Year End Goals

My year of On Purpose is coming to an end. Last week was our last official training session on Friday afternoon. It was an internal meeting, just the 11 Associates alongside the OP team of Tom and Kate. Part of the time was taken by evaluating how well we had achieved the goals we set in the beginning of the year and by setting out our new goals for 2012. Friday’s group setting gave us a chance to individually reflect on the direction we are taking with our careers. How often do I sit down on my own and do such an exercise? Of course it’s not obligatory to “share” with everyone; these are personal goals. But, being surrounded by 10 strangers who have become friends, I found myself glad for the opportunity to ask them to challenge my explanation as to why I have chosen my next path and to ask me to describe the ways in which I will achieve those goals. I don't get too many chances to ask people I respect to challenge my thinking. The other associates are like close colleagues without the competition. They have an insight into me that my friends do not have since we came together for professional reasons. But we also have become friends by sharing experiences such as our weekend retreat to Embercombe in Devon, attendance of social entrepreneurship events, and Friday evening drinks after training. A goal I didn’t set for myself, but now realise I have achieved, is a firm place in a tight network of dedicated SE professionals with whom I can continue to grow alongside professionally. I don’t just have the experiences I have had in the past year to accelerate my career; I have their experiences and contacts as well. There is no Schadenfreude among this group. Only is there a sense of mutual support, where one person’s achievements actually boost everyone else’s chances rather than diminish them. This is a rare trait among colleagues along similar career paths. And, for these relationships alone, I’m grateful to have been an OP Associate for the past year. So, did I meet my goals that I set out in January? 2.5 out of 3 with a bonus it seems. I’m not quite the excel whiz I had planned to be (see a previous post!). But, luckily, I know another associate or two who are.

How Marketing needs to adapt to Social Media

Here's a video we liked that we saw in our training last Fri, shown to us by Adele Barlow who was giving us the basics on all things digital.

More Social Finance

As the Eurozone seems to continually teeter on the brink of collapse, Western governments strain to control budget deficits generated by bailing out failed banks and the stagnant economies left in their wake, there are growing demands for new ways of doing business. The Occupy Wall Street protests have swept the globe, now totalling some 951 cities in 82 countries. Calls for reform are not just coming from the radical left and anarchists; public sentiment for change has been growing worldwide, and this month David Cameron has reiterated the need for reform of "capitalism without a conscience".

As consensus grows on the need for changes in the way businesses are managed, the real question is what needs to change and how can this change be brought about?

Back in March Dominic Barton, MD of McKinsey, expressed his view that “business as usual was not an option”. Top of his list of reforms was to "Fight the tyranny of short-termism". Put simply, the vast majority of major corporations are focused on short-term profits over long-term value.

Breaking this tyranny has much to do with changing the way WE own companies - by WE I mean the 99% in the language of the occupy movement. By McKinsey’s calculations pension funds, insurance companies, mutual funds, and sovereign wealth funds hold $65 trillion, or roughly 35%, of the world’s financial assets. They hold and trade these assets on behalf of the 99%. The culture of investment that these investors have is, in general, the epitome of short-termism. Shares are traded based on quarterly profit targets, basic analysis and PE ratios over the short term. These investors who represent the many often fail to take any active role in the governance of the companies they own, and there is limited interest in the long-term vision or culture of management so long as profit targets are met. And if targets are not hit, there is no challenge to strategy, no block on executive pay: they simply dispose of shares and invest where profit appears easier.

Conversely, the 1% tend to take a very different approach to investment. Warren Buffet, for example, is famed for his active and long-term value-based investment strategy. This is where I see an exciting opportunity in a growing form of more “social” finance, one which offers a more direct route to ownership of growing businesses and, with it, a chance to influence a businesses culture and development.

Crowd funding is a way to raise finance by tapping into a “crowd” or community of people willing to invest smaller amounts of cash in exchange for rewards and a stake in the business. Recently crowd funding has been made much easier by the internet, online micro-payment systems, social networking and more recently by overcoming legal barriers on the marketing of equities.

An enterprise ranging in size from a start-up to an SME can pitch its idea or business opportunity, spread the word to like-minded people or passionate consumers and raise direct investment. The resulting shareholders have a genuine and long-standing interest, and, because the shares are generally not publicly traded, they will inevitably have a more long-term perspective.

This is an exciting time for crowd funding. In the UK the new crowd funding website Crowdcube has just celebrated its first funding request of £1m, the highest amount to date on an online crowd funding site. Crowdcube’s business model is very accessible: there’s no registration fee the site only charges a 5% commission on amounts successfully raised - this is extremely reasonable in comparison to the cost in fees of a typical IPO (c10%).

But sites like Crowdcube are not the only route to crowd funding. Brewdog, an innovative and unorthodox Scottish brewer, recently raised 0.5m in a self-issued online IPO dubbed equity for Punks. This year they are seeking a second tranche of investment, a further 2.1m. Shareholders receive a return on investment through dividends as well as drinks discounts and a sense of ownership of a business close to the heart of passionate beer-drinkers.

The investment mechanism is beneficial to both parties. Investors get access to growing businesses, potentially offering products or services they believe in, opportunities that have previously been restricted to institutional investors and high net worth individuals. There are often additional benefits for investors such as discounts and exclusive access. There’s also the potential for smaller investors to access the Enterprise Investment Scheme tax break for investing in start-up businesses.

The businesses get much needed capital for growth, capital that traditionally would only be available from venture capital. The cost of working with venture capital is often high; a large share of the business and short term focus on growing profits to allow the venture capital partner a lucrative exit via resale or stock market listing. By this point the vision and ethos of the founding entrepreneurs is often lost. Crowd investors bring other benefits, a ready army of advocates keen to promote and support the enterprise, or a wide range of supporters willing to offer skills or experience to support their investment.

It’s still early days for crowd funding so it won’t revolutionise institutional shareholding this quarter, but in the long-term it could play an increasingly important part in business finance and ownership. Firstly, at least some of the 99% get an opportunity to invest small amounts of savings in businesses they believe in – an important step in the right direction towards a culture of empowered share ownership. Secondly, I believe the crowd funding model could lead to the development of new governance relationships; investors being asked to vote on new strategies or product developments, attending online AGMs and crucially really caring about what happens to the business.

If this is a better way of doing business, in the longer term it will be these businesses that flourish. And when they do it will force a wider change.