Here’s a good business cliché, the sort that David Brent would use:
“Your people are your most important business resource.”
But if you look at how many businesses are run, you might assume that people are only a useful business resource because they are cheaper than robots. Work for a big company, and you might occasionally be asked to take part in an employee satisfaction survey which, after much paperwork and editing of spreadsheets will lead to insights such as “10% of junior employees don’t trust their boss, up from 8% two years ago”. Work for a smaller company, and you might see an old-fashioned suggestion box neglected in a corner of the office or factory (with a three-year-old piece of paper folded up inside asking for a better kettle for the kitchen).
Isn’t that a waste?
Don’t you think that maybe, just maybe, your people think about what they are doing and how they could do it better? Even better, maybe your people think about what you are doing and how you could do it better. Best of all, maybe your people think about what your organisation is doing and how it could do it better. Continue reading
If you read cartoons like Dilbert, one common theme you’ll come across is that of the poor downtrodden worker who knows more about his job than his boss. In Dilbert’s case, he’s a hardworking and brilliant engineer. His ‘pointy-haired boss’ is pretty clueless about Dilbert’s work and, well pretty much everything really. Above the pointy-haired boss are a number of vice presidents and executives who are better paid than the pointy-haired boss but seem equally clueless.
I wonder how many medium and large businesses have structures like this. Well, one of the things that being an external auditor for many years taught me is that the answer is probably “too many”. Too many firms have a level of management in between the people at the top who get to make the really big, really important decisions and the people who actually do the work or run the departments. Continue reading
In my last Clare Associates blog post, I looked at aggregate demand curves and aggregate supply curves. We know that for a given product, demand is higher if the price is lower and supply is higher if the price is higher, and how in a competitive market, the market price will tend to the intersection of the two curves.
Now if we know that demand is higher if the price is lower, the next question to ask is this:
How much will demand increase in response to a price decrease?
The answer is all about elasticity.
For many years now, I’ve spent a fair amount of time in local school sixth forms (helping to run this). One thing that surprises me about schools today is how few of them teach economics. While it’s true that you don’t need an economics degree to run a business, some of the theory will help you.
Supply and demand is one of those things that even people without an economics background can grasp quite easily, and if they think about for a bit, can probably work out. But if you understand supply and demand in the way that economists do, you’ll be able to understand slightly more advanced concepts like elasticity, which will be directly relevant to your business. More on elasticity in ‘Important Economics Concepts Every Businessman Should Know, Number 3: Elasticity’…
Important Economics Concepts Every Businessman Should Know, Number 2: Supply and Demand Continue reading
A man starts work as financial controller at a big company.
It’s a good job. The pay is good, his boss (the Finance Director) likes him and the people who work for him do their jobs well.
A few years later, it’s time for the FD to retire. The financial controller applies for the FD’s job, and gets it. He’s very happy.
At the old FD’s retirement party, the financial controller asks his old boss if he has any advice for him in his new role. The old FD says “I thought you’d ask me that. Take these two envelopes. If ever the excrement hits the fan and the walls come down, open the first envelope. It will tell you what to do. If after that, something else happens, well then you open the second envelope.” Continue reading
This is the third in a series of articles on Opportunity Cost and why it matters in business.
Opportunity cost is one of the most important concepts in all of economics. If you understand it, you can start to see the world in a slightly different way. It’s also one of the most relevant economic concepts to simple business decisions. Continue reading
If you didn’t see the first post on opportunity cost, you need to read that first. It is here.
For those of you who have read that post, let’s continue…
If you remember, in part 1 of this article, I asked you to consider this scenario:
You’ve just won a ticket to see Eric Clapton in concert tonight. You can’t resell the ticket. The only other thing you might want to do tonight is see Bob Dylan in concert. Assume that both concerts are the only gigs each performer is playing that you could get to in the foreseeable future.
The Dylan ticket costs £40. You quite like Bob Dylan, and normally, you would be prepared to spend up to £50 to see a Dylan concert. If Dylan tickets cost more than £50 you would think that too expensive and you wouldn’t go even if you had nothing else to do.
What is the opportunity cost of attending the Clapton concert? Continue reading
Let’s say you pay your office cleaners £20 to clean the office each night. You could actually clean the entire office yourself and you wouldn’t have to pay anyone £20, just a few quid on cleaning consumables, dusters etc. Now you know that the reason you don’t is because it would take you a couple of hours to do it, and if you were to spend an extra two hours a day at work, there are far more useful and lucrative things you could be doing with your time. So while the cost of you doing the cleaning should take into account the £20 you’re saving by not paying the cleaners, it also needs to take into account the profit the company would have made but now won’t see on the extra sales that you would have made with an extra couple of hours in the office. That, in a nutshell, is what opportunity cost is all about. Continue reading
This BBC website article annoyed me when I saw it a while back. Or at least, not the article so much but the examples of “good design” in the accompanying photographs.
So that’s a bunch of ugly, hard, uncomfortable plastic chairs and a stupidly expensive, noisy and uncomfortable plane. Is this really “good design”? Continue reading