveal that for the last 47 years a woman has played a major part in our success; at many critical moments my wife Alex has provided much needed common sense advice.

So, for years, women have not only been the better shoppers but they have also had a major influence on how shops are run.

Few get the credit they deserve and even fewer have risen to the top of retail management. But that is all about to change, not just because of the drive for a quota of women in the boardroom.

More flexible working, easier access to child care and the high percentage of women graduating from university now give women an almost equal chance of getting the top job and have helped most people realise that the best man for the job could well be a woman.

It won’t happen overnight. There have already been plenty of role models like Anita Roddick of Body Shop, Laura Ashley, Mary Perkins who founded Specsavers and Jacqueline Gold who runs Ann Summers but while most shoppers are women, high street boardrooms are still full of men.

The surge in importance of HR departments has helped, as has the fast growing number of top women accountants.

I have seen the future at first hand. Sue runs our Max Spielmann photo business, Ann runs Snappy Snaps, Tricia looks after our Property Department, Helen heads our Finance Department and half of our executive directors are women.

I have a simple approach. To become a great business you need to employ the best people and there is a fifty fifty chance that the ideal colleague will be a woman.

In fifty years time when many more women will head retail companies, shops will be run by more people who are in love with shopping. But, in case the pendulum swings too far, could I put in a plea and point out there is still a role to be played by men.

My book reveals 45 male high street heroes and I’m sure that there will still be a few men following in their footsteps.

Think carefully before opening more shops – it could be the worst decision you’ll ever make

Q. My question concerns my son. After thirteen years in the catering trade, he decided to join in a venture with a very good friend.

His pal had opened a health food cafe some 18 months ago and succeeded in establishing a popular business.

He joined him as a partner, and invested in another cafe, which opened within the last month. This too has gone well.

My question is although both businesses are still quite young, and they are both working hard, they have both realised that in order to make this really work they will have to open more outlets.

What would be your view on when this should happen?

A. New businesses are often in a hurry to get bigger but it is wise not to rush.

Your son and his partner have just launched a second outlet and still enjoy the advantage of hands-on management.

As soon as they open another they’ll have to hire a manager who will need supervision.

Why is your son so desperate to get a bigger business?

Big doesn’t always mean better. If the current restaurants make a loss the more outlets they open the more money they are likely to lose.

If, however, as I hope, the two restaurants both make money, before starting to grow them into a chain, why not see how much money can be made by running the two of them even better and building a great reputation.

I’ve already hinted that running lots of outlets can bring lots of complications.

When I studied Industrial Economics at Nottingham University I learnt all about economies of scale, so I understand why managers are tempted to think that a bigger buying power will increase margins and transform profits.

But growing companies can find that overheads, created by a “head office”,soak up all the money made on the shop floor.

We reckon the employment cost of an extra office colleague wipes out the profit of an average shop!

Too many growing companies bring in an expensive general manager who spends all the profit without improving the business.

Your son and his partner are starting a long learning experience. Once they decide it is time to expand, as well as keeping a tight control on overheads, they will have to find the right sites at an affordable rent and resist the temptation to overspend on shopfitting costs.

Most of all they will need to trust colleagues and delegate. It will be vital to pick positive people with the right personality to help them grow their business.

One day your son could have 50 or over 100 restaurants. But, on the way, he and his partner will need plenty of patience and a lot of luck.

Q. Talented people with a strong personality are sometimes difficult to manage. What strategies would you suggest to ensure that such people stay onside?

A. I want people with a strong personality and like colleagues who take responsibility and use their initiative. But you ask a very good question.

Even our free upside down style of management must make sure that we only have team players. Some strong personalities are simply not for us.

We certainly don’t want selfish, bloody-minded rebels with a chip on their shoulder. Extreme characters must be quickly encouraged to find their happiness elsewhere.

Forceful personalities need the guidance of a strong company culture.

The way good management works best is when the chief executive and senior team create the strategy, set the culture and then give colleagues freedom to deliver the detail.

Management are there to help their team. Culture and strategy set the scene, there is no process, no KPIs and no need to issue orders.

Given trust and authority, your strong personalities will deliver the goods.

This is very different from the Corbyn School of Management, which expects party members to help set the strategy and then puts policy into practice by taking away individual freedom and making everyone follow a process policed by central government.

In contrast I’m in favour of “Upside Down Government”.

To succeed, a business needs big personalities but no one should think they are bigger than the business. You will interview plenty of self-confident extroverts but make sure you pick Mr. Happy, Miss Punctual, Mr Smart and Mrs Helpful and avoid Mr Greedy, Miss Selfish, Mr Rude and Mrs Bossy.

Is the new apprenticeship levy good or bad for business?

Q: We’ve had a week to digest the Autumn Statement and Comprehensive Spending Review. Now that the dust has settled, do you think it was broadly good or bad for business?

A: After every budget statement (and we seem to get plenty of them these days), it is natural to look at the proposals from a personal point of view.

In his attempt to balance the country’s budget the Chancellor has made it almost impossible for us and other retailers to balance our budgets. No wonder Dave Lewis of Tesco is unhappy.

With sales pegged by zero price inflation, it will be tough to pay for the living wage, auto enrolment and the proposed apprentice levy and still have enough money left for planned future investment.

Perhaps shopkeepers are getting paranoid but facing a further delay before putting some sense back into business rates suggests that either George Osborne is in no hurry to readjust the tax burden between on-line and high street retailers, or his civil servants simply can’t find another way to raise the £27.3bn.

hoped this statement would show signs of turning my dream of “upside down government” into a reality. Optimistically I looked for less red tape and the cutting of central costs by a government that recognised that most wealth is created by private enterprise.

In my dream, ministers recognised that their role is to support business, not by telling executives how to do their job but by clearing obstacles that get in the way of success.

The apprenticeship levy has turned my dream into a nightmare.

At a stroke, this thinly designed payroll tax has introduced a new bundle of red tape designed to dictate, in detail, how we run our business.

Every new Timpson colleague joins our apprentice scheme, a comprehensive programme that covers all our services including cobbling, key cutting and watch repairs. We have developed a full set of illustrated training guides and a rigorous skill testing system.

Colleagues are required to be fully qualified in all our services by the end of their 12 month apprenticeship. It’s an expensive exercise but money well spent. It is the only way to make sure we provide a quality service in every shop.

In addition we will now contribute 0.5pc of payroll as an apprentice levy, without getting any of it back to pay for our own apprenticeships.

So what happens to the extra £750,000 we put into the apprenticeship pot if it doesn’t help to pay for our gold star training scheme?

First, there is a new standards body to fund, an extra arm of government which will set the rules and decide what boxes have to be ticked. Although its membership will be drawn from industry this new agency will be guided by back room staff who will be keen to develop a process and run apprenticeships by their rule book.

The rules will call for national training standards. Good news for the massive structure of training agencies and independent training providers, who are already sharpening their pencils ready to tick all the right boxes on industry’s behalf.

It’s ok for the engineers, they have a nationally approved training structure. But there isn’t a national apprentice scheme for cobblers and key cutters, we have had to develop our own.

Over the next few months we will be pestered by training providers keen to tweak our training scheme so that we can qualify for some modest training grants while they earn a substantial slice of the levy for themselves.

We prefer to stick to our own scheme even if we pay the levy and get nothing back, but it’s a pity that so much of our money looks likely to be used to fund more bureaucracy and increase red tape.

Q: Black Friday retail sales were far below expectations. Should we just forget it next year?

A: I get the impression that retailers have had a pretty poor November. The terrorist attack in Paris reduced footfall in big shopping centres and Black Friday doesn’t seem to have made things any better.

When I was a lad, working alongside old fashioned retailers, we had a simpler approach to special offers. We sold everything at full margin up to Christmas and sold off the surplus stock in a January sale.

Apart from the furniture and carpet stores that have always promoted price reductions throughout the year, the only shops that put on offers before Christmas were multiple tailors including John Collier and Hepworths who mainly sold made to measure suits with a 10-day delivery.

Understandably, they started their sale as soon as a new suit couldn’t be delivered by Christmas.

Gerald Ratner was one of the first retailers to provocatively cut prices in early December. He enjoyed two years of spectacular success before finding it was impossible to bring out even bigger bargains year after year.

Despite lower margins his jewellery sales were on the slide before his unfortunate speech to the IoD made matters much worse.

More recently some of the department stores along with M&S have lost their nerve and held short and sharp pre-Christmas sales to boost flagging sales, but Black Friday has spread the discount disease right across the high street and it is now in danger of becoming a permanent feature of the on-line shopping calendar.

As a trainee shoe buyer I was taught that anyone can increase turnover if they give the goods away, but it takes a clever merchant to make enough margin to make real money. I wonder whether some of the Black Friday backers are buying record turnovers at a record level of loss.

After a few years, special bargain events aren’t that special any more, but once you start taking the price promotion pill it is difficult to break the habit.

This year’s disappointing sales may reduce retail enthusiasm for Black Friday in 2016, but it will be a very long time before retailers realise the benefits of a full-price Christmas followed by a genuine January sale.