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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Is Britain about to leave the European Union?

A series of bad polls have pro-Europeans panicked. Are they right?

Is this what Brexit looks like? A batch of polls all show significant movement towards a Leave vote. ORB, a phone pollster, has Leave up four points to 46 per cent, with Remain’s leave cut to four points. ICM’s online poll has Leave up three points, putting Brexit ahead of Remain by 52 per cent to 48 per cent once don’t-knows are excluded. ICM’s phone poll shows Leave up six points, a Brexit lead of three points.

That two phone polls are showing advances for Leave are particularly significant, as telephone polling has tended to show lower figures for Brexit. There is a lively debate over which method, phone or online, is likely to be more effective at predicting the referendum, although no-one knows for certain at the present time.

In any case, whether on the telephone or the Internet, the latest polls have pro-Europeans worried, and Brexiteers jubilant. Who’s right?

There are reasons to start trusting the polls, at least as far as voter ID is concerned

So far, the performances of the political parties in local elections and by-elections has been about par with what we’d expect from the polls. So the chances are good that the measures taken post-2015 election are working.

Bank holidays are always difficult

I would be deeply cautious of reading too much into three polls, all of which have been conducted over the bank holiday weekend, a time when people go out, play with their kids, get wasted or go away for a long weekend. The last set of bank holiday polls gave Ed Miliband’s Labour party  large leads, well outside the average, which tended to show the two parties neck-and-neck.

Although this time they might be more revealing than we expect

One reason why the polls got it wrong in 2015 is they talked to the wrong type of people. The demographic samples were right but they were not properly representative. (Look at it like this – if my poll includes 18 actors who are now earning millions in cinema, I may have a representative figure in terms of the total number of Britain’s millionaires – but their politics are likely to be far to the left of the average British one percenter, unless the actor in question is Tom Conti.)

Across telephone and online, the pollsters talked to people who were too politically-motivated, skewing the result: Ed Miliband’s Labour party did very well among young people for whom Thursday night was a time to watch Question Time and This Week, but less well among young people for whom Thursday is the new Friday.  The polls had too many party members and not enough party animals.

But the question no-one can answer is this: it may be that differential turnout in the European referendum means that a sample of hyper-politicos is actually a better sample than an ordinary poll. Just as the polls erred in 2015 by sampling too many political people, they may be calling the referendum wrong in having too many apolitical people.

These three polls aren’t the scariest for Remain released today

IpsosMori released a poll today, taken 15 days ago and so free from any bank holiday effect, without a referendum voting intention question, but one taking the temperature on which issues the British public believe are the most important of the day.

Far from growing more invested in the question of Britain’s European Union membership as the campaign enters its terminal phase, concern about the European Union has flatlined at 28 per cent – within the margin of error of last month’s IpsosMori survey, which put Britain at 30 per cent. The proportion who believe that it is the biggest single issue facing Britain today also remains static at 16 per cent. Evidence of the high turnout necessary to avert Brexit seems thin on the ground.

Pro-Europeans should be further worried by the identity of the groups that are concerned about the European Union. Conservative voters, the over-65s and people from social grades A (higher managerial, administrative and professional workers) and B (intermediate managerial, administrative and professional workers), are more concerned about the European Union than the national average. The only one of those three groups that is more likely to favour Remain over Leave are ABers, while Conservative voters and the over-65s are likely to vote for Brexit over the status quo.

Among the demographics who are least concerned about the European Union, the only pro-Brexit group that is significantly less concerned about EU membership than the national average are people from social grades D (semi-skilled and unskilled manual workers) to E (state pensioners, casual workers and jobseekers). The other groups that are least concerned with the European Union are people who live in urban areas and people aged from 18 to 24, the two most pro-European demographics.

The prospects of a Brexit vote are rather better than the betting odds would suggest. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.