Should we kill off unproductive companies?

The out-of-business business.

The out-of-business business has done a roaring trade this month, as a walk down any high street will testify.  But the staff of one closed store using their empty shop window to advertise themselves as available for work was a heartbreakingly public illustration of what each redundancy actually represents. Stories like that one have been painful to read, but it was both right and necessary that the media (including this newspaper) made space for the victims of these events.

Amid the concern for the newly-jobless, however, has come new talk around an old idea: the notion that some insolvencies can actually promote recovery in the economy. The theory is that labour and capital can be released from fundamentally unproductive companies, to re-enter the system in some more productive context.

For that to hold true in practice, however, the conditions must be in place for capital and labour to be reabsorbed into the economy. That means strong growth – assets find a market, staff find new jobs, creditors can offset loss. But an economy which is currently only adding new jobs at the rate of a few thousand a month will struggle to place the newly-redundant back into work. Therefore, one must sound a note of caution before we decide that unproductive companies should all be killed off.  If the current rash of large-scale insolvencies was indeed a side-effect of the recovery, there would be no cause to worry, but that is clearly not the case.  The economy is simply not adding enough jobs to re-employ those left without work.

By the time a business enters administration, it is generally beyond all help, but the end should not come as a surprise to those in charge. One reason that it might, is that the means used to measure productivity within companies are often inadequate, and provide an incomplete picture at best.  It’s fairly easy for the leader of a small business to look around his or her office and, from the ringing of the phone alone, gain a fairly clear grasp of the productivity of their company.  It’s far harder for the management of a retail chain with hundreds of locations and thousands of employees. That’s a major problem because, if business leaders cannot analyse productivity effectively, then many of their decisions will be based on little more than guesswork.

When attempting to arrest a slide in revenue, or a loss of market share, it ought to be relatively simple to identify the points at which productivity and effectiveness can be improved.  These might include things like closer centralised control of planned absences like holidays, to reduce reliance on costly agency staff; another might be better assessment of the peaks and troughs of customer demand.  Indicators like these allow a much clearer insight into whether problems are internal or external, and whether internal reforms, or more radical measures, are required to return the organisation to health. 

Similarly, the measurement (and projection) of customer loyalty is often left to the most basic analysis, while the factors affecting it are multifarious and complex. No business’s cashflow is immune from the impact of customer loyalty, whether positive or negative, and any kind of long-term planning demands some means to accurately predict what will motivate customers to keep spending.  Indeed, research suggests business leaders are not doing enough to impress their customers: less than half of UK consumers say they are satisfied with the service they receive from organisations including retailers, banks and phone companies.

Of course, some firms do fall victim to truly exogenic factors, and not all businesses can succeed, but those are largely the exception rather than the rule.  Bosses should not be spared blame if they do not do all they can to identify and fix inefficiencies within their business or, indeed, if they pretend to be surprised when their creditors finally run out of patience.

One of the most horrid features of the recent series of bankruptcies was the extent to which staff were kept in ignorance of the state of the company.  At the shop mentioned previously, employees only found out that the company had folded when a journalist phoned the store to ask for comment. That’s unforgiveable – when the writing is on the wall, executives should recognise it, and seek to wind up their company in an orderly fashion. 

Equally unforgivable is if they never made an effort to read that writing in the first place. Business leaders carry an inherent responsibility for those that work for them, ensuring that they stay productive and that the business keeps competing. That entails a duty to make mature decisions about the future of the business, and a duty to do so in full possession of the facts.

Claire Richardson is a VP at customer relations consultants Verint.

Closing down. Photograph: Getty Images
Photo: Getty
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If the left leaves it to David Cameron, we'll have Brexit for sure

Only an upbeat, leftwing case can keep Britain in the European Union.

After months flapping and hesitation, and with much of the reporting and detail so dull that it has barely penetrated the consciousness of even those who speak the language of ‘directives’ and treaty provisions, the EU referendum is upon us. With David Cameron signalling concrete outcomes for negotiations, we seem to be set for June, whatever the protests from opposition parties about the date being too close to local and national elections.  

Cameron’s deal, whose most substantive element consists of denying in-work benefits to European citizens, exemplifies the kind of debate that Conservative strategists want to create: a tedious, labyrinthine parochialism, blending the EU’s procedural dullness with an unquestioned mythology of the little Englander. Try actually reading the various letters, let alone the draft decisions, that Cameron extracted from Donald Tusk, and the agreement turns to putty in your head. But in summary, what Cameron is negotiating is designed to keep the EU debate as an in-house affair within the right, to continue and formalise the framing of the debate as between two strains of anti-migrant sentiment, both of them backed by big business.

The deal may be reactionary, but it is also mediocre in its scope and impact. The worries that many of us had in the leftwing pro-In camp, that Cameron’s deal would push back freedom of movement and working and environmental protections so far that we would be unable to mobilise for continued membership of the EU, can now be put to bed. Quite the opposite of allowing Cameron's narrative to demoralise us, the left must now seize an opportunity to put imagination and ideas back at the heart of the referendum debate.

The British political landscape in which that debate will play out is a deceptively volatile environment. Party allegiance is at a nearly all time low. Inequality is growing, and so is the gap between attitudes. The backbone of the UKIP vote – and much of the Out vote – will come from a demographic that, sometimes impoverished by the legacy of Thatcherite economic policy, sees itself as left behind by migration and change. On top of the class war, there is a kind of culture war underway in today’s Britain: on one side those who see LGBT rights, open borders and internationalism as the future; on the other side, those who are scared of the future. About the only thing these groups have in common with one another is their anti-establishment instincts, their total disdain and mistrust of politics as usual.

The only political movement to have broken through the fog of cynicism and disillusionment in British politics has come from the left. Jeremy Corbyn’s rise to the leadership of the Labour has unleashed something new - and while large parts of the press, and some Labour backbenchers, have portrayed this rise as a crusade of the “croissant eating” metropolitan elite, the reality is very different. The rise of the new Labour left has given voice to a renewed socialist and working class politics; its explicitly radical, outsider approach has given it traction across the social divides – among the young looking for a future, and among Labour’s old base. 

A politics of hope – however vague that term might sound – is the only real answer to the populist Euroscepticism that the Out campaign will seek to embody. Radical politics, that proposes an alternative narrative to the scapegoating of migrants, has to find voice in the course of this referendum campaign: put simply, we need to persuade a minimum wage worker that they have more in common with a fellow Polish migrant worker than they do with their employer; we need to persuade someone on a social housing waiting list should blame the privatisation of the housing market, not other homeless families. Fundamentally, the real debate to be had is about who the public blames for social injustice: that is a question which only the left can satisfactorily answer.

The outsider-led volatility of British politics gives the EU referendum a special kind of unpredictability. For voters who have lost faith in the political establishment – and who often have little materially to lose from Brexit – the opportunity to deliver a blow to David Cameron this summer will be tempting. The almost consciously boring, business-dominated Britain Stronger In Europe campaign makes a perfect target for disenfranchised public sentiment, its campaigning style less informed by a metropolitan elite than by the landed gentry. Its main weapons – fear, danger and uncertainty – will work on some parts of the electorate, but will backfire on others, much as the Better Together campaign did in the Scottish referendum.

Last night, Another Europe is Possible held a launch meeting of about a hundred people in central London - with the backing of dozens of MPs, campaigners and academics across the country. It will aim to provide a radical, left wing voice to keep Britain in the EU.

If Britain votes to leave the EU in June, it will give the Right a mandate for a renewed set of attacks on workers’ rights, environmental protections, migrants and freedom of movement. But without an injection of idealism and radicalism,  an In vote will be a mandate for the status quo - at home and in Brussels. In order to seize the real potential of the referendum, the left has to approach the campaign with big ideas and demands. And we have to mobilise.