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
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Calum Kerr on Governing the Digital Economy

With the publication of the UK Digital Strategy we’ve seen another instalment in the UK Government’s ongoing effort to emphasise its digital credentials.

As the SNP’s Digital Spokesperson, there are moves here that are clearly welcome, especially in the area of skills and a recognition of the need for large scale investment in fibre infrastructure.

But for a government that wants Britain to become the “leading country for people to use digital” it should be doing far more to lead on the field that underpins so much of a prosperous digital economy: personal data.

If you want a picture of how government should not approach personal data, just look at the Concentrix scandal.

Last year my constituency office, like countless others across the country, was inundated by cases from distressed Tax Credit claimants, who found their payments had been stopped for spurious reasons.

This scandal had its roots in the UK’s current patchwork approach to personal data. As a private contractor, Concentrix had bought data on a commercial basis and then used it to try and find undeclared partners living with claimants.

In one particularly absurd case, a woman who lived in housing provided by the Joseph Rowntree Foundation had to resort to using a foodbank during the appeals process in order to prove that she did not live with Joseph Rowntree: the Quaker philanthropist who died in 1925.

In total some 45,000 claimants were affected and 86 per cent of the resulting appeals saw the initial decision overturned.

This shows just how badly things can go wrong if the right regulatory regimes are not in place.

In part this problem is a structural one. Just as the corporate world has elevated IT to board level and is beginning to re-configure the interface between digital skills and the wider workforce, government needs to emulate practices that put technology and innovation right at the heart of the operation.

To fully leverage the benefits of tech in government and to get a world-class data regime in place, we need to establish a set of foundational values about data rights and citizenship.

Sitting on the committee of the Digital Economy Bill, I couldn’t help but notice how the elements relating to data sharing, including with private companies, were rushed through.

The lack of informed consent within the Bill will almost certainly have to be looked at again as the Government moves towards implementing the EU’s General Data Protection Regulation.

This is an example of why we need democratic oversight and an open conversation, starting from first principles, about how a citizen’s data can be accessed.

Personally, I’d like Scotland and the UK to follow the example of the Republic of Estonia, by placing transparency and the rights of the citizen at the heart of the matter, so that anyone can access the data the government holds on them with ease.

This contrasts with the mentality exposed by the Concentrix scandal: all too often people who come into contact with the state are treated as service users or customers, rather than as citizens.

This paternalistic approach needs to change.  As we begin to move towards the transformative implementation of the internet of things and 5G, trust will be paramount.

Once we have that foundation, we can start to grapple with some of the most pressing and fascinating questions that the information age presents.

We’ll need that trust if we want smart cities that make urban living sustainable using big data, if the potential of AI is to be truly tapped into and if the benefits of digital healthcare are really going to be maximised.

Clearly getting accepted ethical codes of practice in place is of immense significance, but there’s a whole lot more that government could be doing to be proactive in this space.

Last month Denmark appointed the world’s first Digital Ambassador and I think there is a compelling case for an independent Department of Technology working across all government departments.

This kind of levelling-up really needs to be seen as a necessity, because one thing that we can all agree on is that that we’ve only just scratched the surface when it comes to developing the link between government and the data driven digital economy. 

In January, Hewlett Packard Enterprise and the New Statesman convened a discussion on this topic with parliamentarians from each of the three main political parties and other experts.  This article is one of a series from three of the MPs who took part, with an  introduction from James Johns of HPE, Labour MP, Angela Eagle’s view and Conservative MP, Matt Warman’s view

Calum Kerr is SNP Westminster Spokesperson for Digital