I am surprised it has taken so long for the marketing professionals to explicitly recognise and exploit the behaviour people have been exhibiting for decades, to check something out in a store with good staff and good advice, and then go down the road to a cheaper supplier to buy it. We don't have to go outside the Dixons empire to see the whole history. I used to got to Currys, make a decision (when Currys still had good staff who had some idea of what they were selling and could tell you more than was just printed on the sticker), and then go and buy it 50 metres away in Dixons. Then of course Dixons bought Currys and the saga moved on to their other wing, PC World, which was their first major campaign using the web in harmony with the store. Dixons group has played the evolution of the web very well and this new campaign is just the next phase. It is no big surprise they are the first company to start it in any big way. It's just surprising that no other company has done it bigger, better, earlier, given how obvious the evolution route is.
So, what's next? Pretty obvious really. And I expect Dixons will probably be in the front runners here too, though probably not the first next time.
Now that we are seeing the first glimmerings of augmented reality, where you can hold out your phone and see graphics showing where the tube stations are, it is a short hop to overlaying marketing data onto video visors. It sort of works with a phone screen, but it is too small and too much effort to use, so the market won't really take off properly until visors become commonplace. Once the augmented reality market reaches critical mass, which won't be very long, you will be able to browse products in a store, point your phone at them, and see how much it costs with another store. So you could do that in John Lewis, and see how much Dixons charges, and order it from there. Booksellers already suffer from some customers scanning barcodes on their books and ordering them directly from the web at a discount, but that is nowhere near as intuitive as it will be using augmented reality.
Augmented reality will allow full-blown digital trespassing. Getting a price for a product is one thing, and will certainly get the market moving, but imagine being in Marks and Spencer and seeing the clothes on sale in their competitors right alongside. A tiny amount of AI is needed to determine which products to set alongside, but it will happen. It will be just like Next having their clothes racks in Marks and Spencer right beside theirs. And vice versa of course.
Of course, marketers will encourage security to block wireless and mobile signals so that they can't carry real-time connections from competitors, but it is easy to bypass that. Mobiles will have plenty of memory, and will be quite capable of downloading enormous databases of competing products before the shopper leaves home. Of course, that also means they don't have to leave home, but we know from experience that people still like to visit real shops for all kinds of reasons even though they have broadband web at home.
Actually, although the first battles will be interesting, I expect the whole market will quickly adapt. Companies will know what brings people to their stores and will still be able to make advantage from that. Even if people can shop around more easily, it doesn't mean and end to diversity in the high street. New technology is mainly a threat to companies that refuse to adapt. For good companies, the battle just moves on, and competition thrives. Bring it on! And congratulations to Dixons for opening the next phase. But you know what? I'll still only buy from Dixons sometimes, sometimes not.
Sunday, 27 September 2009
Thursday, 10 September 2009
ATM Charges reintroduced - Customers suffer again
The celebrations of free ATM transactions from any bank in India was not even over that the RBI accepted the Indian Banks Association (IBA) proposal to re-introduce transaction charges for customers on the use of other banks’ ATM.
IBA has proposed to levy a transaction fee of Rs. 20 per transaction for using another bank's ATM more than five times a month. Also the Reserve Bank of India has said that not more than Rs 10,000 can be withdrawn each time they are used.
It will be optional on the part of the banks to levy this charge on customers. IBA has not made it mandatory but left it to the banks' discretion. Since the banks will recover the transaction costs it would have to pay to the bank providing the ATM services, it has less to lose. Once again, it’s the customers who lose.
ATMs have become an important channel for banking transactions, particularly for cash withdrawal and account balance enquiry and also funds transfer, bill payments and cell phone recharge facilities. The spread of ATMs has increased from 34,789 in March 2008 to 43,651 in March 2009. Banks have entered into bilateral or multilateral arrangements with other banks to have inter-bank ATM networks. The charges levied on the customers for use of ATMs varied from bank to bank and also varied according to the ATM network that was used for the transaction. RBI issued directives making use of own bank’s ATM or any other bank’s ATM free of charge for cash withdrawal, from April 1, 2009. This led to increase in volume of ATM transactions from 17,797 lakh aggregating to Rs.4,38,151 crore during 2007-08 to 23,530 lakh aggregating to Rs.6,16,456 crore during 2008-09.
As per IBA, a majority of the ATM transactions are in the range of average withdrawals of Rs.3500 to Rs. 40000, and 90 percent of all transactions are below Rs.10,000. Hence, the intended purpose to serve the common man is achieved. However, there was a small minority of users who withdrew very large sums on account of high card limits given by some banks to privileged customers.
However, there is more to it than meets the eye. For banks like ICICI and SBI who have established ATM/branch networks have nothing to lose because their customers can find their ATMs close by. These banks can thus, earn a lot of money from other banks with smaller networks whose customers will have to look for ATMs for transactions.
The banks with smaller networks would, thus always encourage their customers to come to the branches rather than using ATMs of other banks. Also, the customers and banks would prefer to have lower transactions and larger withdrawals from ATMs of other banks. While it may be argued that banks who have created large networks should get some benefit of maintaining such ATM networks. After all, it costs close Rs 60000 to Rs 70000 per month for a bank to operate an ATM (including maintenance, electricity, rent and direct expenses of operationg an ATM). But what about the customers? Is it wise for the IBA or the RBI to be biased towards customers of banks with large networks?
Monday, 7 September 2009
city bonuses
Some people get paid lots more than I do. It's a fact of life, and I accepted it a long time ago. Some of them don't deserve more, some do, and I get paid more than some people who deserve more than me, but we all know life isn't fair. But that isn't the point with city bonuses.
Banks have to encourage staff to perform well. Staff are not all equally good. Some can make much more than others because of their personal edge in the market, and without large differences in reward, it is hard to keep such people in a free market. Especially a global market such as banking. So I have no problem with big bonuses if they are rewarding success, and I think it is a mistake to try to stop or limit them.
What does need to be limited is the level of risks that bank staff are allowed to take. I believe strongly in free markets, but free markets mean that companies come and go. Some die, if they are not good enough. That is fine. But when they die, it should be their owners (shareholders) that suffer, and their suppliers (including customers who chose to do business with that company). It should not be the wider community, i.e the taxpayer.
The implementation of this could be relatively straightforward regulation to limit risks to what the company can show it can afford. It is fine if the company wants to risk all it has and lose it and die. It is not fine if it risks all it has and also some of what everyone else has too. Ensuring that banks must show that their total risk exposure is less than their total assets would eliminate the sort of problem we are trying to deal with. They should in essence be forced to gamble only with their own money, not the whole country's. The reason we had the problem was because banks were essentially allowed to gamble with the wealth of the whole country, keeping any big wins for themselves, while expecting losses to be underwritten by the taxpayer. Taxpayers aren't currently even being rewarded for underwriting unlimited losses by getting a guaranteed share of the winnings (apart from corporation tax). That is still the case now, and limiting bonuses will not solve it. I don't care how big the risks and rewards are, that is a free market problem, but they must be forced to gamble with their own cash, not mine. And that's it.
We don't need much more regulation, we probably need a lot less, but it needs to be the right regulation regulating the right things.
Banks have to encourage staff to perform well. Staff are not all equally good. Some can make much more than others because of their personal edge in the market, and without large differences in reward, it is hard to keep such people in a free market. Especially a global market such as banking. So I have no problem with big bonuses if they are rewarding success, and I think it is a mistake to try to stop or limit them.
What does need to be limited is the level of risks that bank staff are allowed to take. I believe strongly in free markets, but free markets mean that companies come and go. Some die, if they are not good enough. That is fine. But when they die, it should be their owners (shareholders) that suffer, and their suppliers (including customers who chose to do business with that company). It should not be the wider community, i.e the taxpayer.
The implementation of this could be relatively straightforward regulation to limit risks to what the company can show it can afford. It is fine if the company wants to risk all it has and lose it and die. It is not fine if it risks all it has and also some of what everyone else has too. Ensuring that banks must show that their total risk exposure is less than their total assets would eliminate the sort of problem we are trying to deal with. They should in essence be forced to gamble only with their own money, not the whole country's. The reason we had the problem was because banks were essentially allowed to gamble with the wealth of the whole country, keeping any big wins for themselves, while expecting losses to be underwritten by the taxpayer. Taxpayers aren't currently even being rewarded for underwriting unlimited losses by getting a guaranteed share of the winnings (apart from corporation tax). That is still the case now, and limiting bonuses will not solve it. I don't care how big the risks and rewards are, that is a free market problem, but they must be forced to gamble with their own cash, not mine. And that's it.
We don't need much more regulation, we probably need a lot less, but it needs to be the right regulation regulating the right things.
Sunday, 6 September 2009
Accountants, corporate governance, strategy
I might come across in occasional blog entries as not thinking much of accountants, but that isn't true. I trust my tax affairs to an accountant and expect that he will save me more in taxes than he charges in fees. They have a valuable place in the world. I have a lot of respect for them, I just think they should stick to what they are good at.
The reason I am so often critical of the role they play is that they are often used outside their core expertise. In a narrow world of counting, calculation, extraploation and looking for legal holes to exploit, they are excellent. I have problems once we assume that this is the primary skill needed to run a company. Every board should have an accountant on it who understands the corporate finances extremely well. But this should only ever be an information provision role, one of simple advice on what is available, and of alerting threats and opportunities. Decisions though should be taken by people who fundamentally align with the nature and purposes of the company, who are visionary and can see the big picture, where they fit in now, and where they could migrate into nearby green fields. There is no reason why an accountant can't learn these skills, and I am certain that many companies are led very well by people of vision who also happen to be accountants, but there is no reason to assume any link between such talents.
Accountancy as a whole needs to learn to better understand the workings of companies. Movement of cash is only one part of it, and I think that too often, they overlook many of the mechanisms that influence the creation and destruction of wealth. Without analysing productive mechanisms properly, it is easy to make cuts where they cause harm to production in excess of the supposed savings. A good example of a classic error would be the elimination of coffee breaks, since if staff are working instead, surely they will be more productive. Errors such as this, and there are many like this, ignore the mechanisms of inetrpersonal interaction in the happiness levels, personal development and loyalty of staff, but even more importantly, the effects on creativity and even invention as staff cross fertilise, the sharing of good practice, the roll-out of corporate messages, improved networking, and of course oiling of the corporate machine by enabling staff to form key relationships with others in the business. These things are hard to measure, but that doesn't mean they should be ignored in favour of those that can, such as hours at the desk or numbers of transactions.
If and when accountants use business models that account sensibly for all the factors that govern the well-being of the company, and its rightful contributions to the host community (no company exists in a vaccuum and all parts of the economy are ultimately linked, so accepting a small loss to a competitor can sometimes generate a long term benefit), then I will be much more willing to give them more control. But where all they do is to count some of the beans, they should be firmly limited to advisory roles, with decisions left to others with a view of the bigger picture, and especially one that includes the long term future of the company.
The reason I am so often critical of the role they play is that they are often used outside their core expertise. In a narrow world of counting, calculation, extraploation and looking for legal holes to exploit, they are excellent. I have problems once we assume that this is the primary skill needed to run a company. Every board should have an accountant on it who understands the corporate finances extremely well. But this should only ever be an information provision role, one of simple advice on what is available, and of alerting threats and opportunities. Decisions though should be taken by people who fundamentally align with the nature and purposes of the company, who are visionary and can see the big picture, where they fit in now, and where they could migrate into nearby green fields. There is no reason why an accountant can't learn these skills, and I am certain that many companies are led very well by people of vision who also happen to be accountants, but there is no reason to assume any link between such talents.
Accountancy as a whole needs to learn to better understand the workings of companies. Movement of cash is only one part of it, and I think that too often, they overlook many of the mechanisms that influence the creation and destruction of wealth. Without analysing productive mechanisms properly, it is easy to make cuts where they cause harm to production in excess of the supposed savings. A good example of a classic error would be the elimination of coffee breaks, since if staff are working instead, surely they will be more productive. Errors such as this, and there are many like this, ignore the mechanisms of inetrpersonal interaction in the happiness levels, personal development and loyalty of staff, but even more importantly, the effects on creativity and even invention as staff cross fertilise, the sharing of good practice, the roll-out of corporate messages, improved networking, and of course oiling of the corporate machine by enabling staff to form key relationships with others in the business. These things are hard to measure, but that doesn't mean they should be ignored in favour of those that can, such as hours at the desk or numbers of transactions.
If and when accountants use business models that account sensibly for all the factors that govern the well-being of the company, and its rightful contributions to the host community (no company exists in a vaccuum and all parts of the economy are ultimately linked, so accepting a small loss to a competitor can sometimes generate a long term benefit), then I will be much more willing to give them more control. But where all they do is to count some of the beans, they should be firmly limited to advisory roles, with decisions left to others with a view of the bigger picture, and especially one that includes the long term future of the company.
eBay and Skype, the correct strategy
So eBay made a big loss selling Skype. While a lot of analysts are saying 'I told you so' because they never thought it was a wise purchase, I think it was the right decision, but it was badly managed. Certainly, eBay should have ensured that they were buying the proper package, it seems that they didn't actually buy the rights to use some of the key technology on which it depends, so are now crippled. But that is the only obvious error in the acquistion. In my view, the rest of the subsequent decline in the perceived market value is down to vision failure. And it was entirely recoverable right up to the point of the discount sale last week. The biggest mistake eBay made was to sell it. With a strategy review and a bit of effort, they could have made a lot of money from it, and used it to increase the overall presence of eBay, ensuring its longevity. They thought it was just a means to allow people to talk to each other during auctions, but they over-estimated the size of the market for that, and how saturated it already was. Now eBay is disappearing fast from everyday awareness as other entrants on the web take the limelight. Here is what they should have done and why the deal made perfect sense if they had carried through a sensible strategy.
When they acquired Skype, eBay already had a large market presence, with a very high level of trust from a very large number of users, and hence enormous brand value, while Skype was just getting going, so was still relatively cheap with a lot of potential in the right hands, but already well recognised and trusted. eBay owned Paypal, a well-recognised electronic cash variant, used all over the world.
At the same time, we started seeing the market acceptance of electronic cash, e.g. the Oyster card in London, which was just beginning to migrate from the London underground, to become acceptable in other shops for minor payments, exactly the sort of territory Paypal could have aimed at. And at the same time, mobile phones were being used for more and more payments, such as car parking, ticketing, store vouchers. So we were seeing a key vulnerability in the small payments markets worldwide. People everywhere obviously want a simple, convenient, portable, and most of all, trusted alternative to carrying lots of cash around, especially small change. The key factor in acceptance is the level of trust in the supplier, people need to be sure they won't lose all their cash through technology errors or fraud, and eBay was exactly the sort of company that could have pulled it off. It had enough presence, brand image, trustworthiness, and the ability to handle the many transactions involved. Supposing it had decided to do so. It would be the provider of the sort of platform needed to make a whole range of viable business models for mobile music,and all kinds of on-line content purchasing. It would also be able to implement cross linking of the physical and on-line worlds in areas such as enabling and policing access to on-line content on purchase of other physical products or services. So, but this physical product, get various forms of electronic cash bundled, and access to on-line content. Areas such as air-miles, supermarket loyalty points and other electronic cash could migrate easily onto a single platform.
So where does Skype fit in to all this? It was the missing link. Provision of the servers and software is only part of the solution. Having a global communication capability is also key to such a market success. Skype provided the ability to allow users free text, data, voice and video interactions across the net, so that vouchers and cash could change hands easily, and discussion or negotiation between parties could take place easily and for free. Skype was the oil to the global small financial transaction machine. Most importantly, mobiles were starting to replace laptops as the platform of choice for email and web access on the move. That was obvious even then. Now, with mobiles also due to become the target platform for services such as Spotify, destined to be the prototype business model for content distribution, it is increasingly obvious that we need more than ever a simple electronic payments service that works across all platforms, with no currency borders. Paypal, backed up with Skype, and offered as a wholesale platform for mobile operators, with the eBay transaction engines there to run it all, and all implemented by a trusted company, would be in pole position to capture a very large share of the revenue from micropayments, air miles, loyalty schemes, travel ticketing and minor purchases at millions of retail outlets. They could become the default platform for paid content distribution. And any mobile operator that didn't join up would face the threat of becoming marginalised since their call and text revenues would be increasingly bundled into other more palatable business models by their competitors. Even services such as smart metering would naturally fall into their camp.
So in a nutshell, the eBay/Skype/Paypal alliance was in a superb position to capture a lion's share of the revenue circulating the networked world. Starting with small payments and establishing trust, they could have grown via future alliances into the world's default electronic banking/retailing/ticketing system. With a competent and visionary team at the top, they could still be up there with Google as masters of the universe instead of looking enviously at Twitter and Facebook and wondering where it all went wrong.
eBay didn't really understand the world they were in. The guys who created Skype were visionaries. The guys who invented eBay and Paypal were too. But as with most companies in the IT world, they grew, the visionaries moved on to other things, and they became ordinary companies, with any lingering visionary skills pushed further and further down the organisation structure, as control migrated to mega-managers who are probably really good at managing generic big companies, but don't really understand the point of the company they are managing, and have too little awareness of the value of what they have in their armoury. They bought Skype for the wrong reasons, and never really understood what it was or how to use it.
So they blew it. Not the first company to get lost, and they won't be the last. But it's still sad looking at the lost potential.
When they acquired Skype, eBay already had a large market presence, with a very high level of trust from a very large number of users, and hence enormous brand value, while Skype was just getting going, so was still relatively cheap with a lot of potential in the right hands, but already well recognised and trusted. eBay owned Paypal, a well-recognised electronic cash variant, used all over the world.
At the same time, we started seeing the market acceptance of electronic cash, e.g. the Oyster card in London, which was just beginning to migrate from the London underground, to become acceptable in other shops for minor payments, exactly the sort of territory Paypal could have aimed at. And at the same time, mobile phones were being used for more and more payments, such as car parking, ticketing, store vouchers. So we were seeing a key vulnerability in the small payments markets worldwide. People everywhere obviously want a simple, convenient, portable, and most of all, trusted alternative to carrying lots of cash around, especially small change. The key factor in acceptance is the level of trust in the supplier, people need to be sure they won't lose all their cash through technology errors or fraud, and eBay was exactly the sort of company that could have pulled it off. It had enough presence, brand image, trustworthiness, and the ability to handle the many transactions involved. Supposing it had decided to do so. It would be the provider of the sort of platform needed to make a whole range of viable business models for mobile music,and all kinds of on-line content purchasing. It would also be able to implement cross linking of the physical and on-line worlds in areas such as enabling and policing access to on-line content on purchase of other physical products or services. So, but this physical product, get various forms of electronic cash bundled, and access to on-line content. Areas such as air-miles, supermarket loyalty points and other electronic cash could migrate easily onto a single platform.
So where does Skype fit in to all this? It was the missing link. Provision of the servers and software is only part of the solution. Having a global communication capability is also key to such a market success. Skype provided the ability to allow users free text, data, voice and video interactions across the net, so that vouchers and cash could change hands easily, and discussion or negotiation between parties could take place easily and for free. Skype was the oil to the global small financial transaction machine. Most importantly, mobiles were starting to replace laptops as the platform of choice for email and web access on the move. That was obvious even then. Now, with mobiles also due to become the target platform for services such as Spotify, destined to be the prototype business model for content distribution, it is increasingly obvious that we need more than ever a simple electronic payments service that works across all platforms, with no currency borders. Paypal, backed up with Skype, and offered as a wholesale platform for mobile operators, with the eBay transaction engines there to run it all, and all implemented by a trusted company, would be in pole position to capture a very large share of the revenue from micropayments, air miles, loyalty schemes, travel ticketing and minor purchases at millions of retail outlets. They could become the default platform for paid content distribution. And any mobile operator that didn't join up would face the threat of becoming marginalised since their call and text revenues would be increasingly bundled into other more palatable business models by their competitors. Even services such as smart metering would naturally fall into their camp.
So in a nutshell, the eBay/Skype/Paypal alliance was in a superb position to capture a lion's share of the revenue circulating the networked world. Starting with small payments and establishing trust, they could have grown via future alliances into the world's default electronic banking/retailing/ticketing system. With a competent and visionary team at the top, they could still be up there with Google as masters of the universe instead of looking enviously at Twitter and Facebook and wondering where it all went wrong.
eBay didn't really understand the world they were in. The guys who created Skype were visionaries. The guys who invented eBay and Paypal were too. But as with most companies in the IT world, they grew, the visionaries moved on to other things, and they became ordinary companies, with any lingering visionary skills pushed further and further down the organisation structure, as control migrated to mega-managers who are probably really good at managing generic big companies, but don't really understand the point of the company they are managing, and have too little awareness of the value of what they have in their armoury. They bought Skype for the wrong reasons, and never really understood what it was or how to use it.
So they blew it. Not the first company to get lost, and they won't be the last. But it's still sad looking at the lost potential.
Friday, 4 September 2009
Workplace Facebook ban is ill-advised
So, one of the Dragons from Dragon's Den (Theo Paphitis) has banned his staff from using Facebook at work and suggested other companies should do the same? I am not about to criticise the business judgement of someone who is obviously successful; what he does in his company is up to him and it plainly works for him. But I don't agree that other companies should necessarily do the same. It depends what business they are in, and is wrong for most.
Some companies, indeed, most companies, exist to make money. Some are short term ventures which only make a fast buck and then close. For some such companies, I think he is probably right. They want a focused workforce who just get on with the job, make money for the owners, and then disperse when it all shuts down. The advantages of allowing staff to use Facebook might be exceeded by the costs is some of these companies, in others, not.
Other companies have an additional purpose in mind, but want to make money too, and still others are not for profit organsiations. Most companies though have a desire for longevity, and I think that regardless of their profit or social function motives, long term businesses should not ban staff from using social networking tools such as Facebook and Twitter, provided that they don't let it get in the way of doing their jobs, which obviously is a line management policing function. Allowing them to use them during breaks is fine, and even a modest usage during work periods is fine too. Only if it takes up so much time that it reduces their productivity significantly should managers intervene. Why?
Actually, a few good reasons:
People are not just cogs in a big machine, or rather, they should not be treated as just cogs in a big machine. We don't stop being human when we go to work, and as our economy grows, we can afford to concentrate on other quality of life issues than pure financial wealth. Part of the point of wealth generation is that as we become wealthier, we can take time to enjoy life a bit more. Being able to blur the lines between home and work a little is a good thing. It makes people happier. They feel more in control of their lives. This is especially true of people working in mundane jobs. It is historically the nature of low paid work that there is a clear line between work and non-work, but it doesn't have to be that way. As long as the business can cope, why not let staff enjoy their lives too? They will probably work harder and be more loyal.
Secondly, many staff take work home, and companies of course encourage them to do so (Blackberry users work much longer hours than no-users), and it is both mean and exploitative to ask that they leave their social lives at home while expecting them to take work into their social lives. Companies make money by exploiting the efforts of employees, and of course employees gain from the relationship too, but there should be a mutual respect. Confrontation between unions defending staff from bad employers is a regular symptom of bad management or bad unions. In a good company, both sides understand and respect each other, and ensure that both sides get an equally fair deal from the relationship. To demand otherwise is selfish and unethical.
Thirdly, the economy is changing. People doing mundane jobs and behaving as cogs in a machine is sometimes unavoidable, in production lines for example, where they fill the areas that still can't be done by machines. Humane management can make up for this by providing generally good working conditions. But this kind of work is disappearing fast in the developed world. Modern work is already less machine-like, and will become increasingly focused on 'human skills' as time goes on. Adminsitration can be automated to a high degree by smart machines, especially as the semantic web takes hold. Professional knowledge can increasingly be captured and used by machines. Transactions in call centres have been highly displaced by voice recognitions and basic AI. What is left after all this runs its course is that part of work that involves emotional skills, caring skills, interpersonal skills, leadership and communication skills, entertainment, sports, policing, teaching, social work, personal services and and so on. i.e. jobs that are focused on dealing with other people. People doing this kind of work need to have good people skills of one kind or another. Companies that are here for the long term need staff with those skills. It make little sense to prevent them from becoming adept at them by banning them from using social networking tools. Time spent on sites like Facebook and Twitter might be wasted sometimes, but not always. It also sometimes helps improve human skills, so companies could reasonable think of it as training.
Fourthly, using social sites and thereby building and fostering personal networks helps people's employers directly. It is key to them building relationships with other companies that might be suppliers or customers, since those companies are also staffed by people. When companies are comprised of armies of AIs directly interacting with other AIs, we will no longer need to worry about Facebook anyway, but while the work is done by humans, it is a useful tool. Knowing people at the other end helps build and maintain trust, a very key (and increasingly so) ingredient for successful business interaction. Inter-company interaction via social networking also helps cross fertilise ideas and best practices. Finally, having staff that know potential future employees personally is a huge asset, saving on recruitment costs. And of course knowing the competition personally is a great asset too. The ancient wisdom tells us to 'keep your friends close but your enemies even closer'.
So companies have a lot to gain by letting staff use social networking sites while they are at work. Their loyalty will increase, they will be happier, and hence more energetic and probably work harder. The company's relationships with suppliers, customers and other companies will improve and their chances of survival enhanced by continuous updating of best practice and cross fertilisation of ideas. Sure, some employees will always abuse the freedom, but that is a simple line management issue. Most people will behave better when the company treats them better.
So, summarising, I don't think Theo Paphitis is necessarily wrong to implement a Facebook ban in his own ventures, it all depends on his business models. But for most organisations, it would be counter-productive. Treat your staff like humans and you will earn more, it's as simple as that. Even for the most extreme capitalist company, the long term advantages probably outweigh the short term costs.
Some companies, indeed, most companies, exist to make money. Some are short term ventures which only make a fast buck and then close. For some such companies, I think he is probably right. They want a focused workforce who just get on with the job, make money for the owners, and then disperse when it all shuts down. The advantages of allowing staff to use Facebook might be exceeded by the costs is some of these companies, in others, not.
Other companies have an additional purpose in mind, but want to make money too, and still others are not for profit organsiations. Most companies though have a desire for longevity, and I think that regardless of their profit or social function motives, long term businesses should not ban staff from using social networking tools such as Facebook and Twitter, provided that they don't let it get in the way of doing their jobs, which obviously is a line management policing function. Allowing them to use them during breaks is fine, and even a modest usage during work periods is fine too. Only if it takes up so much time that it reduces their productivity significantly should managers intervene. Why?
Actually, a few good reasons:
People are not just cogs in a big machine, or rather, they should not be treated as just cogs in a big machine. We don't stop being human when we go to work, and as our economy grows, we can afford to concentrate on other quality of life issues than pure financial wealth. Part of the point of wealth generation is that as we become wealthier, we can take time to enjoy life a bit more. Being able to blur the lines between home and work a little is a good thing. It makes people happier. They feel more in control of their lives. This is especially true of people working in mundane jobs. It is historically the nature of low paid work that there is a clear line between work and non-work, but it doesn't have to be that way. As long as the business can cope, why not let staff enjoy their lives too? They will probably work harder and be more loyal.
Secondly, many staff take work home, and companies of course encourage them to do so (Blackberry users work much longer hours than no-users), and it is both mean and exploitative to ask that they leave their social lives at home while expecting them to take work into their social lives. Companies make money by exploiting the efforts of employees, and of course employees gain from the relationship too, but there should be a mutual respect. Confrontation between unions defending staff from bad employers is a regular symptom of bad management or bad unions. In a good company, both sides understand and respect each other, and ensure that both sides get an equally fair deal from the relationship. To demand otherwise is selfish and unethical.
Thirdly, the economy is changing. People doing mundane jobs and behaving as cogs in a machine is sometimes unavoidable, in production lines for example, where they fill the areas that still can't be done by machines. Humane management can make up for this by providing generally good working conditions. But this kind of work is disappearing fast in the developed world. Modern work is already less machine-like, and will become increasingly focused on 'human skills' as time goes on. Adminsitration can be automated to a high degree by smart machines, especially as the semantic web takes hold. Professional knowledge can increasingly be captured and used by machines. Transactions in call centres have been highly displaced by voice recognitions and basic AI. What is left after all this runs its course is that part of work that involves emotional skills, caring skills, interpersonal skills, leadership and communication skills, entertainment, sports, policing, teaching, social work, personal services and and so on. i.e. jobs that are focused on dealing with other people. People doing this kind of work need to have good people skills of one kind or another. Companies that are here for the long term need staff with those skills. It make little sense to prevent them from becoming adept at them by banning them from using social networking tools. Time spent on sites like Facebook and Twitter might be wasted sometimes, but not always. It also sometimes helps improve human skills, so companies could reasonable think of it as training.
Fourthly, using social sites and thereby building and fostering personal networks helps people's employers directly. It is key to them building relationships with other companies that might be suppliers or customers, since those companies are also staffed by people. When companies are comprised of armies of AIs directly interacting with other AIs, we will no longer need to worry about Facebook anyway, but while the work is done by humans, it is a useful tool. Knowing people at the other end helps build and maintain trust, a very key (and increasingly so) ingredient for successful business interaction. Inter-company interaction via social networking also helps cross fertilise ideas and best practices. Finally, having staff that know potential future employees personally is a huge asset, saving on recruitment costs. And of course knowing the competition personally is a great asset too. The ancient wisdom tells us to 'keep your friends close but your enemies even closer'.
So companies have a lot to gain by letting staff use social networking sites while they are at work. Their loyalty will increase, they will be happier, and hence more energetic and probably work harder. The company's relationships with suppliers, customers and other companies will improve and their chances of survival enhanced by continuous updating of best practice and cross fertilisation of ideas. Sure, some employees will always abuse the freedom, but that is a simple line management issue. Most people will behave better when the company treats them better.
So, summarising, I don't think Theo Paphitis is necessarily wrong to implement a Facebook ban in his own ventures, it all depends on his business models. But for most organisations, it would be counter-productive. Treat your staff like humans and you will earn more, it's as simple as that. Even for the most extreme capitalist company, the long term advantages probably outweigh the short term costs.
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