How the PM can steer out of stormy waters

First published in the Financial Times on 4th May 2012.

Lessons UK government could draw from studying commercial comebacks

Having bust companies is easy compared to the task confronting this government. A board of directors can run a business like a totalitarian state – but our politicians work within a parliamentary democracy, under the permanent scrutiny of relentless media. A company chief executive may delay creditors, shed employees, sell assets, gain forbearance from the bank and use dozens of other tactics to stave off collapse and find a solution. Whole countries are vast undertakings, however, with intractable social problems, whose citizens tend to have unrealistic expectations of their lawmakers. Any political leader who achieves even modest improvements should be hailed as a hero; managing a 21st-century state through a recession is a Herculean assignment.

I am a businessman, not a politician. After a month of travails and stumbles, however, I think there are lessons our government could draw from studying commercial comebacks. My experience at companies such as PizzaExpress, Channel 4, Borders and Patisserie Valerie leaves me in little doubt that there is no rigid prescription or guaranteed formula for fixing challenged organisations. Yet I have found common features.

First, David Cameron needs to appreciate the need to stabilise the operation rather than rush into a relaunch. So he has to draw up a coherent strategy; communicate this to the stakeholders – in his case primarily his cabinet colleagues and his restive party – and then carry out the restructuring in a determined manner. All these are simple procedures to write down, yet difficult to execute.

Second, he has to re-emphasise his leadership. This quality can be hard to define, but we know it when we see it in action. It involves confidence, decisiveness, resilience and an ability to identify and motivate talent. I assume Mr Cameron possesses such attributes; otherwise he would not have risen to such high office. The Tory high command demonstrated it when negotiating the coalition deal with the Liberal Democrats two years ago. Labour were the Lib Dems’ more natural allies, but somehow Mr Cameron seized the initiative and took power. That required courage – including fending off critics from within his own party. He needs to take on the malcontents who accuse him of being lackadaisical, in the most effective way possible – by displaying such boldness again

A willingness to compromise in order to grab a more important victory is the sort of skill needed during any corporate turnround. When a company is failing, the right captain will do whatever it takes (within the law) to save the ship. Given the challenges that confront Britain and this government, it feels a bit more like a rescue than business as usual. The last administration bestowed a catastrophic economic inheritance, and since then overall conditions have done the coalition no favours. It will be a significant test of character to see if our prime minister can bounce back from his latest setbacks to seize the day.

Third, it is vital that – like the best chief executives – he fights on many fronts. These are some of the areas I would urge him to address. In particular he needs to encourage investment and job creation by entrepreneurs. He must cut burdensome red tape and keep the bond vigilantes happy. He needs to quell dissenting elements within his own party and his coalition partners. He must carry out spending reform to keep the nation solvent, and try not to alienate too many voters who benefit from the welfare system.

In addition, there also needs to be a revival of opportunities in the provinces, debt must be repaid, inflation kept at bay, and schools reinvented. The to-do list is long and intimidating but successful business leaders expect nothing less, and nor should Mr Cameron if he wants to leave a valuable legacy.

Fourth, he should be thinking day and night of “efficiency” – or what the public sector calls austerity. The public sector must do more with less. The Labour government added a million jobs to the state’s payroll that the taxpayer can no longer afford to fund. Meanwhile, many public servants such as GPs and teachers saw substantial increases in pay. Their pensions are unsustainable. Educating the electorate on these painful truths is essential. Most corporate recoveries are about cutting costs – and that usually means shedding labour. A major part of state spending is wages. Unfortunately, the taxpayer foots the bill, whether someone works for the government or claims the dole. So Mr Cameron must hope private sector growth returns to absorb those thrown out of work.

Fifth, he should focus on the long term and strive not to be distracted by the media’s excitable flitting from the latest Murdoch revelation to the queues at Heathrow. These are short-term concerns for the cabinet. Far more important are the issues that are inevitably tougher to mend: making the nation more productive, competitive and optimistic. Such change takes years. Cultural shifts cannot come overnight from Number 10. Yet the PM must do his best to show the nation that he is seeking to make a difference. Dynamism matters, although he should not expect gratitude. As so many chief executives have found over the years, in tough times you receive scant applause for achievements – in the government’s case modest interest rates, a strong currency and no property crisis.

Finally, every turnround is a juggling act but you have to be ruthless. Expansion has to be pushed with minimal resources; expenses have to be slashed while morale is maintained; rivals must be repelled despite sustaining injuries. This requires a committed team, considerable stamina, a positive attitude and a ruthless streak. There can be no sentimentality if sacrifices have to be made, whether in the cabinet or in Number 10. Plenty of apparently worthy budgets must be chopped; lots of decent individuals must depart. Will Mr Cameron and Mr Osborne hold the line? It is in our interest that they do. They should recall Marshall Foch’s report from the Marne in 1914: “Hard pressed on my right; centre is yielding; impossible to manoeuvre. Situation excellent. I shall attack!”