Is this financial turmoil the birth pangs of a new business model?

I’m reading and hearing things that make me wonder.

Consider,  at one extreme, the occupy movements (I am not quite sure what they stand for or want, but it is pretty clear what they are against) and at the other end of the scale Professor Michael Porter’s work on Creating Shared Value and add into the mix the undercurrent from popular culture that could be encapsulated as “Big business = bad guys” you can make the case that the pressure is building on the existing “Survival of the fittest” capitalist model.

Reinforcing the pressure on this model is the movement towards philanthropy led by Bill Gates and Warren Buffet in the US and the on-going emergence of Social Entrepreneurs world-wide.

Further reinforcing the impression that the model is broken is the continuing controversy over high pay and the demands for excessive pay and bonuses to be constrained – although that seems to be more of a British obsession and I have not heard a similar level of complaint from the US.

Perhaps the starting point of the new model is to be found in finance (any model that is sustainable will have to have some means of supporting itself) and in particular in crowd funding where there is a many-to-one relationship between the funder(s) and the recipient of those funds. Contrast that to the traditional model, where the relationship is closer to one-to-one but the funder is significantly larger than the funded (think of a Bank lending to an SME as an example) and consequently has considerable leverage over the operations of the funded business.

Perhaps this is also a reflection of the internet age, where massive businesses are built almost overnight (by historical standards) and information, opinion and criticism is widely and rapidly shared.

Where does all this lead?  

I confess, I hate football. I am immediately bored when it is on the news (I always seem to tune in just in time for it) but this week, the coverage of the ‘arry trial and the dismissal of John Terry by the FA, undermining the manager, has caught my eye.

I am astonished by the inability of HMRC to come up with a better target than an apparently very popular football manager and his multi-millionaire former boss, suggest an avoidance of tax which, in their terms was peanuts. HMRC have made monkeys of themselves!

I am equally astonished at the actions of the FA. Surely, if a manager is to manage a team, he has responsibility for all the aspects of the team – including the captaincy. Dismissing the captain should have been his job, and for the FA to go over his head would, if the FA were a business, give the manager a pretty strong case for constructive dismissal!

Thinking about football from a business perspective,  how is it that senior managers in banks, and in other professions, are being pilloried for excessive pay while footballers, their managers, their agents and who knows else are making even more exorbitant sums as “entertainers” (I don’t like football, so they don’t entertain me)

At least the bankers are in the real world…some of them may even have employed some people, or saved a few jobs by rescuing a business..just look at how Mitt Romney is being attacked in the US for his time at Bain Capital  where I am sure sme jobs were lost but many more were created or saved bys successful businesses.

One of my clients told me just the other day that he is taking it a bit easier, now that he has reached 60

“I've taken some business risks over the years and overall they have paid off - although some better than others of course - and at least I can claim to have created or saved a few hundred jobs in numerous activities along the way !”

So please explain to me why a footballer should be worth so much money?  My client worked hard all his life and I suspect even in semi-retirement he will be working harder than most. I know which I value more!

Many businesses pay lip service to employee motivational schemes. We are all different, have different needs, wants and desires, yet bonus and reward schemes treat us all the same.

How often have you seen a company wide bonus scheme really work to motivate and incentivise an individual?  Many times I have seen the opposite effect, where the bonus was a little less than expected and the negative impact is dramatic. If there is anyone not pulling their weight and they get the bonus too, how does that encourage the harder workers?

Bonuses are often seen as fair reward for average performance. That’s not what was intended, but it is the way things end up. In the city, you’ll see guaranteed bonuses for bankers – how does that work as a motivational tool?

We want to encourage and reward exceptional performance!

Treat people as the individuals they are, recognise and reward their performance and you'll be a long way down the road to having a great team.

Well, Sir Fred Goodwin has been stripped of his knighthood, and banned by the FSA from holding a senior banking position in the UK.

Is the FSA action a good thing? To me it smacks of bolting the stable door long after the horse has bolted. Do we really think a serious bank would risk the adverse publicity of hiring Sir Fred?

Just what does taking away the knighthood say about us? Why was he given one in the first place is perhaps a  better question – I believe it was awarded for “services to banking” which I thought was his job and what he got paid for!

How is it that the regulators, who were supposed to be watching out for our (taxpayers) interests, seem to have escaped the public humiliation visited upon the bankers? Weren’t they at fault?

I’ve said many times and I still believe the single decision with the most adverse consequences was the decision to let Lehman fail. That destroyed confidence in the banking system and the effects are plain for all to see – even at this remove. Who paid the price of that decision? All of us still are, but those responsible?

I am chairing the next Breakfast Business Forum event in Abingdon on the 25th April.

The centrepiece of the event will be Finance Question Time, where a number of finance providers will be answering questions from the audience.

We have panellists from the clearing banks, alternative finance providers and equity investors.

Please let me have your questions, and if you’d like to come along please book at http://breakfastbusinessforum.com/