Zak Meziane

Published: October 2016

Zak Meziane

Did business ‘crystal ball gazers’ call Brexit impact right?

Back in April 2016 we found 95% of UK big business leaders apparently assuming Brexit wouldn’t happen as they had nothing in place to estimate its’ potential impact for their companies. Given this forecast was somewhat ‘wide of the mark’ we were interested, given the general level of uncertainty regarding winners and losers, at what else had been predicated and what the first few months since the referendum now indicate.  

Living in an age of uncertainty

Following the Brexit referendum the maxim “the only thing that is constant is change” is apposite.  Uncertainty is our watchword as confusion reigns about the likely impacts.

Currently for bad news observers, Markit (the UK's purchasing managers’ index) has recently shown the services sector suffering its biggest drop in confidence for 20 years. Unsurprisingly, this news did nothing for importers with a weak pound being ‘situation normal’.

On the plus side, Brexit winners are exporters and larger global companies able to hedge their operations; the FTSE 100, is on a high.  Other more positive news finds reports that an 'emergency break' on migration for the UK for up to seven years whilst retaining access to the single market is being considered in European capitals. Could a compromise with the EU be in the offing?

As nothing really is certain we were interested to compare what our April 2016 survey of 201 UK large business decision makers by YouGov thought Brexit would mean and where we are today, just a few months later.  Were our business leaders able to see into the future?

Negative predications of uncertainty and volatility

Our April survey revealed the largest proportion of UK big business leaders (41%) thought that Brexit would have a negative impact on their organisations, 14% indicating it to be a serious threat.

This group was asked to identify where the largest issues might lie. We examine the top 3 below:

  1. The number one challenge (identified by 34%) was seen as an “extended period of uncertainty and volatility”. This certainly seems to be the case. Theresa May's government have indicated that Article 50 (the official notification to the EU of withdrawal) is unlikely to happen until at least the Spring of 2017. Even then the 2-year ‘de-coupling’ process may not offer definitive answers about the future.

It’s hardly surprising then that reports are identifying hold-ups by foreign investment in almost every sector. Surveys from the Centre for Economic and Business Research (CEBR) and others are seeing pessimism double. Already there appear to be investment reductions and hiring freezes.  For example, referendum-induced indecision has seen a small fall in gross profit in the UK business of recruitment company PageGroup. We are also hearing similar stories.

  1. A further 10% of our survey respondents identified the “potential hit to the pound” as the number one issue. The strength of the pound has weakened with the potential to help exporters, although higher value goods and services have proved to be somewhat inelastic. For importers it’s far less good news.
  2. Interestingly, 10% saw “an increase in costs and/or overheads” as the biggest problem. Analysis from legal firms suggests that access to the single market would require EU regulation compliance (without the chance to change it), and bi-lateral trade agreements like Australia  or China wouldn’t necessarily be devoid of the dreaded red-tape.

It wasn’t all negativity. Our survey of large business leaders also identified almost 20% who were positive about the impact of leaving the EU. We examine the upside below.

Accentuating the positive

What were the top three positive impacts foreseen by the business EU ‘outers’, and were they right?

  1. Almost half (47%) identified a “reduction in red tape/bureaucracy and overheads”. This might be overstated given the regulation compliance that’ll still be part of the package of any trade agreement.
  2. A further 17% thought they could “focus on doing more business with other parts of the world.” There is much talk about free trade deals but less clarity on when they might materialize. It’s said the UK needs 20 times more trade negotiators than is currently available.
  3. 16% thought they would have “less competition from EU companies.” It’s too early to make the call on this one.

Worryingly 95% of business leaders in our survey had nothing in place to estimate the impact of Brexit –the prevailing view appeared to be “it will never happen”.  On this critical assumption the crystal ball was clearly cloudy.  Anecdotally we’re seeing many organisations scrambling to refocus business plans and adjust to a new reality. The key areas clients want support with are as follows.  

Working with an external change agent

So far, we’ve found clients valuing an objective perspective in assessing the areas of their business most at risk and developing a clear and prioritized mitigation plan. Typically, Clarus Consulting has supported a range of organisations to identify and capitalize on growth opportunities, which deliver returns on investment of at least 10 times.

If you’d like to comment, or share your own experience of managing growth please get in contact. Email zak.meziane@clarusconsulting.com, web www.clarusconsulting.com

 

 

Older entries

Oct 6, 2016

Did business ‘crystal ball gazers’ call Brexit impact right?

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Sep 8, 2016

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Jun 10, 2016

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Zak Meziane

Published: September 2016

Zak Meziane

One third of business leaders in the dark on organizational issues, survey shows

We’ve found 34% of the leaders of UK big businesses don’t fully understand their organisational issues. Those that do are most concerned about growth. We were intrigued, so ran a series of in-depth interviews with business leaders which identified practical ways to un-lock the growth challenge. The interviews reveal the importance of connecting with the customer and developing people within the company, rather than buying-in technical process prowess. For more top-tips on managing one of the most tricky current business challenges read on.

Leaders of large business don’t always have the answers

It’s somewhat comforting that our recent survey of 201 UK large business decision makers by YouGov reveals nearly 60% either, “need to better understand the challenges facing my business” and, or “don’t feel my business has the capabilities to tackle them.” Worryingly, 10% believe they don’t either understand the issues facing their business, or have the capabilities to tackle them. This could place them at particular risk from new 'disruptive' market entrants who force incumbents to radically change the way they operate to survive.

Managing growth is the critical concern

We were interested to find, when asking about the number one challenge that kept large business leaders up at night, it was all about growth (24%), and productivity (15%). Growth for large companies is clearly just as important as for small organisations, and reflects a worrying national picture. The Office for National Statistics latest ‘output per hour’ data has registered its biggest quarterly fall since 2008. The UK has the weakest productivity of any nation in the G7 with the single exception of Japan.

David Cather, CEO Avocet Mining, echoed the quantitative findings, “We have banked the low-hanging fruits and need to tackle the more difficult challenges by improving productivity, which requires dealing with resistance to change.

Clearly, understanding how to tackle the barriers and drivers to growth is high up on the business agenda.

Customer connection key, for a differentiated proposition

We decided, in May 2016, to find the answers, through holding 20 in-depth interviews with UK business leaders. Our aim - to identify how successful companies are tackling the growth challenge. The single practical tool, the most confident leaders were using, was regular, robust and credible customer insight. Those that had the most unblinkered vision of their operating environment also had the strongest customer connection.

Zak Meziane, Clarus Consulting partner, commented: “The customer is not the last but the centre piece in the strategic jigsaw and the starting point for success and sustainability.

Confidence was bred by identifying the most important customer segments, clients and prospects; understanding their expectations and view of excellence; and honestly benchmarking any offer, in its entirety, against competitors. The use of an independent party to challenge and support is seen as vital in developing an objective and balanced appraisal of market dynamics. Interviewees used non-executive directors and consultants for this role.

Kevin Keaney, Chief Executive, The Work Stores, commented, “We take a lot of confidence from being close to our customers and understanding their needs. Our loyalty programme is relatively unique in the discount value sector and provides us with very valuable insights.

How to make a growth strategy work? It’s buy-in…

It was noticeable, from our interviewees perspective, the absence of an actionable growth strategy was less about insight shortages and more about low involvement and buy-in.

At Clarus, we find our most successful clients set the vision and then collaborate with others from across the organisation, from shop floor to board, to evolve a strategy. Seemingly, the process takes longer but avoids the subtle hi-jacking of the uninvolved who reject a plan they perceive as imposed.

Giovanni Gorbetta, Managing Director, JFD agrees, "The biggest challenge in improving productivity is managing resistance to change. It’s about making people understand why we need to change as an organisation and why it would be a good thing for them too."

And creativity

We were also struck, to find business leaders identifying a lack of fresh, creative and innovative thinking as a barrier. This was particularly true of highly regulated and prescriptive industries, such as financial services; or sectors with low staff turn-over such as engineering.

Company culture in some sectors didn’t always reward lateral thinking. It could repress risk taking. Fear of failure, or the lack of exposure to people ‘doing things differently’ can create an inherent under confidence in trying something new. So, what to do? Invest in the latest IT sharing software, or popular process methodologies such as Six Sigma or Lean?

Leadership is the single most important ingredient

Our insight found the most successful businesses developed managers who could lead their teams through the change journey and didn’t take on more than they had capacity for. It had little to do with technological tools.

Such ‘change leaders’ ensure external customer needs are genuinely at the heart of the value proposition and involved in every step of the design process; just as people within the business have a voice in designing any growth plan. They build a safe environment for their people to think laterally, to experiment and learn from their failures – to iterate rather than procrastinate.

Zak Meziane, one of our partners, commented: “Our most innovative clients are those who are willing to try new ways of generating ideas and create a safe environment for people to experiment and learn. Failure is ok."

What we’ve discovered about growth

As always, we find conversations with business leaders extremely revealing. Their insight about how to manage growth and increase productivity has identified the following top 5 tips:

  1. Objective and continuous customer insight into the proposition and the competition is vital
  2. It’s all about investing in management ability, not the latest process methodology
  3. Build a case for change with buy-in from across the organisation. Remember WIFM – What’s in it for me
  4. Create a safe environment where the status quo can be challenged, and failure supported
  5. Don’t do too much too quickly. Reduce the scope but accelerate the delivery

If you’d like to comment, or share your own experience of managing growth please get in touch using our contact form.

 

 

Mark Croft

Published: June 2016

Mark Croft

EU referendum: on a knife edge amongst business vote, survey shows

Our new survey of business decision makers shows just how close voting intention is for the upcoming EU referendum. We uncover some fascinating facts about what’s influencing business leaders, the confusion many feel in making an informed vote and our view about how the campaigns could better make their case.

‘Remain’ lead is narrow, regardless of company size

Our newly commissioned survey of business decision makers by YouGov shows that EU referendum voting intention amongst business leaders is far more even than many previous business surveys have found. The April survey of 618 business leaders, representing GB businesses of all sizes, found that just 49% were in favour of remaining in the EU while 40% favoured leaving – with 11% as yet undecided.

We were fascinated to find that even amongst the respondents from large businesses, the split was only 53% remain, 37% leave and 7% undecided. This is despite a string of other survey’s finding a clear business majority for remaining in the EU – with anything up to 80% backing remaining. Zak Meziane, one of our partners, commented: “Business, and particularly big business, is often portrayed as being strongly ‘Remain’. But our survey suggests that, across the spread of businesses, it’s actually a close-run thing.” For more information about voting intention try the battle of the Brexit trackers with FT.com Brexit Poll and Economist Brexit Poll.

Plenty of “sound and fury” – but not the information that’s needed

Despite all the Referendum ‘noise’, 38% of respondents said they still don’t feel they have the information needed to make their vote. This rose to 43% of respondents from small businesses. Even the EU fact checker services, developed by many major media companies, to examine the claims of both sides are not being read by the broader business community.

Zak Meziane commented: “One of the major issues for businesses appears to be a lack of information – with nearly four in ten respondents saying they still don’t feel they have enough information on which to base their vote. This is perhaps pushing executives towards making a personal/emotional decision rather than basing it on business factors.
So how are business leaders actually making up their minds?

It’s personal, business leaders say

One of the most unexpected survey findings was that a clear majority, 70% of respondents, said their vote will be primarily influenced by personal rather than business considerations. This was a consistent view regardless of company size: 73% of respondents from small businesses said it will mainly be a personal decision, 71% from medium sized businesses, and 67% from large companies.

Is this national vote appealing to personal politics, personal links with Europe, or are debates and voting intention amongst families and friends exerting more influence for business people than expected? There are clearly inconsistencies. Our survey found that just 20% of total respondents believed leaving the EU would be positive for their business – and yet 40% intend to vote ‘Leave’.

The impact of Brexit? – Larger companies more gloomy

Overall, a sizeable minority (40%) of business leaders said Brexit would have a negative impact on their company. Interestingly, despite the scare stories a third of respondents felt it would have ‘no impact’ on their business.

Those who say a negative impact predicated an “extended period of uncertainty and volatility” (34%) followed by a “loss of business/revenue to EU companies” (19%). the most commonly cited positive effect was a “reduction in red tape/bureaucracy and overheads” (47%).  However, there were definitely differences based on company size. Over half (51%) of large companies, compared 30% of respondents from small businesses, saw the impact of Brexit as negative. This supports a recent finding of British unicorns, private companies with a valuation above $1bn.

Time to change direction?

We think it could be time for a re-think regarding the narrative for business. Mark Croft, managing partner of Clarus Consulting , commented: “With just over a month to go, there is time for the picture to change. But both campaigns need to make the business case in a more persuasive and compelling way – or go all out on the personal/emotional arguments instead.”

We want to know more

We hope you’ve found the post thought provoking. We were certainly intrigued to bust some current EU referendum myths about business voting intention and to discover that business leaders are voting from a personal perspective.

We’re intrigued. So we’re going to set up some depth qualitative interviews with a range of business leaders to discover more. We’ll let you know what they said shortly. If you’d like to comment, take part in our research, or know about our change programmes the feeling is mutual. Please get in touch using the contact form on this website.

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