2010 the year ahead - 6 January 2010

Happy New Year. Many business leaders will be happy to see the back of 2009. Businesses that survived the tsunami that was the past 18 months are now hoping for brighter futures, with growth fueled by greater access to capital, increased productivity and employee engagement.

Here are my top tips to help companies obtain that brighter more positive future:

1) 2010 is all about 2011 – With 2010 expected to be a flat year with the economy bumping along, it will be those companies that position themselves strongly in this year that will excel in the next.
2) Don’t bet the house but do increase investment and do make some strategic investments that have high risk.
3) Become more externally visible - Leaders in 2009 were visible within their companies but as 2010 progresses it is vital that CEOs play a more market facing role, this will be both an internal and external statement.
4) Empower all levels of the organisation as the year progresses – It is important to create a more nimble and decisive organisation as such empowering beneath will be a key to high performance into 2011.
5) Reengage with a clear vision – After the storm its important to reset goals, including mission and vision. Alignment is essential.
6) Go for that run – its going to be another long year, stamina is vital so keep yourself healthy.
7) Spend more time with your loved ones
8) Love your bank for they shall love you back, you are their future – Remember bankers provide oxygen, it’s a two way relationship and they provide access to one of your core raw materials!
9) Have more fun – business is hard and over the last two years brutal, important that we remember that work is not just about money, we spend too long at it not to enjoy the time we commit! A happy company will always do well!
10) Beware of dark alleys and shadows – the market will remain tough as such tough rules still apply. Watch out for conspiracy, if in doubt drag things into the open at least you then know where you stand.

Even with this sound advice is it possible that leaders are expecting too much? 2010 still holds many challenges. The upcoming general election, that has to be held by May, will almost certainly throw the public sector into turmoil which could have an adverse effect on the recovering economy. Furthermore, the debt market is showing little sign of getting back to levels seen before the financial meltdown and access to financing is very difficult and wildly expensive.

This makes for a very uncertain 2010. Without access to a crystal ball, we asked our Associates and Advisory Board members for their thoughts on 2010. Here are some of their comments:

"The nature of the recovery in 2010 depends on the skill exercised by governments as they attempt to deal with the costs and consequences of the emergency action taken so far. In the UK, in particular, the difficulties will be exacerbated by politicians posturing in the run-up to the election, and perhaps by post-election haste by the victors. The best we can hope for is slow recovery," says Mike Lewis, Associate, Criticaleye.

"2010 will be the same as 2009 - good for some, difficult for most – the difference being the well-run businesses with a good value proposition will always do OK. The sad thing is, most businesses have survived up to now, despite missing one or other of these two basics. The two immediate improvements I always get my clients to focus on, whatever their size/sector are 1. Ruthless attention to value for money – not just cost-cutting. 2. Each member of the management team, and the board, to have one personal objective that will improve the customer experience – but only if it means the value for money criteria above – and engage with the customer through a very simple feedback mechanism to ensure they know this is your number one focus," said Peter Heath, Associate, Criticaleye.

Edward Fitzmaurice, CEO, Hastings Direct puts it simply and is approaching 2010 by going back to business basics. He says: "One of my main focuses in 2010 is on 'weaknesses'. What are the weaknesses we have in our business and then addressing them. And what are the weaknesses our competitors have and exploiting them."

Bob Garratt, Associate, Criticaleye says: "First, times will get tougher as major cuts in public spending affect the UK economy. Business, and the public services, will have to do more for less. The key concepts will be around rapid productivity growth. This will rely heavily on tapping the investment in learning already held by the staff but rarely consciously tapped by CEOs. The UK has a fine tradition of 'action learning' of which few CEOs are aware.

"Second, the whole corporate governance framework is changing fast with the 2006 Companies Act in full operation, the Walker Report on Banking corporate governance and its wider consequences, the consultation paper on the revised Combined Code, and the Code of Responsibilities for Investors all in play. These will put much more focus on board performance, the working relationships between CEOs and the board, and the development at both levels of true strategic thinking as distinct from strategic planning. Coupled with the new requirement for tougher board appraisals and the use of external appraisers every three years, corporate governance will become much more performance focused."

Gary Kildare, Vice President, Human Resources, Americas, Europe and Asia Pacific, IBM, thinks that 2010 will be challenging: "Depending on where you sit in the world (eg, China, Hong Kong, India and Brazil) there are clear signs of growth and recovery. The rest of the world (including the UK) will remain sluggish. The business/economic community are divided - some predict 2010 to be flat; others see an extended period of very low growth; a small number suggest a double-dip. The public sector in the UK is trailing commerical sector by at least 12-14 months and 2010/2011 will bring heavy budgetery and financial pressures. Turnover and recruitment will pick up generally and signs are that this is starting to happen - speed will vary depending on country/market. The importance of high quality leaders and leadership has never been greater to help organisations and employees move forward. Employees and staff are increasingly concerned about the values and integrity of the organisations they work for and the spotlight is increasingly on leaders - personally and collectively - and consequently their actions and behaviour are important."

Peter Waine, Associate, Criticaleye: "I believe we will be in for a very tough year, especially post the general election. Both public and private expenditure will need to be cut and jobs in the public sector reduced, somehow without dipping the economy back into recession. The City should not assume that it will come out of the credit crunch unaffected and still allowed to operate in the way that it did prior to the bailouts. Do not underestimate the degree of public anger and many bankers are not that brilliant. UK based companies which operate mainly in the UK will take longer to come out of the recession than those that operate across the EU and globally. Having said that, there are some outstanding companies and directors in UK corporate life, as good as any to be found anywhere."

Andrew Hosty, CEO Technical Ceramics, Morgan Crucible believes that the economy will probably stay relatively flat, if not contract a little. He says: "The US is already showing signs of recovery and Asia is still growing so I would favour investments in those regions. Particularly with the US dollar exchange rate which makes opportunities in the US good value. As soon as the markets show signs of improvement in Europe I think we will find staff looking to move on, I think we should be taking positive actions early to try to retain key staff in 2010."

Martin Hall says: "Business leaders face a particularly uncertain year. Hopes for a sustained economic recovery have to be based on private investment and exports. The fiscal squeeze which any General Election result must bring will cut the money in consumers' pockets and squeeze government spending. But several conditions have to be met before those hopes can be realised. Investment will only happen if businesses see reasonable prospects of profitable future markets for their output. Rising productivity has to enable exporters to benefit from the weaker exchange rate; continued depreciation will put unwelcome pressure on interest rates and inflation.

"It is important that whichever party gets elected secures a good working majority and then uses the time that markets have granted to implement a credible plan for correcting public finances. If that doesn't happen we risk sharply rising interest rates as the government struggles to finance its debt. The prospects for inflation are particularly uncertain. It has been the traditional route for reducing governments' real debt burdens, and monetary easing is an unprecedented policy with unpredictable unwinding. Yet major upheavals create many opportunities, and there could be big rewards for those prepared to take well-researched risks as the world recovers."

The constant onslaught of bad news stories that permeate the media will make for considerable unease says Geraldine Sharpe-Newton, Associate, Criticaleye. She explains: "For business leaders, it is not easy to look into a crystal ball and figure out what's next. I think being able to articulate long-term vision (not just quarter to quarter) and also to understand and use new media in an opportunistic and proactive way. Our world moves so quickly being able to respond is crucial. I also think that business leaders have to think about the messages they are giving to their own work force. It is vital that staff are kept abreast of company plans and strategy on a regular basis. As someone who is in the communications business, this is vital."

We have a number of articles and papers available on the issue of reputation in our 'Insights' section. In the Write-up 2009 and the Decisions you Should Take - Part II Trevor Williams, Chief Economist, Lloyds TSB Corporate Markets gives insight into how 2010 is expected to turn out and the December CEO Breakfast, where participants were concerned about this new year.

Please get in touch if you have any comments about the issues in today's update.

I hope to see you soon,

Matthew