Keeping up with the Jones’: My other car’s a bus load of PRP

Please click on the following link to read the article this blog post refers to.

http://news.bbc.co.uk/1/hi/business/8068926.stm

Middle Britain is not happy; the credit crunch has significantly reduced availability and size of lines of credit, rendering our high-spending consumer economy temporarily lame. As if reduced spending, falling house prices and ailing pension pots weren’t enough to test the resolve of the British public, recent publicity regarding certain investment bankers’ take home pay per annum at the height of pre-crunch Britain, and MP’s liberal usage of their expenses forms have done nothing but add a volatile catalyst to the nation’s temperament regarding the current state of the economy. As the public’s rage continues to be fuelled by superficially matter-of-fact journalism and media coverage and the witch hunt for overall culpability continues, one is left wondering, what it shall take to satisfy the mob? 

The BBC Business article delivers some insightful statistics upon Britain’s average and median income. The findings presented in the article clearly demonstrate that the issue we face as British economic agents is not so much the large gap between ‘middle Britain’ and the ‘super-rich’ the 4% at the top of the pay scale, but rather; primarily the fact that income figures of £200-275 per week represent the largest percentage of the UK’s population secondarily the fact that in spite of over 40% of the UK population attending higher education, the mean point for national salaries £450 per week (already skewed by income data from the ‘super-rich’) constitutes fairly average pay a recent graduate can expect to take home within the first 2 years of their first post. Household number whom take higher pay then plunge along the graph as salaries increase up to the £1100 per week (under £55,000 a year, a total increase of approx 120% over starting graduate salaries). This suggests there is a fundamental error in the post-graduate labour market’s, as with 40% of Britain attaining qualifications which would enable them to gain recruitment at a graduate level, one would expect at least 20% of each year’s graduating classes to progress along the pay scale with a steady momentum, and for the line not to plunge, but rather to remain relatively level. 

The reason for the first finding (peak numbers of UK workers earning £200-275 per week) is obvious; the largest proportion of British economic agents take home minimum wage or just above it before tax, furthermore given the steep rise on the income distribution graph prior to that point, a far greater proportion of the UK take home what constitutes either below minimum wage or perhaps more commonly work in minimum wage jobs part time, than those UK workers whom earn graduate and post-graduate salaries. This finding is disturbing for a variety of reasons. Most evidently, the findings lead one to contemplate what exactly quantifiably constitutes the breadline. The breadline is an interesting concept, not least because the price of bread continues to rise with inflation, but the majority of those salaries that would amount to being above or below it by 1 or two standard deviations, are not index linked to account for inflation. Consequently, wherever one draws the breadline, its undeniable fact that the largest proportion of economic agents within Britain are actually getting poorer, and have been for decades, even within the ‘boom years’ pre-crunch. The breadline as an older pre-fordist concept has not evolved to incorporate the greatly expanded product and service market’s offerings. Consequently, one cannot say with any accuracy that if one adjusts for inflation, the breadline in the UK will amount to the same amount relatively speaking to that which it amounted to 30 years ago. This brings one to contemplate whether internet usage, mobile phone usage, computer usage, and the ability to find cost-effective entertainment and engage in social activities such as go to the cinema or the pub constitute necessities, without which an individual economic agent cannot lead a healthy life. One may draw the line at the point it is currently drawn; anything that constitutes a boon to lifestyle beyond not collapsing from malnutrition constitutes a ‘luxury’. However, one may agree that with prevailing technology and cost-efficiency that the internet and the subsequent ownership of a computer supply constitute necessities without which ensuing issues such as reduced expenditure-efficiency, reduced communication ability, increased searching costs (be it for jobs or commercial products/services) and a small element of free entertainment and information (free TV via BBC I-player, and free access to the BBC news pages for example) occur, and are significantly retrograde to quality of life and thus increase the risk of both suicide and health risk factors due to increased stress, and/or development depressive disorders. If one agrees with the latter attribution, then its evident that those UK citizen’s in work earning anywhere below £13,000 a year and whom decide admirably not to be reliant upon state aid such as council housing, are for the most part entirely excluded from maintaining such a lifestyle. Thus a decision has been made; it is not the responsibility of employers to ensure their employees earn enough money per week to maintain the barest minimum of positive lifestyles, but rather such a responsibility falls upon the government, whom is currently generously maintaining the largest portion of cross-generational individuals in the UK with council housing, assisted housing, and/or other benefits, whilst steadfastly refusing to pay more than lip service by raising the minimum wage considerably and thereby creating a far more sustainable income distribution within the UK. 

The second finding the graph indicates; plunging numbers of incomes above the graduate salary line constitute a different only slightly less disturbing issue, that again has to do with government regulation of the private sector, and the UK private sector’s hiring practices and the UK’s overall labour market. The prevalent hiring practice the UK private sector utilises is horizontal insertion, rather than the prevalent hiring practice utilised by mainland Europe; vertical insertion. Horizontal insertion constitutes organisations recruiting candidates from their external environment (the labour market) for posts they require to be filled along their organisational hierarchy; graduate, experienced hired, senior hire, expert, departmental directors etc. Organisations that follow a vertical insertion recruitment strategy recruit from the internal labour market, for the same posts. It is very important to understand that the internal labour market is not limited to those employees they currently employee but rather constitutes the entirety of candidates with the requisite skills and industry specific rather than transferrable experience required for such a role. Consequently, Vertical insertion has its pick of all those individual economic agents whom have worked or currently work within a certain industry or sector.

A major example of two such industries in France and Germany, would be both countries application of vertical insertion within their manufacturing sectors, especially the motor industry, at the lower end of the pay scale and their banking services at the highest end of their pay scale. It is important to note that both horizontal and vertical insertion strategies confer inherent advantages and disadvantages upon an organisation and if found in prevalent usage upon a national economy. The global recession has pressed into sharp relief the inadequacy of nations decisions to operate nationwide prevalent insertion strategies. It is clear that the UK is entirely dependent upon GDP generated in London and given the varying levels of expertise required to work in such an environment horizontal hiring practices to a certain extent confer upon the city and organisations within it the ability to pick and choose the best workers for the posts they need to fill, and thus attain optimum organisational performance. However, the same strategy is applied across the UK, within urban and rural centres of economic productivity when the organisational need to hire from an extremely varied candidate pool for specific posts does not exist nearly to the same extent as it does in the financial services rich London. Consequently, when an organisation within the retail, hospitality, manufacturing, construction, administrative, educational or many other sectors entertains applicants from all over the UK from all other sectors and industries for the position it needs to fill, it is utilising an highly inefficient recruitment and selection device, to the extent that while competition for the post shall theoretically be a lot higher than if recruitment were limited to internal labour markets, the focus of the recruitment effort is not to find the candidate whose industry specific skills and experience most behove the post but rather the candidate whom is best at convincing employers that he or she’s demonstrative lack of industry experience is inconsequential due to the highly transferrable nature of their previous education and experience in unrelated industries.

Clearly, the ability of each companies HR department to determine whether a candidate is a good fit or not varies, and many companies whilst encouraging external labour market applications, do evaluate potential candidates with industry specific education and experience as slightly lower risk hires. However, the very fact that someone with an English literature degree and operations management experience within the airline industry is entertained as a relatively equally attractive hire for the post of logistics director for a furniture retailer as someone with a business studies degree with a specialisation in supply chain management and experience as an assistant logistics manager for a rival furniture company, inextricably decreases the likelihood that the furniture retailer shall hire the best candidate for the post. Consequently, their organisational performance shall suffer as a result, whilst at the same time massively decreasing job security and employment stability across all unrelated industries due to the tenuous nature of transferrable education and skills. It is now apparent that the usage of nationwide insertion strategies in areas where one particular strategy simply is less efficient and problematic than the other, for the sake of following the model of those hubs within a country which provide the greatest GDP such as London, Stuttgart, Paris etc has made national labour markets entirely unstable and is the major contributing factor to unemployment rates within the EU. It is also clear that whilst the need for organisations to reduce overheads by reducing workload is undeniably the case at times in a recessionary climate, companies operating a vertical insertion strategy and thus those that cultivate extremely specific skills rich competent labour markets, cannot afford to do so to the same extent as those companies whom operate horizontal insertion strategies for the sake of them, as the former cannot afford to anger or disenfranchise its smaller better trained pool of candidates, whereas the latter can do so for the sake of short term benefit with no regard to long term consequences for their own organisational performance or indeed a national economies wellbeing. Similarly, those economies that operate vertical insertion strategies within economic hubs that specialise in the financial services sector are significantly disabling themselves from being adaptable in any climate let alone a recessionary one, due to over-commitment to hiring only a certain type of individual for a post and thus decreasing the likelihood that they shall remain fit and survive. 

This brings us to two questions; firstly how prevalent hiring structure in the UK maintains social inequality and actively reduces private sector organisational performance and thus profit. Secondly as a nation, where does the UK go from here, to ensure a more stable, more profitable economy based upon a more aspirational, but more efficient form of capitalism?


Somewhat ironically some of the lowest paid sectors in the UK irrespective of location actually offer some of the most vertical insertion friendly posts such as in the case of retail; Sales assistant, assistant manager, manager, regional manager, and yet the majority of those that enter the retail world and do not attain promotion within the first 5 years often languish low down the ladder and pay scale and thus a large pool of candidates exist forming an internal labour market, competition for such promotions to assistant manager, or manager are so ridiculously fierce due to the extremely low barriers to entry (specific retail education and experience not required), that the usage of horizontal hiring practice actively decreases the likelihood that such promotions shall be filled via promotion, thus killing the idea of a ‘career in retail’. Consequently, the internal labour market for minimum wage retail work maintains a huge surplus of supply for the amount of posts needing to be filled, thus prompting a large proportion of prospective candidates to seek welfare benefits and employees whom due to their disgruntled attitudes toward the lack of respect their experience and efforts have earned them find it very difficult to get promotions and thus secure their financial independence. This ‘trend’ is not limited to the retail industry by any means, but rather extends across the majority of industries around the UK. The prevalence of such due to inaccurate usage of horizontal hiring in the UK in fact creates a delineating line between the majority of previously thought of ‘white collar work’ within the services rather than trade sectors such as (retail management, or hotel management), separating the majority of workers and prospective workers in such a form of work from the minority of workers whom due to accurate implementation of horizontal hiring structure within the financial services sector of white-collar work may well earn large salaries and huge performance related pay bonuses, by virtue of the fact that companies value their ‘expertise’ far more than they do the common pool’s industry expertise. 


Thus there exists a great inefficiency within the UK labour market which acts as a major variable that shall if not corrected deepen the recession and prevent economic growth for years to come. The answer lies, broadly in UK private sector organisations re-examining under governmental duress the insertion strategies they utilise. Whilst financial regulations on the risk evaluation of securities must be maintained to a high standard, and whilst the IMF, the Bank of England, and every investment bank must actively employ expert individuals to monitor the state of the economy and operational standards, London must not succumb to any Euro zone pressure to adopt vertical insertion strategies, lower its risk tolerance significantly and become a less lithe financial centre even if such battening down of the hatches would halt the recession, such a shift would cause London to lose its crown as financial centre of the world and thereby GDP would be reduced which would prevent economic recovery from occurring rapidly. However, The rest of the UK, must be made to abandon horizontal insertion strategy as the prevalent insertion strategy, and move toward a far more stable (in light of greatly lower GDP generation potential of all other economic hubs excluding London in the UK) vertical insertion approach. That constitutes the broad solution, however, in practice a paradigm shift from horizontal to vertical insertion is fraught with danger, and the spectre of political correctness and societal anomie surround such a shift, if it is not perfectly executed over a sufficient timescale of 25 years, with momentum increasing slowly at first, and upon reaching critical mass in the next 5 years maintaining momentum and increasing slowly but steadily till a peak point where paradigm shift can quantifiably be seen to have been accomplished. Toward such a shift in the labour market and its interactions with the private sector, government organised educational reform is key. The purpose and efficiency in achieving that purpose of universities across the academic and reputational spectrum must be re-examined. The governmental goal to send 50% of the school leaving population to university must be recognised as an extremely foolish move that has served to and shall continue to increase inequality in income distribution and arguably decrease quality of life within the UK, in spite of its theoretical foundation; decreasing inequality by increasing levels of broad unfocused education and the numbers of citizens with degrees instead of industry specific qualifications and experience. In principle it was a nice idea; lunging toward a more meritocratic model. However, in practice, UK wide adoption of horizontal hiring practice and the reformation of the education system to attempt to meet that formats needs has caused great inequality by allowing only a few to succeed, and the majority whom, due to the unsuitability of the specific form of higher education that university represents for their learning needs, to languish somewhere slightly above or below the breadline, or unhappily passed up for promotion within fiercely competitive for the sake of it expanded candidate pools. 

 A more meritocratic system which promotes qualification and experiential achievement in all UK citizens must be created toward a more stable yet efficiently aspirational UK economy and toward increasing quality of life and decreasing inequality within the UK. The education system must be reformed to match the landscape of extra-London vertical insertion, and yet also optionally cater successfully toward London, and specific niche organisations horizontal insertion needs. The model that must be applied expects a 100% successful participation within higher education however, the boundaries and limitations of the concept of HE within the model have been expanded from purely university awarded qualifications to include the establishment of departmental specific professional training colleges, trade schools, supplemented by cross-sector apprenticeships which provide lower pay in return for extensive training and several years of pre-qualification experience, with near certain employment prospects after such a formative period for all school leavers whom do not want to enter either academia, the medical or legal professions, become scientists or enter a field which requires a candidate to attain a great level of education instead of training supported on the job experience. It is extremely important to recognise the need for the private sector to re-define its appreciation of what constitutes good business qualification, to the extent that the study of business, or the aspiration toward departmental expertise within fields such as; advertising, investment banking, marketing, sales, accounting, human resource management and operations management are objectively best attained (from a quality assurance perspective) through business apprenticeship schemes for school leavers with structured training toward both organisation specific certificates and departmental specific diplomas. In short the tri-partite education system needs to be revived and at the same time extensively remodelled to include the majority of professions rather than only trade professions. Such a political/business endeavour constitutes a difficult pill to swallow for the already dissatisfied, change adverse British public across the income distribution scale, however, if such a pill can be swallowed the UK economy and people shall be far better for in both the short term and very long term, and shall become the single greatest aspirational economy in the world. 

Compartmentilisation and CSR: You can't make chicken soup without a good boiling pot.

Please click on the link below to read the article this blog post refers to.

http://www.economist.com/business/displaystory.cfm?story_id=13648978 

Corporate Social Responsability or 'CSR', its a mouthful, but its one that marketers have been attempting to make their counterpart accounting departments swallow for quite a while with varying degrees of success. 

As the Economist article indicates, CSR campaign budgets assigned to marketing departments amongst the blue chips remain relatively well insulated in comparison to many other marketing related budgets such as those assigned to create advertisements and purchase adspace. Pre-crunch CSR was taking off, reaching critical mass having passed the early adopter stage with a decent momentum, even though it was clear many companies, certainly those whom were not at risk of losing marketshare in the short term if they did not diminsh the scope of their rivals first mover advantage, seemed dubious as to how CSR expenditure would benefit them financially without sinking into the unprofitiable 'noise' area of many other such promotional activities thus preferring to bide their time for the next round of investment defined by subsequent fiancial quarters, waiting to see if CSR became more than just a stakeholder approval seeking publicity stunt and rather upgraded to a key success factor, a benchmark accross sectors that would yield either brand appreciation or depreciation based upon level of perceived investment and committment from each company. 

Crunch time hit, the recession occured, and CSR as a paradigm for capitalism 3.0 was left dangling over the side of a cliff having tripped on a tangle weed of media propounded corporate panic regarding the financial apocalypse and failed to make the leap to reach critical mass and gain much greater cross-sector diffusion. 

So what are firms doing now with their relatively well insulated CSR budgets, and where do we go from here? 

The Economist article, alongside many other similar articles that have been published over the last few months in reputable business pages, indicate that a compartmentalisation regarding what constitutes effective CSR has occured amongst the blue chips, the then and current key proponents and standard barers of CSR. There was always the fear that such initiatives would not be taken seriously by consumers and other stakeholders, especially in the case of the traditionally less morally concerned companies. However, whilst there appears to have been consensus on the importance of perception of CSR activities, there exists currently a fundamental disconnect within many companies between that realisation and their choice to shift CSR budgets toward such activities which present a short term return, such as investing in tele-conferencing systems isntead of far greater expenditure on corporate travel, which just happens to also reduce a companies annaul carbon footprint. In and of itself this short-termist approach to CSR, in comparison to other companies approach such as 'Tripple Velvets' new initiative to plant 3 trees for every tree it cuts down which constitutes a more long term commitment to CSR, are not and should not be perceived as lesser attempts to become a socially responsible company. However, the benefits accrued in terms of brand appreciation through positive differentiation from competitors in the short term and consumer incentivising benchmark creation in the long term in the context where such activities as actively reducing carbon emissions and purchasing more fairly traded cocoa beans where farmers are paid more for their yield, are paltry in comparison to the context where the same activites are occuring and a decent amount of ad money is earmarked for in-tandem expenditure to promote to stakeholders, especially consumers, that such activities are going on. 

As the majority of CSR's initial proponents and detractors noted the key success factor for such initiatives toward building brand appreciation was and is perception, specifically gaining the trust of stakeholders and informing them of such activities so that they may recognise the genuine nature of effort CSR companies are putting into such activities. Consequently, those activities such as 'Tripple Velvet's which represent a greater (harder to wiggle out of) committment to CSR in the long term are far more effective at inspiring such appreciation and trust from stakeholders than short term initiatives which are quite clearly designed to cut costs in the recessionary climate and just happen to be constituents of good CSR practice.

Not every company can undertake such an initiative as planting trees/investing in stock to the extent that its primarily a socially responsible expenditure (though one could argue the toilet paper company is merely investing into stockbacks to avoid the volatility of resource price fluction), however, when in doubt there's always the tried and test 'Ben and Jerry's' approach; giving a percentage of your profits to a sequential list of charities. Such a move would constitute possibly the greatest, most long term committment to CSR, however, it also cuts down consumers cognitive expenditure in cutting through the marketing noise and rationally assessing which company is more ethical and from whom to purchase which product, by creating a set of substitute products/services and experiential goods that instantly attest to their own socially reponsible natures with a simple packaging point that says 5%... 

Whether Capitalism 3.0 manages to pull itself back onto the ledge, take a running jump and learn to fly is moderated by many variables, some national economy specific, some global, some politically determinable some determinable by the private sector, and some mutually determined through co-operating and long term thinking, but whats certain is CSR shall play a large part in determining whom within the market is the fittest post crunch, be it in the form of adapting to the revenue poor recessionary climate by growing a fur coat; changing operational expenditure in the long term, or adapting to the current climate to the extent that constitutes evolution of the species, one with a far healthier, far safer, far more alltogether profitable appraoch to this brave new world. 

Is that chest hair, or just a worn pullover?

Please click on the following link to access the article referenced in this blog post:

http://www.ft.com/cms/s/0/26fe62d6-49fa-11de-8e7e-00144feabdc0.html?nclick_check=1 

I'm sure Herr Adidas and Monsier leshalles are currently sitting together over a post publishing dinner-cum-e-chat. I'm equally sure the Frankfurter is rubbing his hands together gleefully as he tucks into his bratwurst mit zenf und kartoffeln salat, content to see his phone did not in fact ring, but rather his Parisian counterpart ascented to his latest proposal; the utilisation of webcam based e-chat, something which Herr Adidas has steadfastly made sure he knows about lest he be left behind in these modern times. 

Monsier Leshalles stares indignantly down the measly 1.3 megapixel webcam resting atop his company provided Dell laptop, as he attempts to navigate his latest error; attempting to prepare his happy-go-lucky Italian friend's linguini a la calamari, that after some effort and much tut tutting in his 11 sqft Bastille kitchen lies tepidly between himself and the laptop screen. 

 Herr  Adidas heartily wipes his mouth with a napkin his girlfriend 'Uta' bought him in an attempt to make sure such a steadfastly typical man, a long time bachelor, gets into some good habits even when she cannot be there due to the evening German lessons she provides to some charming recently immigrated Turkish friends of friends.  The proud bachelor then readjusts his belt, stifles a burp and moves the conversation with his french friend on from the pleasantries. 

"Zo...vee have zun a gut job ya!?" (you'll notice he's speaking in English) 

At this Monsier Leshalles blurs a bit till he gets into focus, his face plastered with a thin lipped smile, as his picture blurs again in what Herr Adidas determines is a normal Gallic shrug. 

"Ben oui, bien sur..." 

After a few seconds of dead air, both men begin to speak, however, the Frenchmen decides given his counterpart took the initiative to initiate the conversation it's probably up to him to rescue it before it stalls due to the German's rambunctious enthusiasm. 

"We-eu, diide-eu, verriii, well-eu." 

Another Gallic shrug. 

The frankfurter, decides against taking another sip of his reasonably priced, normal, trocken riesling, and presses the conversation onward.

"Ja, zis artikle ist ganz relevant! Und it is auch important zu note zat Deutchsland und zee France are both zoing very well in zis economic climate, if...order...wenn, zee others, like zee England und zee Spanien are not!" 

The Parisian shifts in his Habitat chair, a tingle of glee running down the spine of the well worn blazer his parents gave him upon graduation from his grandes ecoles 10 years ago. He recognises truth in his German counterpart's words, his rigourous economics education has, as it has done everyday paid off, and even though his sister, the favourite of the family, went to Insead and is now working as communications director for L'oreal, he too may be seen as a successful individual. 

The German journalist continues.

"Zer is a fundamental inefficiency in zee British economic zystem...Zay, rely zu heavily on zee credit, zo wenn zis is taken away from them! Zay are zu afraid zu go zu zee supermarkt!" 

The Frenchman frowns and comprehends perhaps half of what the German is saying, but nods vigourously; 

"Zay are, fooooliiiish, zay will-eu, not-eu help-eu zerr-eu economie-eu zu recover-eu, if-eu, zay-eu zu not-eu spend-eu like us-eu!" 

The french journalist allows himself another drop from the bottle of of 1998 Chateau Les Cambrailles, the manager at the Nicholas on his street corner, sold him for 1 euro 50 because he too foolishly thought it was corked. The Frenchman, recognised a bargain when he saw one, perhaps due to his 7 years of formation at les grandes ecoles, 1 euro 50 is a normal price for a good vin du tables, but for a bottle of vinegar, or cooking wine, it is excellent! 

A silence passes over their respective tables, as the two, newly paired by their respective editors to write such a piece, think of how best to close the conversation without appearing rude, as given their educational history and titles, they are very busy men,.

As one they both lean, opening their mouthes about to say something, and their respective hands both slam into the return key on their respective laptops, where they had both positioned their cursors over the 'end call' or 'red' button. 

After a moment contemplating free rider theory, the pair almost at the same time conclude the conversation by IM chat. They both blame the call failure upon their respective internet connections, which are both provided by Orange, clearly, the company is having issues with its service maintenance as its UK consumers all hasten to cut their contracts, discard their handsets in favour of shouting loudly in the street and waving banners, and their revenues fall, leaving the company on hard times. 

In short the article is interesting, in that it flags up the shamelessness of Euro, by which I mean, currency member, zones in their smug one-up man ship over truly free and aspirational economies such as Britain and the US. German and French consumers are still spending the same amount they have done over the last few years, what do you want to bet that taken relatively, consumer expenditure post crunch is still much healthier in the UK? 

The French economy is more stable in the same way that a table is more reliable than a computer, and the German economy is more rigorously efficient in the way that CRT TV's preserve the illusion of fiction better than HD TV's which reveal all. 

The German economy will recover the quickest, and the French economy is the most insulated. However, so long as Britain sticks up for itself and does not allow itself to be brow beaten by the eurozone's smug call for its ailing cousin to join the Euro so that it can be taken in hand, Britain, shall dramatically overtake both economies over the course of the next 10 years in growth, and yet, learning from some of its mistakes, become even more stable than the others, whilst the others find themselves having to bail out institutions whom were previously reliant upon UK consumer spending. 

The attitude that we as Brits must adopt outside of our brilliant "Keep calm and carry on" motto coined in equally difficult times when European neighbors attested to their superiority, is 'watch this space.' 

Britain shall inform the nature of socially moderated, aspirational capitalism for decades to come, and shall further reduce national economic apartheid by taking the world by surprise in presenting a much better tuned version of capitalism for global pursuit.