David Jacobson's External Insights

Where is your business going? #1

The newspapers are full of IPO’s (initial public offers or stock exchange listings), trade sales, franchising and private equity deals.

Some strategies are designed to provide extra capital to expand the business, some are purely exit strategies to pay out the business founder or investors.

Each of the strategies has its advantages and disadvantages. But none of them can be achieved without thought and preparation. None of them can be maintained without diligent management.

Making a decision on any of these strategies requires the current owners to have agreed on where their business is going and where they, as individuals, want to go.

It is not unusual for a business to go public and be listed on a stock exchange, and its original owners decide to buy it back a short time later. This is a costly exercise.

I will be publishing a series of posts dealing with these issues.

#2: Franchising
#3: Family businesses
#4: Raising finance: Venture capital

State taxes to be reduced (over time)

The Queensland Government has committed to abolishing a number of state taxes over the six years from 2005-06 to 2010-11.

In an agreement with the Commonwealth Treasurer, Queensland and 5 other States and Territories have agreed to the program in return for GST payments.

The Queensland taxes to be abolished are:
* Stamp duty on non-quotable marketable securities;
* Stamp duty on leases;
* Stamp duty on mortgages, bonds, debentures and other loan securities;
* Stamp duty on credit arrangements, instalment purchase arrangements and rental arrangements; and
* Stamp duty on business conveyances other than real property, such as goodwill, supply rights of a business and intellectual property.

Queensland does not have stamp duty on cheques, bills of exchange and promissory notes and has already abolished credit card duty.

However Queensland has refused to abolish stamp duty on business conveyances on real property.

UPDATE:

The proposed timetable outlined for the abolition of the taxes is:

• 2005-06: Qld to abolish 100% lease duty and credit business duty (from 1 January 2006); SA to abolish mortgage duty (in part) from 1 January 2006; NT to abolish 100% of electronic debits tax;

• 2006-07: Vic to abolish 100% of rental duty from 1 January 2007; Qld to abolish 100% of hire duty and marketable securities duty (from 1 January 2007); SA to abolish 100% of other minor duties; Tas to abolish 50% of mortgage duty; ACT to abolish 100% of non-realty conveyances; NT to abolish 100% of marketable securities duty and lease duties;

• 2007-08: Qld to abolish 50% of mortgage duty on 1 January 2008; SA to abolish 33% of rental duty and the remaining mortgage duty; Tas to abolish 100% of mortgage duty; ACT and NT to abolish 100% of rental duty;

• 2008-09: Qld to abolish 100% of mortgage duty on 1 January 2009; SA to abolish 67% of rental duty and remaining mortgage duty; Tas to abolish 100% of non-realty conveyances;

• 2009-10: Qld to abolish 50% of non-realty conveyances from 1 January 2010; SA to abolish 100% rental duty and remaining mortgage duty, and 50% of non-realty conveyances and marketable securities duty; ACT to abolish 100% of lease duty; NT to abolish 100% of non-realty conveyances;

• 2010-11: Qld to abolish 100% of non-realty conveyances on 1 January 2011; SA to abolish 100% of non-realty conveyances and marketable securities duty; ACT to abolish 100% of marketable securities duty.

Transforming a company's culture

Changing a company involves changing the people in the company. What is the best way for people to learn about the company's culture or policies?

McKinseys have produced a chart showing the change in a company's employees' values after a leadership development program.

The key quote:

Facilitators focused on personal development, encouraging managers to reflect on their own experience of being mentored or of mentoring others. This effort tapped into these managers' deep personal values—such as the desire to improve and to leave a positive legacy among peers—which supported the goal of developing better leaders.

Learning which involves experience is more effective than lectures.

Another McKinsey article discusses the psychology of change management.

The article discusses the change management program of a European retail bank:

people assimilate information more thoroughly if they go on to describe to others how they will apply what they have learned to their own circumstances. The reason, in part, is that human beings use different areas of the brain for learning and for teaching

Is there such a thing as a good call centre?

One of the most self-aware ads currently on television is ANZ Bank's ad for its 24/7 call centre.

It features a range of robots from old television programs (starting withThe Robot from Lost in Space) who pass the telephone down the queue ("your call is important to us") until it reaches the Dalek which screeches "exterminate".

According to this HBS Working Knowledge article there is a call centre that works. It looks at the processes of  Sallie Mae in the US which looks after $100 billion in student loans for 7 million borrowers. It receives nearly 20,000 calls a day.

A sample quote:

One way Sallie Mae uncovers new trends is through a process called "hot topics." When agents notice a trend, they write a summary of it with examples and send an e-mail to management so that issue can be reviewed. Once a resolution is determined, a Knowledge Tool is created—a user-friendly online resource that agents can access for real-time information. The online system is a repository for the expertise of the entire call center. So by typing in a keyword from a caller's question, an inexperienced agent can retrieve all the information he or she will need to answer it.

I'd like to see that.

UPDATE : 5 May
This article from The McKinsey Quarterly discusses the metrics of call centres.

Corporate and Business Blogs

If you're an employer who wants to know more about blogs and whether you should let your employees write one, then I recommend  you read Edelman's Guide to the Blogosphere (pdf) and  this post on the interrelationship between businesses, weblogs and employees .

If you just want to know more about what blogs have to offer and want to read some samples then go to this week's Carnival of the Capitalists and Blawg Review (where my usability note is mentioned).

UPDATE: NY Times has this article: When the Blogger Blogs, Can the Employer Intervene?  (via Between Lawyers)

What you need to know before you become a director

The jailing this week of  Ray Williams a former chairman and Rodney Adler a former non-executive director of the failed HIH Insurance Limited are timely reminders of the risks faced by public company directors.

If you're thinking of accepting a directorship then a new guide published by CPA  Australia Finding the right board for you: 10 questions to ask before joining a board (pdf) is worth reading.

The guide — targeted at those considering directorships with listed companies, not-for-profits and government enterprises — encourages potential directors to fully research the organisation they are considering joining before committing.

Regulatory reforms across all sectors, as well as increased stakeholder activism, have significantly increased the responsibilities of directors.

The guide is a structured approach to finding out about the company, its existing board, its business and processes. Even the way in which the company responds to the questions will be an indicator of the company's internal processes and culture.

But it's not all about the company. 3 of the 10 questions are about you.

Usability: how good usability can improve performance in your business

Are you sure that your new client induction system, knowledge management system, your accounting system or document production system is as good as it can be? Have you asked the users?

Jakob Nielsen writes a regular column on usability at useit.com

He is recognised as a leader in website and intranet design (eg navigation and search tools) and advocate of usability testing to improve user experiences and therefore site performance.

He believes that the principle of usability applies to any system which interacts with people, from fighter planes to cars to office software.

His column this week is about medical usability. He discusses a recent hospital field study which recorded 22 instances of  how a poorly designed medication system resulted in patients getting the wrong medication.  These ranged from poor readability and wrong dates to  wrong doses. His article does not mention it but I recall recent publicity about an incident where the colour of labelling on a drug bottle  had to be changed because it had been confused with a toxic drug in an emergency. 

A key quote:

When it comes to user errors caused by bad design, there's a further problem as well: If the interface fails to provide adequate feedback, users might not even realize that they've committed an error.

How many of your office systems could be improved by asking your customers and staff to show you how they use them and problems they face?

As a bonus, the article then describes the writer's difficulty in tracking down the report used as the basis for the original New York Times story on the study.

The article is well worth reading as a case study, not just on your internal systems' usability but also in how to improve your marketing by ensuring newsworthy articles are accessible on your website.

UPDATE: Paul McKey mentioned today that Nielsen's partner, Donald Norman, wrote The Design of Everyday Things. Paul designs e-learning systems and is critical of programs that are compliance-focussed without offering a learning experience for users.

The Usernomics blog discusses "Usability in the news" . Its latest post points to an article on IBM developerworks about the design (or lack of it) of the US tax form.

Ageing Australia

The Productivity Commission has released its research report, Economic Implications of an Ageing Australia .

The study examines the productivity, labour supply and fiscal implications of likely demographic trends over the next 40 years, to further improve understanding of the challenges and opportunities resulting from an ageing Australia.

The report starts off with the key premise:

Australia faces a pronounced ageing of its population over the next forty years. One quarter of Australians will be aged 65 years or more by 2044–45, roughly double the present proportion. The proportion of the ‘oldest old’ will increase even more.

Will health care costs  be the target for government?

Spam prosecutions by ACA

A Melbourne car company that text-messaged people after copying their mobile phone numbers from classified ads has been fined more than $6,500 by the Australian Communications Authority (ACA) under the Spam Act.

carsales.com.au Ltd was issued with infringement notices for on-the-spot penalties of $6,600 by the ACA for sending unsolicited commercial SMS messages in breach of the Spam Act 2003.

“The ACA believes that those people selling cars published their telephone numbers in classified ads only so potential buyers could contact them,” ACA Acting Chairman Dr Bob Horton said.

“They did not consent to receiving commercial SMS messages advertising a car sales website from a company they had no relationship with, and who collected their mobile phone numbers from the newspapers.”

According to the ACA, since the Spam Act came into force in April last year, the ACA has required 200 businesses to amend their practices to comply with the Act. Of those required to changes their practices, three were fined by the ACA for more substantial breaches, three were issued with formal warnings and one gave an enforceable undertaking.

UPDATE: a US spammer got 9 years' jail.

Directors and Officers Liability Insurance

InWilkie v Gordian Runoff Limited [2005] HCA 17, the High Court of Australia reversed a Supreme Court of NSW decision and found that GIO Insurance Limited was liable to pay  an insured in advance for his legal costs of defending criminal charges arising from his employment at FAI.

FAI had purchased the Directors & Officers/Company Reimbursement Policy for Wilkie.

The High Court had to interpret the Policy in circumstances where Wilkie notified a claim in respect of criminal proceedings and sought the advancement of his defence costs (as defined in the Policy) but GIO denied liability, relying upon a "dishonesty exclusion".

Wilkie has not admitted the offences and the trial has not been heard. He wanted his costs paid in advance. The insurer did not want to pay unless he was acquitted.

The policy had a specific clause entitled "Advance payment of  defence costs". The decision was based on the interpretation of that clause and whether a separate dishonesty exclusion prevented its operation even though no dishonesty had yet been found.

In a separate decision the High Court rescinded special leave to appeal of Rich and Silberman (who are facing charges by ASIC) because their policy gave their insurer CGU  "discretion" to pay defence costs in advance.

The lesson? If you are a company director or officer, check the policy carefully to not only ensure that defence legal costs are covered (both civil and criminal) but also that the insurer must pay them when they are needed, before and during a trial, not after. Also check that the policy applies even if you have left the company.