How Can You Develop Business At Your Firm Through Increased Employee Engagement? – 26th May 2011
Coaching can help you stand out from the crowd and unlock the potential in your firm by engaging your employees in business development. It provides a collaborative strategy that develops self-awareness and motivates them to deliver.
How will “Tesco Law” affect your firm? The need for change
“Ultimately, lawyering is becoming more of a business than a profession. Some lawyers decry this. Others welcome it. Few deny it.” *1
Developments such as alternative fee arrangements, globalisation, the growth of technology and liberalisation mean that the legal market cannot grow as it used to.
Reforms under the Legal Services Act, dubbed “Tesco Law” have been described as the legal equivalent of the City of London’s “Big Bang” in 1986. Lawyers, especially in small, high street firms, are bracing themselves for the shake-up that they fear could lead to intense competition from aggressive new entrants.
At a time when traditional sources of work (including legal aid and property conveyancing) are drying up, firms will be competing for business with new entrants into the legal sector (such as The Co-Op) who have deep pockets, or can tap into the equity markets.
About half of law firms have lost or expect to lose work to non legal competitors in radical reforms that will make the UK legal market one of the most deregulated in the world.
How are firms preparing?
Recent research *2 found that 9% of law firms were interested in bringing in outside investors and a further 47 per cent said they would consider doing so after October’s reforms.
Irwin Mitchell wants to increase its annual turnover from £157m to more than £200m. It has appointed Espírito Santo Investment Bank as financial adviser and said it was “highly likely” that it would raise fresh capital for acquisitions of other law firms or for the hiring of specialist lawyers to build up certain areas of expertise.
Pannone is set to launch a “white label division”, where it will join retailers, insurers and utilities to market its legal services to their customers. Pannone will provide the underlying legal advice on issues such as personal injury claims, which will then be rebranded by retailers and insurers to sell to their own customer bases.
Quality Solicitors, a grouping of 150 smaller law firms, also recently announced a deal to place legal access points staffed by lawyers in hundreds of WH Smith stores this summer, providing a first port of call for many consumers unsure about their legal options.
However, firms “must be careful that the legal Big Bang . . . does not result in an equally devastating loss of respect for the legal sector and the rule of law… You cannot treat the supply of legal services by lawyers like the supply of baked beans.” (Lord Neuberger, the UK’s master of the rolls) *3
Don’t throw the baby out with the bath water
London’s Magic Circle firms, which include some of the world’s biggest law firms (such as Clifford Chance and Herbert Smith) have indicated that they are unlikely to seek fresh capital.
Selling out could destroy the value of law firms, as partners will be reluctant to give up control and young lawyers who had been aiming to become partners would leave and go into a better paid industry such as banking.
Since the collapse of Halliwells, banks have been unwilling to lend to law firms because there are few assets to lend against. A firm’s value is in it’s staff and whilst developing new strategies to stand out they must ensure that employees are engaged with the company vision.
This is exemplified by the closure of Howrey. When the 55-year-old firm changed its strategy, a few angry partner departures snowballed into a mass exodus and the top law firm was destroyed in a shockingly quick manner.
Less than 50% of law firms rate their business development as better than average
Our research *4 explored the attitudes and activities of sales and marketing in the legal sector; how firms are reacting to “Tesco Law”, what changes they are making and their opinions about these changes. Crucially, we found that less than 50% of firms rated their ability to develop new business as better than average.
Whilst senior partners appear to appreciate the importance of promoting business development (with 88% responding that senior partners encourage all staff in this respect at least quarterly), in the majority of firms, less than half of all employees carry out business development activities.
Going the extra mile
In order to develop your business in the current climate of change and uncertainty, firm wide strategies for engaging employees at all levels of the firm to act as organisational advocates are vital.
As legal firms do not provide a tangible product, you must continue to develop authentic relationships with your clients. Establish yourself as a trusted advisor by providing customer satisfaction, professional competence and integrity.
This requires ‘soft skills’ and the creation of a culture based on mutual respect between managers and employees. This emotional intelligence can be developed through coaching.
Why Thompson Dunn?
• We can help you to find, keep and reward the right people in your firm at the right time.
• We assist you in your business development by helping you understand your value proposition to your clients.
• The first step to knowing your clients is to know yourself:
- Individually
- In teams
- As a culture
• Our business development workshops use tools to better understand your clients and help set business plans for customer penetration and profit.
Then, armed with the right tools:
• Understand your clients and their needs. Ultimately to know and understand your clients’ clients.
• Become the trusted advisor.
• Be part of your clients business solutions.
Why Does Coaching Help?
• Coaching grows the individuals and enhances self-knowledge by giving feedback on skills and progress.
• Coaching raises the awareness of the needs of others by asking what makes others ‘tick’ and how to respond. It develops awareness of subtle clues about human behaviour, e.g. key buying signals from clients.
• It builds confidence in seeking creative solutions for clients. Is this sales training? No! Coaching develops skills for solution selling, rather than order taking. Can we develop business generation? Definitely!
How Do Thompson Dunn Coach?
• By using the same rigorous assessment principles as for recruitment and development.
• We establish a baseline from which we explore the developmental needs of the individual or group. This gives us sound data to implement a development plan.
• We use tools like the Myers Briggs, Herrmann, Decision Profile and Occupational Personality Questionnaire.
A whole-brained approach
Science and logic combined with vision, intuition, feelings and creativity.
How does this engage and motivate staff to go the extra mile and develop new business?
• Staff understand what initial strengths and limitations they are bringing to the table.
• They see how they are influencing the decisions regarding client’s needs.
• They need to get the balance right.
What is our value add?
1. 20 years experience as trusted advisors at all levels of the business.
2. We help you recruit, retain, develop and promote key individuals e.g. to partner.
3. Succession planning and talent development, essential for business growth.
4. Your trusted advisors.
5. We help you to deal with pain points in your business (although we prefer to work with a positive approach).
- Individuals.
- We help facilitate better team work.
- Leadership development for ‘managers’ to become mentors.
6. We understand the issues.
- Like us, your roles demand expert technical skills and academic credentials.
- BUT in an ever competing world can you afford not to learn how to develop and sell your skills?
Coaching builds confidence in how to develop and sustain key client relationships. The ultimate tool in selling.
“80% of Business FinancialDecisions Are Made Emotionally”? – 20th October 2010
A Workshop to Understand How Behaviour Shapes Financial Decisions
The Thompson Dunn workshop on the Thames could not have been timelier. While we were chartering the murky waters of Decision Making and Finance, Chancellor George Osborne unveiled the 2010 Spending Review. Later, BBC Political Editor Nick Robinson described the financial statement as a “massive gamble economically and politically”. So, could the Chancellor have benefited from joining us? What would his Decision Profile look like? We have summarised our discussions during the day below.
Finance is not rational!
Finance is not as objective as you might think. During the workshop, Pat revealed the profiles of three Finance Directors who you might expect to demonstrate a preference for logical, rational and critical thinking. However, their Decision Profile Questionnaire results also indicated high levels of intuition.
Intuition enables the Finance Directors to make fast decisions, read between the lines and look for underlying meanings. They go beyond what is in front of them and look for patterns, interconnections and associations that enable them to see the bigger picture.
Creative accounting
Budgets are often perceived in different ways by different people. They may be seen as; a forecast, a promise, a basis for planning growth, an amount that can be spent, a way of planning funding, or even a hope. Budgets are also typically fluid and negotiated with senior members of the organisation. Consequently, the finance team must be able to manipulate the information they are presenting and work collaboratively with other departments.
Philip Wood
An example of this fluidity and potential for creative accounting is the American GAAP – Non-GAAP debate. Historically, American firms have reported their business income and expense, assets and liabilities according to the Generally Accepted Accounting Principles (GAAP), so that a peer-to-peer comparison can be applied. However, many companies now also report non-GAAP figures, which exclude certain expenses, stating that they give a clearer picture of the company.
Errors in decision-making
Finance is also subject to heuristics such as trial and error rules of thumb, mental shortcuts or ‘back-of the envelope’ mental calculations, which are used to simplify complex judgements or decisions and are imperfect.
For example, a recent study found that “market reactions to earnings surprises are incrementally more positive (or less negative) when earnings are announced on sunny days”. * Do you think The Sunshine Effect could have influenced the publics’ response to the Chancellor’s announcement?
Another study of an American health club found that members who worked out on average just four times a month chose to pay a monthly membership fee of $85, even though the gym also offered a pay-as-you-go rate of $10 per visit. The author suggested that when people are polled about their beliefs as to what they are going to do, there is a radical refusal to accept reality. **
The influence of personality on decision-making
The group exercises revealed various examples of rational thinking, gut instinct and emotional bias. These cases illustrate that, whilst we may believe our actions are based on reason, in practice our ability to make complex financial decisions is limited. As well as rational considerations, decision-making is also driven by aspects of our personality. Finance professionals are beginning to recognise the importance of understanding the biases and errors to which we are all prone. By doing so we can significantly improve the decisions we make.
How can you improve your decision-making?
1. Greater self-awareness – recognising your strengths and development points is key to improving decision-making.
2. Understand your thinking and decision-making processes. Thompson Dunn use The Decision Profile (DP), Myers Briggs (MBTI) and other instruments to provide insight into how people make decisions.
3. Coaching will enable you to explore different, more creative or challenging choices.
4. Find a mentor to act as a sounding board and a valuable and accessible source of experience.
5. Remember to use your whole brain; balance your logical ‘left-brain’ thinking with your more intuitive ‘right-brain’. The key is to make knowing yet emotional decisions. Acknowledge that intuition, emotions and creativity in combination with rigorous thinking have a critical part to play in key decision-making.
Behavioural Economics
Understanding how the brain works
Behavioural economists start from an understanding of how the brain works: the underlying “lizard brain” and its conflict with the “human brain”, which sits on top and tries to control it. They show how the brain’s basic desires, working on “automatic pilot”, guide about 90% of our behaviour. They carry out experiments to understand why kind of assumptions and approximations people make while buying products or applying for a job and then show how you can apply that in your business.
Motivating employees
At the level of employing people, behavioural economics shows how important trust and social relationships are – how performance-related pay can be counterproductive if it makes people too focused on money – and how employees can be motivated to do the best work for their company while gaining job satisfaction.
Leigh Caldwell
Setting your prices
Behavioural economics also shows how companies can set their prices: influencing consumers to put a higher value on their products and using specially designed price structures to get people to pay a higher price. Monthly payments, interest-free credit, prices ending in 9 and showing the high value products at the front of a shop as a decoy to get people to pay more for the mid-priced products at the back – all of these are techniques inspired by cognitive and behavioural economics.
Stockmarket bubbles
Finally, behavioural economics explains why there are stockmarket bubbles, why there are economic booms and recessions and how to regulate the financial industry to take the appropriate risks, that are in the interest of the economy, and prevent the high-stakes financial gambling that led to the credit crunch.
Thank-yous
A special thank you to Philip Wood who gallantly stepped in at the last minute to lead the discussions on Finance.
Thank-you to Leigh Caldwell, who contributed a welcome third dimension to the day sharing his expertise as a Behavioural Economist (and his laptop).
Thank you to all the finance experts who chaired a table.
Thank you to James Howe for taking such great photos of the day.
Thank you to Lance Moir for contributing his slides. We hope he feels better soon.
Finally, thank-you to all our guests who shared their valuable knowledge and experience.
Networking Evening with Garry Hunt – 8th December, 2009
Social Networking and how Business can make use of it
We were delighted to have Garry Hunt talk on the subject of Social Networking for business at our networking event on Tuesday evening. We have summarised the key points from his presentation below.
1. Changing Workforce
• Broadly speaking there is a changing workforce, and not simply a change in corporate climate. Generation Y and many new employees have grown up in a world where the internet and connectivity have always been present. This is ‘generation gadget’. Young professionals access the internet through iPhones and Blackberries as well as laptops and desktop computers. Access to the internet is moving inexorably towards handheld devices, and therefore is available 24-7.
• Your clients, prospective clients and colleagues are demanding information from you in new ways. The new paradigm is conversation and contribution. Marketing literature and collateral is fast becoming a rhetoric. They expect to take information and respond to it, add their views and pass it around.
• If you want your employer brand to attract the best young executives you need to present your organisation through the media channels that they communicate within. The use of social networking is not only restricted to Generation Y, 49% of British people have updated or created a network account in 2009. Usage in the US is as follows: 18–22 (75%), 23-35 (49%), 36-49 (21%), 50-65 (9%) and over 65’s (3%).
2. Social Networking Channels
Is email the new snail mail? 75% of emails are spam and consequently only 20% of emails are opened, whilst 95% of text messages are opened. Is it quicker to telephone or text? Recent research has shown that the time taken for a recipient to open an email is, on average, 6.4 hours. It’s 14 minutes for text messages.
• Whilst Facebook is predominantly perceived as a social or social life network, there are business opportunities to be had. Facebook users are happy to move from social to business interaction at the click of a button, and enjoy being part of attractive and interactive groups (responding to surveys, votes and ongoing debate from questions you pose). Creating a corporate page for your organisation and providing information on products services, recruitment and illustrations of your work, allows you to communicate to a diverse audience.
• A powerful tool for graduate recruitment, for example Cisco.
• “Twitter” was the most popular word in 2009 (according to the Global Language Monitor). This channel’s largest age group is 35-49 year-olds. 6000 small firms a day are joining.
• Twitter provides an opportunity to quickly convey relevant and important information, such as new products and services, or to pose questions and seek information. Although restricted to 140 characters, a ‘tweet’ can include links to web pages, blogs and video links. As such, it can be a vital component of your overall online marketing strategy.
• It can be very popular when opinions are required. For instance, whilst BBC Question Time with Nick Griffin was on air, it stimulated 74,747 tweets. The BBC Question Time account also gained an additional 7,500 followers, with 17,401 texts compared to 3,335 the week before.
• Linkedin is specifically aimed at business people and is used extensively by them. It can be an invaluable tool for researching and developing relationships with prospective clients and suppliers. Linkedin enables users to search for people or information by individual name, organisation or sector.
• By asking a simple business question that you need answers to, Linkedin will not only provide a range of diverse responses and insights, it will simultaneously create new networking opportunities. If you develop a curiosity for knowledge, and ask for help, people will respond. Just don’t overtly ‘sell’ your services, as this will put people off.
• Make sure that you have a company profile on Linkedin. This can often be forgotten, whilst personal profiles are added to and developed.
• Promoting training and development through distance learning is a growing organisational trend. YouTube provides a cost-effective way for companies to convey information to people anywhere in the world and at their own pace.
• YouTube videos can also be used to facilitate meetings with potential clients. A short video clip can enable you to introduce yourself and your products or services. A one or two minute video can convey much more information than a standard email, and is a more focused and user-friendly way to communicate.
3. Actions for Business
Smart companies set up rules of engagement for social networking. It must not become a time wasting activity and there are actions and consequences for inappropriate use. You cannot stop your employees networking and nor should you. If you try they will continue to do so in counter-productive ways to the business.
A social networking strategy for business requires the security issue to be addressed. Anti virus software needs to be included on PC’s and servers and firewall level web filtering in necessary to prevent access to potentially inappropriate sites.
4. Benefits to Business
Recruitment- you can locate candidates, check their credentials and career histories, and information on business activities. There are also opportunities for potential candidates to interact with current employees. Equally, current employees and alumni can be turned into evangelists that help your business become an attractive recruitment proposition.
Sales– increased exposure has the potential to boost sales and profitability. People buy from people, rather than organisations, therefore networking has financial implications.
Employee engagement– you can get closer to your staff and they can get to know each other better, quicker.
If you don’t think this is going on, check out some examples of the following companies using Facebook and Twitter: Apple, AT & T, BoA, BBC, Cisco, CNN, Ernst & Young, Economist, Dell, United Airlines and numerous universities and colleges of higher education.
Your staff want to work in this way, can you afford to disappoint them? Remember the security issues at stake and negotiate effective rules of engagement that are clearly communicated. Once this is in place, you are in a position to harness the benefits of a networked global business community.
7 Ways to add HR value in a Recession – 10th June, 2009
HR Breakfast with Rhiannon Chapman
We would like to thank Rhiannon for leading a lively and thought provoking discussion at our recent HR Breakfast. We would also like thank all those who attended and shared their valuable knowledge and experience.
We have endeavoured to capture some of the key themes that Rhiannon spoke about and which emerged from our discussion;
1. Target training spend on mission-critical areas only for the next 6-12 months
Have the conversation on what is ‘mission-critical’. It will inevitably be different for each organisation. HR can facilitate this discussion.
In recession times, training needs to attend to the core competencies of the business (e.g. core technical skills that drive bottom-line results). The rest needs to be stripped out.
Managing the expectation of training and development is important. Clearly communicating what is available, and what support can be expected from line management, will mitigate against anger and frustration.
It is also necessary to carefully manage the delicate and sensitive balance between managing employee redundancy whilst simultaneously offering targeted training to remaining staff, who need support to sustain business performance.
2. Use the opportunity to prioritise and plan training and development over the longer term
It was suggested that unrealised potential and leadership capability within the business will, in some instances, emerge through a period of trading difficulty, which would not necessarily be made evident in more favourable trading periods. This provides valuable insights into the receptivity and ‘hunger’ for development from certain groups and individuals within the organisation.
3. Outsource/ minimise HR admin and re-focus/ right size HR resources
HR needs to be lean and efficient, with basic staff administration (such as absence records) devolved to line management.
HR needs to understand the business intimately. Be open to listening to stories that uncover implicit procedures and processes that can be refined and made more efficient. Being in a position of having a cross-functional perspective, HR can do this.
HR can usefully align with Finance to ensure they understand the department’s own cost to the business, and how it’s initiatives have a clear return on investment. The business case for spending HR budget strategically is greater if there is a case for recovering the costs through initiatives elsewhere in the business.
4. Uncover opportunities to redeploy and/ or multi skill – rather than recruit
Retain staff by allowing the movement of high potential staff across to other areas of the business as part of their development. Develop a company culture that allows this to happen, avoiding a silo-ed mentality.
HR should support managers to develop their coaching/ mentoring skills to support and retain staff.
5. Introduce more flexible working patterns to improve cover whilst reducing overtime, and the need to employ temps
It was suggested that Boards and managers will invariably be resistant to this, probably because it means a greater emphasis put upon communication. HR needs to positively challenge this resistance.
Working from home can tackle the problem of unproductive presenteeism in the office, and develop trust in individuals to self-manage and maintain their own levels of company engagement.
6. Manage absence effectively
HR and line managers need to take an interest in why absence occurs, rather than merely recording it objectively. Having the dialogue as to why someone has been ill, and how the organisation can be of assistance, will help to alleviate further absence, and tackle the problem of absenteeism.
7. Negotiate ‘preferred supplier’ relationships e.g. recruitment agencies, temping agencies
New terms of engagement can be established to ensure the correct pricing and service level agreements are set for the current trading period.
Overall HR needs to be lean and efficient in its own practices. As a department it needs to re-position itself as a value-add provider, rather than a service centre that is merely “winding the handle”. Rhiannon offered a great example of her own – she significantly lowered insurance premiums on car fleet costs, by getting managers to take advanced driving courses. Thinking creatively and laterally will create the value-add opportunities. HR needs to embrace and utilise its cross-functional perspective and challenge established ways of working in the business.
Thompson Dunn has also held several Corporate Cooking events at the Cookery School. These events provided an enjoyable opportunity for informal team working, external observation of team dynamics and an opportunity to explore the group’s individual and team development needs.
Prior to the events, Thompson Dunn provided individual and group personality profiling, which illuminated the groups strengths and development areas. At the Cookery School, the teams worked well together to produce a challenging 3 or 4 course meal under the guidance of experienced and qualified chefs. They were then able to enjoy the meal together and Thompson Dunn fed back fed our observations on how the teams responded to the challenge.
News & Events
How Can You Develop Business At Your Firm Through Increased Employee Engagement? – 26th May 2011
How will “Tesco Law” affect your firm? The need for change
“Ultimately, lawyering is becoming more of a business than a profession. Some lawyers decry this. Others welcome it. Few deny it.” *1
Developments such as alternative fee arrangements, globalisation, the growth of technology and liberalisation mean that the legal market cannot grow as it used to.
At a time when traditional sources of work (including legal aid and property conveyancing) are drying up, firms will be competing for business with new entrants into the legal sector (such as The Co-Op) who have deep pockets, or can tap into the equity markets.
About half of law firms have lost or expect to lose work to non legal competitors in radical reforms that will make the UK legal market one of the most deregulated in the world.
How are firms preparing?
Recent research *2 found that 9% of law firms were interested in bringing in outside investors and a further 47 per cent said they would consider doing so after October’s reforms.
Irwin Mitchell wants to increase its annual turnover from £157m to more than £200m. It has appointed Espírito Santo Investment Bank as financial adviser and said it was “highly likely” that it would raise fresh capital for acquisitions of other law firms or for the hiring of specialist lawyers to build up certain areas of expertise.
Pannone is set to launch a “white label division”, where it will join retailers, insurers and utilities to market its legal services to their customers. Pannone will provide the underlying legal advice on issues such as personal injury claims, which will then be rebranded by retailers and insurers to sell to their own customer bases.
Quality Solicitors, a grouping of 150 smaller law firms, also recently announced a deal to place legal access points staffed by lawyers in hundreds of WH Smith stores this summer, providing a first port of call for many consumers unsure about their legal options.
Don’t throw the baby out with the bath water
London’s Magic Circle firms, which include some of the world’s biggest law firms (such as Clifford Chance and Herbert Smith) have indicated that they are unlikely to seek fresh capital.
Selling out could destroy the value of law firms, as partners will be reluctant to give up control and young lawyers who had been aiming to become partners would leave and go into a better paid industry such as banking.
This is exemplified by the closure of Howrey. When the 55-year-old firm changed its strategy, a few angry partner departures snowballed into a mass exodus and the top law firm was destroyed in a shockingly quick manner.
Less than 50% of law firms rate their business development as better than average
Whilst senior partners appear to appreciate the importance of promoting business development (with 88% responding that senior partners encourage all staff in this respect at least quarterly), in the majority of firms, less than half of all employees carry out business development activities.
Going the extra mile
In order to develop your business in the current climate of change and uncertainty, firm wide strategies for engaging employees at all levels of the firm to act as organisational advocates are vital.
This requires ‘soft skills’ and the creation of a culture based on mutual respect between managers and employees. This emotional intelligence can be developed through coaching.
Why Thompson Dunn?
• We assist you in your business development by helping you understand your value proposition to your clients.
• The first step to knowing your clients is to know yourself:
- Individually
- In teams
- As a culture
• Our business development workshops use tools to better understand your clients and help set business plans for customer penetration and profit.
Then, armed with the right tools:
• Become the trusted advisor.
• Be part of your clients business solutions.
Why Does Coaching Help?
• Coaching grows the individuals and enhances self-knowledge by giving feedback on skills and progress.
• Coaching raises the awareness of the needs of others by asking what makes others ‘tick’ and how to respond. It develops awareness of subtle clues about human behaviour, e.g. key buying signals from clients.
• It builds confidence in seeking creative solutions for clients. Is this sales training? No! Coaching develops skills for solution selling, rather than order taking. Can we develop business generation? Definitely!
How Do Thompson Dunn Coach?
• By using the same rigorous assessment principles as for recruitment and development.
• We establish a baseline from which we explore the developmental needs of the individual or group. This gives us sound data to implement a development plan.
• We use tools like the Myers Briggs, Herrmann, Decision Profile and Occupational Personality Questionnaire.
A whole-brained approach
Science and logic combined with vision, intuition, feelings and creativity.
How does this engage and motivate staff to go the extra mile and develop new business?
• They see how they are influencing the decisions regarding client’s needs.
• They need to get the balance right.
What is our value add?
1. 20 years experience as trusted advisors at all levels of the business.
2. We help you recruit, retain, develop and promote key individuals e.g. to partner.
3. Succession planning and talent development, essential for business growth.
4. Your trusted advisors.
5. We help you to deal with pain points in your business (although we prefer to work with a positive approach).
- Individuals.
- We help facilitate better team work.
- Leadership development for ‘managers’ to become mentors.
6. We understand the issues.
- Like us, your roles demand expert technical skills and academic credentials.
- BUT in an ever competing world can you afford not to learn how to develop and sell your skills?
Coaching builds confidence in how to develop and sustain key client relationships. The ultimate tool in selling.
References and Further Reading
*2 Research by Baker Tilly, 2011
*3 Co-op to offer legal services after Big Bang, The Financial Times 27th March, 2011
*4 The National Solicitor Selling Survey, 2010
Read more about coaching at Thompson Dunn.
Read more about the National Solicitor Selling Survey.
“80% of Business Financial Decisions Are Made Emotionally”? – 20th October 2010
A Workshop to Understand How Behaviour Shapes Financial Decisions
The Thompson Dunn workshop on the Thames could not have been timelier. While we were chartering the murky waters of Decision Making and Finance, Chancellor George Osborne unveiled the 2010 Spending Review. Later, BBC Political Editor Nick Robinson described the financial statement as a “massive gamble economically and politically”. So, could the Chancellor have benefited from joining us? What would his Decision Profile look like? We have summarised our discussions during the day below.
Finance is not rational!
Finance is not as objective as you might think. During the workshop, Pat revealed the profiles of three Finance Directors who you might expect to demonstrate a preference for logical, rational and critical thinking. However, their Decision Profile Questionnaire results also indicated high levels of intuition.
Intuition enables the Finance Directors to make fast decisions, read between the lines and look for underlying meanings. They go beyond what is in front of them and look for patterns, interconnections and associations that enable them to see the bigger picture.
Creative accounting
Budgets are often perceived in different ways by different people. They may be seen as; a forecast, a promise, a basis for planning growth, an amount that can be spent, a way of planning funding, or even a hope. Budgets are also typically fluid and negotiated with senior members of the organisation. Consequently, the finance team must be able to manipulate the information they are presenting and work collaboratively with other departments.
An example of this fluidity and potential for creative accounting is the American GAAP – Non-GAAP debate. Historically, American firms have reported their business income and expense, assets and liabilities according to the Generally Accepted Accounting Principles (GAAP), so that a peer-to-peer comparison can be applied. However, many companies now also report non-GAAP figures, which exclude certain expenses, stating that they give a clearer picture of the company.
Errors in decision-making
Finance is also subject to heuristics such as trial and error rules of thumb, mental shortcuts or ‘back-of the envelope’ mental calculations, which are used to simplify complex judgements or decisions and are imperfect.
For example, a recent study found that “market reactions to earnings surprises are incrementally more positive (or less negative) when earnings are announced on sunny days”. * Do you think The Sunshine Effect could have influenced the publics’ response to the Chancellor’s announcement?
The influence of personality on decision-making
How can you improve your decision-making?
1. Greater self-awareness – recognising your strengths and development points is key to improving decision-making.
2. Understand your thinking and decision-making processes. Thompson Dunn use The Decision Profile (DP), Myers Briggs (MBTI) and other instruments to provide insight into how people make decisions.
3. Coaching will enable you to explore different, more creative or challenging choices.
4. Find a mentor to act as a sounding board and a valuable and accessible source of experience.
5. Remember to use your whole brain; balance your logical ‘left-brain’ thinking with your more intuitive ‘right-brain’. The key is to make knowing yet emotional decisions. Acknowledge that intuition, emotions and creativity in combination with rigorous thinking have a critical part to play in key decision-making.
Understanding how the brain works
Behavioural economists start from an understanding of how the brain works: the underlying “lizard brain” and its conflict with the “human brain”, which sits on top and tries to control it. They show how the brain’s basic desires, working on “automatic pilot”, guide about 90% of our behaviour. They carry out experiments to understand why kind of assumptions and approximations people make while buying products or applying for a job and then show how you can apply that in your business.
Motivating employees
At the level of employing people, behavioural economics shows how important trust and social relationships are – how performance-related pay can be counterproductive if it makes people too focused on money – and how employees can be motivated to do the best work for their company while gaining job satisfaction.
Setting your prices
Behavioural economics also shows how companies can set their prices: influencing consumers to put a higher value on their products and using specially designed price structures to get people to pay a higher price. Monthly payments, interest-free credit, prices ending in 9 and showing the high value products at the front of a shop as a decoy to get people to pay more for the mid-priced products at the back – all of these are techniques inspired by cognitive and behavioural economics.
Stockmarket bubbles
Finally, behavioural economics explains why there are stockmarket bubbles, why there are economic booms and recessions and how to regulate the financial industry to take the appropriate risks, that are in the interest of the economy, and prevent the high-stakes financial gambling that led to the credit crunch.
Thank-yous
A special thank you to Philip Wood who gallantly stepped in at the last minute to lead the discussions on Finance.
Thank-you to Leigh Caldwell, who contributed a welcome third dimension to the day sharing his expertise as a Behavioural Economist (and his laptop).
Thank you to all the finance experts who chaired a table.
Thank you to James Howe for taking such great photos of the day.
Thank you to Lance Moir for contributing his slides. We hope he feels better soon.
Finally, thank-you to all our guests who shared their valuable knowledge and experience.
References and Further Reading
Read more about the Decision Profile and Myers Briggs Questionnaires.
Read more about ‘whole-brained’ thinking.
Read more about Lance Moir.
Read more about Leigh Caldwell and behavioural economics.
Read about James Howe and see more photos of the day.
If you are interested in reading more about the topics covered at the workshop you may find these books useful:
Payne, Bettman, & Johnson, (1993) The Adaptive Decision Maker, Cambridge University Press, Cambridge.
*Shon, John J. and Zhou, Ping (2006) “Are Earnings Surprises Interpreted More Optimistically on Sunny Days? Accounting Information and the Sunshine Effect”.
** Jeremy Tobacman (2009) “Hope, Greed and Fear: The Psychology behind the Financial Crisis”.
Networking Evening with Garry Hunt – 8th December, 2009
Social Networking and how Business can make use of it
We were delighted to have Garry Hunt talk on the subject of Social Networking for business at our networking event on Tuesday evening. We have summarised the key points from his presentation below.
1. Changing Workforce
• Broadly speaking there is a changing workforce, and not simply a change in corporate climate. Generation Y and many new employees have grown up in a world where the internet and connectivity have always been present. This is ‘generation gadget’. Young professionals access the internet through iPhones and Blackberries as well as laptops and desktop computers. Access to the internet is moving inexorably towards handheld devices, and therefore is available 24-7.
• Your clients, prospective clients and colleagues are demanding information from you in new ways. The new paradigm is conversation and contribution. Marketing literature and collateral is fast becoming a rhetoric. They expect to take information and respond to it, add their views and pass it around.
• If you want your employer brand to attract the best young executives you need to present your organisation through the media channels that they communicate within. The use of social networking is not only restricted to Generation Y, 49% of British people have updated or created a network account in 2009. Usage in the US is as follows: 18–22 (75%), 23-35 (49%), 36-49 (21%), 50-65 (9%) and over 65’s (3%).
2. Social Networking Channels
Is email the new snail mail? 75% of emails are spam and consequently only 20% of emails are opened, whilst 95% of text messages are opened. Is it quicker to telephone or text? Recent research has shown that the time taken for a recipient to open an email is, on average, 6.4 hours. It’s 14 minutes for text messages.
Facebook
• Whilst Facebook is predominantly perceived as a social or social life network, there are business opportunities to be had. Facebook users are happy to move from social to business interaction at the click of a button, and enjoy being part of attractive and interactive groups (responding to surveys, votes and ongoing debate from questions you pose). Creating a corporate page for your organisation and providing information on products services, recruitment and illustrations of your work, allows you to communicate to a diverse audience.
• A powerful tool for graduate recruitment, for example Cisco.
Twitter
• “Twitter” was the most popular word in 2009 (according to the Global Language Monitor). This channel’s largest age group is 35-49 year-olds. 6000 small firms a day are joining.
• Twitter provides an opportunity to quickly convey relevant and important information, such as new products and services, or to pose questions and seek information. Although restricted to 140 characters, a ‘tweet’ can include links to web pages, blogs and video links. As such, it can be a vital component of your overall online marketing strategy.
• It can be very popular when opinions are required. For instance, whilst BBC Question Time with Nick Griffin was on air, it stimulated 74,747 tweets. The BBC Question Time account also gained an additional 7,500 followers, with 17,401 texts compared to 3,335 the week before.
MySpace
• Of less interest to corporate clients, and overall a much younger demographic, MySpace is predominantly used for sharing music and videos.
Linkedin
• Linkedin is specifically aimed at business people and is used extensively by them. It can be an invaluable tool for researching and developing relationships with prospective clients and suppliers. Linkedin enables users to search for people or information by individual name, organisation or sector.
• By asking a simple business question that you need answers to, Linkedin will not only provide a range of diverse responses and insights, it will simultaneously create new networking opportunities. If you develop a curiosity for knowledge, and ask for help, people will respond. Just don’t overtly ‘sell’ your services, as this will put people off.
• Make sure that you have a company profile on Linkedin. This can often be forgotten, whilst personal profiles are added to and developed.
YouTube
• Promoting training and development through distance learning is a growing organisational trend. YouTube provides a cost-effective way for companies to convey information to people anywhere in the world and at their own pace.
• YouTube videos can also be used to facilitate meetings with potential clients. A short video clip can enable you to introduce yourself and your products or services. A one or two minute video can convey much more information than a standard email, and is a more focused and user-friendly way to communicate.
3. Actions for Business
Smart companies set up rules of engagement for social networking. It must not become a time wasting activity and there are actions and consequences for inappropriate use. You cannot stop your employees networking and nor should you. If you try they will continue to do so in counter-productive ways to the business.
A social networking strategy for business requires the security issue to be addressed. Anti virus software needs to be included on PC’s and servers and firewall level web filtering in necessary to prevent access to potentially inappropriate sites.
4. Benefits to Business
Recruitment - you can locate candidates, check their credentials and career histories, and information on business activities. There are also opportunities for potential candidates to interact with current employees. Equally, current employees and alumni can be turned into evangelists that help your business become an attractive recruitment proposition.
Sales – increased exposure has the potential to boost sales and profitability. People buy from people, rather than organisations, therefore networking has financial implications.
Employee engagement – you can get closer to your staff and they can get to know each other better, quicker.
If you don’t think this is going on, check out some examples of the following companies using Facebook and Twitter: Apple, AT & T, BoA, BBC, Cisco, CNN, Ernst & Young, Economist, Dell, United Airlines and numerous universities and colleges of higher education.
Read more on employee engagement.
5. Final Point
Your staff want to work in this way, can you afford to disappoint them? Remember the security issues at stake and negotiate effective rules of engagement that are clearly communicated. Once this is in place, you are in a position to harness the benefits of a networked global business community.
Read more about Garry Hunt.
7 Ways to add HR value in a Recession – 10th June, 2009
HR Breakfast with Rhiannon Chapman
We would like to thank Rhiannon for leading a lively and thought provoking discussion at our recent HR Breakfast. We would also like thank all those who attended and shared their valuable knowledge and experience.
We have endeavoured to capture some of the key themes that Rhiannon spoke about and which emerged from our discussion;
1. Target training spend on mission-critical areas only for the next 6-12 months
Have the conversation on what is ‘mission-critical’. It will inevitably be different for each organisation. HR can facilitate this discussion.
In recession times, training needs to attend to the core competencies of the business (e.g. core technical skills that drive bottom-line results). The rest needs to be stripped out.
Managing the expectation of training and development is important. Clearly communicating what is available, and what support can be expected from line management, will mitigate against anger and frustration.
It is also necessary to carefully manage the delicate and sensitive balance between managing employee redundancy whilst simultaneously offering targeted training to remaining staff, who need support to sustain business performance.
2. Use the opportunity to prioritise and plan training and development over the longer term
It was suggested that unrealised potential and leadership capability within the business will, in some instances, emerge through a period of trading difficulty, which would not necessarily be made evident in more favourable trading periods. This provides valuable insights into the receptivity and ‘hunger’ for development from certain groups and individuals within the organisation.
Read more on the leadership pipeline.
3. Outsource/ minimise HR admin and re-focus/ right size HR resources
HR needs to be lean and efficient, with basic staff administration (such as absence records) devolved to line management.
HR needs to understand the business intimately. Be open to listening to stories that uncover implicit procedures and processes that can be refined and made more efficient. Being in a position of having a cross-functional perspective, HR can do this.
HR can usefully align with Finance to ensure they understand the department’s own cost to the business, and how it’s initiatives have a clear return on investment. The business case for spending HR budget strategically is greater if there is a case for recovering the costs through initiatives elsewhere in the business.
4. Uncover opportunities to redeploy and/ or multi skill – rather than recruit
Retain staff by allowing the movement of high potential staff across to other areas of the business as part of their development. Develop a company culture that allows this to happen, avoiding a silo-ed mentality.
HR should support managers to develop their coaching/ mentoring skills to support and retain staff.
5. Introduce more flexible working patterns to improve cover whilst reducing overtime, and the need to employ temps
It was suggested that Boards and managers will invariably be resistant to this, probably because it means a greater emphasis put upon communication. HR needs to positively challenge this resistance.
Working from home can tackle the problem of unproductive presenteeism in the office, and develop trust in individuals to self-manage and maintain their own levels of company engagement.
6. Manage absence effectively
HR and line managers need to take an interest in why absence occurs, rather than merely recording it objectively. Having the dialogue as to why someone has been ill, and how the organisation can be of assistance, will help to alleviate further absence, and tackle the problem of absenteeism.
7. Negotiate ‘preferred supplier’ relationships e.g. recruitment agencies, temping agencies
New terms of engagement can be established to ensure the correct pricing and service level agreements are set for the current trading period.
Overall HR needs to be lean and efficient in its own practices. As a department it needs to re-position itself as a value-add provider, rather than a service centre that is merely “winding the handle”. Rhiannon offered a great example of her own – she significantly lowered insurance premiums on car fleet costs, by getting managers to take advanced driving courses. Thinking creatively and laterally will create the value-add opportunities. HR needs to embrace and utilise its cross-functional perspective and challenge established ways of working in the business.
Read more about Rhiannon Chapman.
Thompson Dunn teams up with Cookery School
Thompson Dunn has also held several Corporate Cooking events at the Cookery School. These events provided an enjoyable opportunity for informal team working, external observation of team dynamics and an opportunity to explore the group’s individual and team development needs.
Prior to the events, Thompson Dunn provided individual and group personality profiling, which illuminated the groups strengths and development areas. At the Cookery School, the teams worked well together to produce a challenging 3 or 4 course meal under the guidance of experienced and qualified chefs. They were then able to enjoy the meal together and Thompson Dunn fed back fed our observations on how the teams responded to the challenge.
Cookery School run corporate events, cooking parties and private classes.