Good busy and bad busy

What should you call “work”? 

I define work as whatever needs to be done to reach a certain goal. If you work in a company, this outcome is usually about producing revenues and EBITDA.

Productive work is essential. On the contrary, producing an intermediate outcome is not work by itself. Communicating to your team that you have reached an intermediate task, or that you are in the middle of something but have not reached your goal yet: this to me is not work. People often delude themselves into thinking that they are really busy when in reality, all that they are doing is sending emails around.

Spending hours on tasks which do not contribute to reaching an outcome is not work either. Carrying out a repetitive task, which was defined as part of a routine some years ago in a specific situation, but brings no advantage or added value whatsoever is the present or the immediate future, is not work – at least from my perspective. This is sometimes called “bad busy“. 

slow down, relax, take it easy

What can be done to promote effective work? 

What can you do if you come to the conclusion that your team is doing work that is not leading to any substantial outcome?

The first step would be to analyse the situation: is your team working effectively? Is your team reaching its objectives? If not, there are usually 4 scenarios:

  1. Wrong objectives. In this case, the first step towards a solution is obviously to communicate objectives that are meaningful and achievable
  2. Right objectives, inadequate execution. In this case, objectives are not reached because you or your team are performing the wrong tasks. Focus on useful tasks, rather than losing time with repetitive, useless tasks or discussing intermediary outcomes
  3. Right objectives, fear of failure. Do not fear failure, embrace it. It is part of working life. Think of the dire consequences of inaction
  4. Right objectives, procrastination. Often the best solution is to stop altogether and fix and existing emotional problems. If one of your team members has emotional problems about work, do not assume that will improve with time. It will likely worsen. These types of problem are quite tricky to solve and it often is down to the individual concerned to make an effort towards a resolution.
Tagged ,

Financing innovation during a credit crunch

We spend a lot of time discussing the need to cut Government debt. While this is legitimate, we keep forgetting that in every 6 SMEs in Portugal, one has failed its debt repayment or interest payment obligations.

If you think that companies are adjusting to the crisis by reducing their debt, think again. The debt/GDP ratio for private, non-financial companies was on the increase until 2012 and only recently has there been a change in this trend.

debt 20140513Debt of non-financial private companies in Portugal as a % of GDP, 2009-2013. Source: Bank of Portugal (2014)

The difficulty here is that this lack of credit creates a bottleneck for the financing of innovative projects. The credit market has been affected by the economic crisis. The main problem of the commercial banks is to restrict the concession of credit at all costs, to manage their loan portfolio. This means that innovative companies are unable to get access to bank credit to finance their expansion. It is difficult for the banks’ existing clients to draw credit, let alone for new projects which are inherently risky.

SOURCES FINANCING 20140513Sources of financing for a sample of start-ups based in Lisbon (2014). Source: Macrometria

In a recent survey, Macrometria found that bank financing accounts for 2.8% of total financing sources for a representative sample of start-ups in Lisbon. As banks seek to cut their credit exposure, and existing funds are used to re-finance over-indebted companies, the true losers are start-ups and ultimately, innovation itself.

On the other hand, bank debt is not being used to finance start-ups and this can be seen as a positive. The current business culture relies excessively on debt. The next stage of recovery will be sustainable if companies learn how to grow using equity. If the excessive levels of debt as a source of financing were one of the reasons for the anemic growth of the last decade.

Tagged , , , , ,

2 arguments against increases in civil servants’ wages in Portugal

The Portuguese Government is about to announce increases in civil servants’ wages between 2015 and 2020.

The IMF, European Commission and European Central Bank are about to complete the adjustment programme and meanwhile, the President has declared that he would welcome an increase in the civil servants’ wages in the coming years.

Government appears to be leaning towards an increase in wages, in line with the President’s opinion. This demonstrates concern over the upcoming European elections in May 2014 and Parliamentary elections in 2015.

Increasing civil servants’ pay could potentially result in lower corruption levels, as motivated and relatively well-paid civil servants would have a lower tendency to accept bribes. However, a number of arguments can be made against any increases in civil servants’ wages at this stage:

  1. A number of cuts in the wages of civil servants were proposed from 2008 onwards but the Constitutional Court blocked their implementation. As a result, unit labour costs are back at 2008 levels in the public sector, while there has been a decrease unit labour costs in the private sector. From this perspective, nothing has changed since the beginning of the crisis, for civil servants.
  2. Any increase in wages would have to be justified with improvements in services provided by the State. However, there is evidence that the public is not satisfied with the level and quality of services provided. In its 2013 report (Third European Quality of Life Survey – Quality of society and public services), the European Foundation for the Improvement of Living and Working Conditions finds that the perceived quality of public services in Portugal is well below European average.
Captura de ecrã 2014-04-29, às 13.41.32Source: Eurofound (2013), Third European Quality of Life Survey – Quality of society and public services, Publications Office
of the European Union, Luxembourg

I do not mind paying civil servants well, as long as I receive a good service in return. The main problem is the low perceived quality of public services in Portugal and from this perspective, increasing wages does not make any sense at this stage.

Tagged ,

5 lessons I learned from Américo Amorim

Some lessons I learned by working with Américo Amorim:

  1. Never rely on anyone. You should not depend on a single supplier, bank, or person. If you offer someone the chance to influence your actions, you are effectively exposing yourself and this will become a source of weakness sooner or later. We live and work in a market economy, you should only depend on the system. Use the system to your own advantage;
  2. Walk the talk. Working in a company (or a bank) is a choice and a lifestyle. Some chose to become an artist, a politician or a civil servant – you made your own choice. You will meet people from all walks of life: understand what they expect from you and walk the talk;
  3. It is often physical. No-one ever seriously developed a business just by sitting in an office. If you work in an industrial company, you need to talk with people on the shop floor. If you sell a service, you need to meet your clients. Travel if you need to. Spreadsheets are good, being on the ground is absolutely fundamental;
  4. Keep your promises, and ask others to keep their own. While some people are good at delivering on what they promised, most are not. Remember what you were promised and demand it. Conversely, you should make a real effort to honour your promises;
  5. Talk with everyone – including politicians. While you may have your own political views, you cannot afford to alienate a group of people based on their political views, as you may need their support further down the road. This is more tricky to carry out than you might think, since you should make yourself scarce at the same time. Find that balance.
Tagged , , ,

The situation in Kiev

Russia depends on its natural gas exports to Europe. In fact, 50% of Russia’s Federal budget stems from duties on natural gas exports.  European countries, on the other hand, could easily find alternative natural gas supplies – albeit at a higher cost.

From this strictly economic perspective, Russia has much more to lose from cutting off natural gas supplies to Europe. While European countries would probably see a significant reduction in their economic growth if natural gas supplies face disruption, Russia would face a major budgetary crisis. From this perspective we are in the clear, for now.

To complicate matters, while the aspirations of the Ukrainian people are legitimate, some supporters of the new Government seem to be political extremists. One suspects that this matter is no longer in the hands of the Ukrainian Government, in any case.

As usual, the US is playing its role as international arbitrator. The fact that Ukraine is actually in Europe does not seem to bother the Obama Administration.

This is not Hollywood [Economics and Policy]

Whenever a company faces financial trouble, one of the first restructuring measures is to cut the number of non-core subsidiaries. Company restructuring is about specialisation: a business with negative operating income usually needs to make what sells and drop everything else.

A similar approach could be taken by the Portuguese Government to limit spending and improve the country’s public accounts. Following a prolonged period of low GDP growth (or recession) and very high Government debt (128% of GDP and growing), there is a pressing need to cut the size of the State.

Yet, almost 2 years following the intervention of the IMF, ECB and European Commission, the major tangible results of the so-called restructuring measures imposed by the country’s main lenders were a reduction in the wages of civil servants and pension cuts. Any improvements in the State’s efficiency remain to be seen.

Improving efficiency means cutting costs and this could be achieved in a number of ways. The most obvious fix is to cut salaries, which is what  Government did so far. More cuts are likely in 2014, after the European Parliament elections in May. Any serious Public sector restructuring should also involve a reduction in the number of institutes, independent entities and associations that are financed using Government money. One estimate places the total number of Government and Quasi-government entities at over 13.000, for a country with under 10 million inhabitants. These are estimates since not even the Bank of Portugal knows for sure. In fact, no-one appears to know – a tell-tale sign that restructuring is badly needed.

Yet this is not likely to happen. Everyone now understands how things will turn out: there will be no fundamental reforms, nor will the State’s efficiency improve. A significant reduction in the number of State entities is not strictly needed, and will not be executed. The political system as we know it would have to change dramatically. No-one in the political arena really wants that to happen.

All that is strictly needed is to cut wages and pensions, transfer a massive amount of debt from the balance sheets of certain banks to the ECB  – and that is it. Economic miracles happen in Hollywood. Around here? We will probably go back to the usual muddle-through economy. It will go according to plan.

Need for speed [Economics and Policy]

Ever since the country went into financial assistance mode, the Portuguese Government has cut costs essentially by reducing wages and pension benefits. Why is it so hard to admit that, inevitably, some Government institutions are less efficient than average and less efficient than in other European countries? Would it not make sense to conduct some benchmarking and implement reforms?

There is a pressing need for efficiency improvements and this would almost certainly involve merging the significant amount of small institutes, independent entities and regional authorities that were created in the past 20 years.

Hopefully for the better...

Hopefully for the better…

The advantages would far outweigh the disadvantages: fewer needless consulting committees, boards, and commissions. Increased efficiency, leaner organisations employing more qualified civil servants would all result in sustainable cost savings.

This Government’s stated aim of tapping financial markets ASAP could create the wrong incentive. This need for speed could well become a way to avoid deeper reforms which would result in a leaner Government sector.

Tagged , , , , , ,

Se vogliamo che tutto rimanga com’è bisogna che tutto cambi (2)

Are there any alternatives to the measures currently being implemented by the Portuguese Government under the supervision of the IMF, the Commission and the European Central Bank? The actions implemented up to date amount to an increase in taxes and cuts in civil servants’ pay and pension costs. While this is an effective way to make sure that the country can meet its debt obligations, little is being done to increase Government’s efficiency.

Current estimates show that 12,000 entities can carry out public procurement (according to OPET). That compares to about 800 in Ireland. In 2013, Government entities spent an estimated 15 billion euros in the acquisition of goods and services to third parties (similar to operating expenditure in company accounting). This represents roughly 20% of total Government spend. A simple 5% reduction in this expenditure would cut costs by 750 million euro on an annual basis.

How can this be achieved? It would almost certainly involve merging the plethora of institutes, regional entities, hospitals and other institutions. In Portugal, nearly every State-run hospital is a standalone company, as is every school. It would also involve using electronic procurement platforms in a more efficient way. Local Government and indeed political parties would have to adapt to this new reality.

What are the odds that this will happen in the coming years? As I wrote before, everything needs to change, so everything can stay the same.

Tagged , , ,

A Bloggers’ Conference (#ABC)

This coming Saturday 14 December, I will attend #ABC – A Bloggers’ Conference at the LEAP Centre in Lisbon.

The event is organised by Coworklisboa, Marta Valente and IAMIN, who have invited a number of speakers to discuss subjects including creative writing, social marketing and web design.

It is the first time I attend a bloggers’ event. I am certain that there is a lot to learn from bloggers and marketing specialists. If you are in Lisbon and would like to attend, follow the link above.

Tagged ,

Way over budget

The Portuguese Government’s 2014 budget is being discussed in the so-called “specialised” committees in parliament. The budget approval process consists of 3 steps: first, a “big picture” version of the budget is approved by Parliament- this was done at the end of October. Second, representatives of parties with a seat in the National Assembly discuss the budget in more detail. The representatives are organised in various committees (the so-called commissions) which are mandated to discuss specific themes. This is underway. This coming week, the National Assembly will again cast its vote on the budget, following its review by the parliamentary commissions. This last step is largely pro forma.

In practice, this means that the true political decisions are made at this stage, within the various parliamentary commissions. The process is relatively opaque, which gives politicians some leeway to do their job. Negotiations are often disguised as technical arguments, with each party using an army of lawyers to bring some credibility to what is largely a political debate.

PS, the main opposition party, has put forward several proposals which are small and have no real economic impact on investors or economic growth. Sentiment seems to be that PS does not really have any alternatives to the austerity measures which are being put forward by Government.

Yet there are alternatives. While the 2013 budget was largely about raising taxes and getting more income to service debt, this one is about cuts in expenditure. The cuts are being carried out essentially via reductions in wages and pension obligations. Very little is being done to improve the efficiency of Government’s consumption. Specifically, Government could use electronic procurement platforms to optimise public spending. The gains in efficiency could be real. Various proposals have been put forward in this direction, none of which seem to have been taken into account.

This budget represents another lost opportunity to improve the State’s efficiency. The Portuguese State is like a huge tanker which follows its course. Trying to steer it takes extremely long and the only way to reduce costs seems to be via cuts in wages and pensions. Any attempt to improve its efficiency seems to be futile.


Get every new post delivered to your Inbox.

Join 27 other followers