Having just paid my car insurance fee that, despite having nine years no claims bonus, rose once again I was delighted to hear that referral fees are to be outlawed and that The Office of Fair Trading is putting motor
insurance under the spotlight after premiums rose by
40% on average in a year.

First step in tackling dysfunctional compensation system
The Association of British Insurers – said it welcomed the announcement. As reported by the BBC, Director General Otto Thoresen
said: “We are very pleased that the government has listened to the
insurance industry’s campaign for a ban on referral fees.

“Banning referral fees is an important first step in tackling
our dysfunctional compensation system, and needs to be accompanied by a
reduction in legal costs and action to tackle whiplash if honest
customers are to benefit from these reforms.”

Change in culture and teams
Insurance companies, law firms, garages and other interested parties in the referral system merry-go-round will have to change their systems and their teams to reflect these changes.  That either means redundancy or allocation to other jobs (on the basis that the entire system doesn’t move underground).

Reduced bills
It’s interesting how there is expectation that once the system is outlawed and the teams that manage the current the system are disbanded, saving employment costs, and the huge compensation costs reduced that insurance premiums will fall.

I will await next year’s policy renewal notice with interest!

I have watched with some amusement the mess that the UK’s coalition Government have found themselves in over their announcements to “Housing benefit” changes. We’ve been told that this will be capped at £400 per week. It reminds me of the situation that many business leaders and executives in a new job find themselves when introducing a “Quick win”. The reason is that to often “Quick wins” fail to deliver the expected results.

Let’s consider the UK’s proposal to cap housing benefit to reflect average earnings. On the surface it would seem sensible and would certainly reduce costs. But the (hopefully exaggerated) image of hundreds of thousands of families and children, particularly in London, being made homeless and trudging up the the road with their belongings as they are forced out of their homes to find cheaper accommodation has generated claims of “Social cleansing” from Mayor Boris Johnson and concern from many MPs.

Too often  a new team leader or senior executive in a business will introduce a “quick win” because they understand that they have little time to prove themselves and want to demonstrate that they are “hitting the ground running”. It’s also seen as a useful tool to create a positive reputation for being a forward thinker or innovator.

The change that’s generally selected has often worked for the individual in the past. However, what the new leader fails to consider is the new team, new culture and new management style. In communicating the “quick win” great emphasis will be placed on instant results (saving money) without analysis of the long-term consequences in other departments of areas of the business.

This often causes a storm of protest, the executive is wrong footed and either has to revise their plans with the consequence of “loss of face” and reputation or stick to their guns and be accused of being unfeeling, autocratic or worse. The problem is that a “Reputation” has been made and it’s a negative one and that reputation is often difficult to change.

I judge that we can expect some “Good news” from the coalition Government within the next few days

This is an answer I made to a question on Linkedin today about the failure of leaders to sack under- performing people. I thought it worthwhile also posting my answer onto my blog so that more of my network could read it.

I believer that business is going through a revolution.

In past credit squeezes firms and Governments would shed talent to reduce costs (the UK Government is about to do this again by reducing civil service personnel by up to 25%). The result was that essential knowledge and skills were lost and recovery took longer as a result.
So, this time round, firms have attempted to retain their talent, even those less productive, as leaders hope for a quick upturn. The problem is that the upturn is slow in the west.

Further problems are that with coming food inflation and possible grain shortages, extended insecurity as the credit crunch continues and Government policy that increases tax whilst reduces spending businesses are now being forced to start to look to their staff costs. This means that some of the “good” people will be shed as well as the “bad” and that the trend is to hire part-time employees.

I suspect that the result is that the “business revolution” will generate a significant percentage of the working population having a number of part-time jobs as opposed to a single full time position. (including professional firms such as lawyers, accountants and financiers)

There is security in this position for employees who may be “shed or fired” in that income is not reliant on one employer and totally and immediately lost on redundancy whilst the employer has a capability of expanding and contracting a workforce more easily.

So, in my opinion, it’s not “under-performers being hired or fired” it’s that we may be witnessing a change in the way employment may work in the future.

Over the past few weeks I’ve been speaking to some senior bankers about the financial crisis that’s gripping us all. One thing that seems obvious is that the one sector that is likely to make a lot of money over the next few years will be the corporate lawyers.

My reasoning is that the banks are beginning to argue over themselves over who was to blame for selling AAA assets to financial institutions that weeks later were assessed as being worthless. Who was to blame, the banks, the buyers or the rating agencies?

Then there are the law enforcement agencies such as the FBI investigating some of the “deals” and “Sell-offs” to see is some acted fraudulently.

What is interesting is that whilst the US authorities are taking action the UK Government is not instigating any criminal investigations. Perhaps the UK Government is too afraid of what they might find or perhaps they intend to let the US authorities extradite hundreds of our top bankers to face the courts and imprisonment. (Someone asked me last week if they would have a prison big enough).

In any event most corporate lawyers must be thinking that all the Christmases until 2020 are about to come early.