Bad presentations are bad for business

It’s been said that Al Gore lost the race for the White House in 2000 as he couldn't relate to his audience and tell his story. Years later, in his powerful presentation and narrative story telling of “An Inconvenient Truth” he showed just how to use modern multi-media communications tools. Businesses could learn a lot from Al Gore.

Tens of millions are wasted every day by business people whose presentations simply bore people to death. Businesses spend millions not only on making bad presentations but paying for their staff to attend seminars and other events that don’t work. From routine information days to high powered presentations on which success or failure depends, businesses simply fail to make the grade. Few invest in understanding how to craft and deliver effective presentations that engage their many audiences.

Gradually evolved over the 20^th century, the business presentation has become the primary and most important of communications channels. In the past twenty years, business people have become captive of one particular form of presentation, the slide deck. Rather than use modern presentation software as an aid to communicating, many have allowed the software itself to dictate how they present.

Called “Death by PowerPoint” after Microsoft’s ubiquitous presentation software, business people have learned how to excel at delivering mind-numbing presentations. They expect us to sit passively as tables of figures, lists of bullet points and, even worse, entire paragraphs are thrown up on screen across which our eyes’ are jarringly dragged. All too often the speaker, back turned to us, either reads from the slides or from pages of notes that have nothing to do with the slide at all. By the time the second slide pops up or flies in, we are left perplexed, annoyed and slightly angered. No wonder we switch off.  

Addicted to stock templates that encourage the relentless, lazy use of bullet points, business organisations churn out near useless material which their highly paid people struggle to communicate to audiences fed up with being bored silly by one slide after another crammed full of largely meaningless information. More recently in an effort to spice things up, businesses have turned to graphic designers to layer boring presentations with glossy pictures, videos and flash animation.

Far too many presenters ask us to do three things our brains simply cannot accomplish. They expect us to read what’s on the screen, process the graphics and listen to their monotonous narrative at the same time. Few of them spend time in considering the one thing that matters most – their audience.

Some years ago, addressing the pervasive use of PowerPoint, leading communications expert, Edward Tufte wrote “rather than supplementing a presentation, it has become a substitute for it. Such misuse ignores the most fundamental rule of speaking. Respect your audience”.

Yet fewer than one in four business people say they spend more than two hours in preparing for an important presentation. Most say they spend less than thirty minutes. They cut and paste from their previous presentations, borrow from their colleagues’, or get their assistants to run one off. Many presentations are assembled on the fly in a last minute rush to generate enough slides to fill the allotted time.

Studies on how adults learn from multimedia presentations have found most that most business presentations cause cognitive overload. Neurological research shows how we process visual and verbal communication along two channels. Asking us to look at pictures, read words and listen overloads our short term memory. We become numbed by the sheer volume of information we try to process using our audio (hearing) and visual (seeing) channels.

In ground breaking work, educational psychologist Richard E Mayer proposed design principles for communicating using multimedia tools. These include carefully designing presentations and creatively understanding what active-learning is and isn’t. It most definitely is not treating an audience as some form of passive receptacle for a data dump.     

Conservative estimates put worldwide PowerPoint users at between 250m and 400m making upwards of 30m presentations a day. With the majority boring their audiences to death, businesses are estimated to waste over €220m.

The ability to communicate, persuade and encourage people to act is a key managerial and leadership competence. A presentation well made, reflects well on the presenter who is seen as a competent manager, effective leader and skilled communicator.

Yet how many executives have taken the time to understand how to craft compelling presentations? How many know how to tell their stories using pace and narrative that inspire others to act or at least recall the message or story teller?  Rather than remaining captive of a software genre that, when badly used, stifles proper communications, businesses should invest time and money in ensuring their people appreciate how to craft and deliver compelling presentations. In straightened times it would be money well spent.   


A version of this article appeared in the Irish Examiner, Business Section, Monday 25th July 2011.

Credit unions must make changes to remain viable

Bill Hobbs suggests that credit unions in Ireland need to consolidate like they do in other countries. But the “two becomes one” approach will only work if a new business model is adopted.

Credit unions are doing badly, but they can change this, writes Bill Hobbs.

There are far too many poorly governed and managed credit unions, which are either too small or too financially vulnerable to remain independent. If credit unions are to survive, they will need to operate on “county” and not “parish” lines by creating about 60 larger, new model credit unions from their existing 409 operations. As such a change will probably require substantial state aid, credit union leadership will need to prove that this consolidated network along with a new central shared service corporate structure can become, in time, an alternative banking system for ordinary people and small businesses owners.

Faced with the very same regulation, operational complexity and consumer sophistication, credit unions elsewhere have been successfully consolidating for decades. Consolidation has allowed them to deliver on their mission to provide ordinary people access to a full range of affordable financial services on fair terms. First established here in the 1950’s, by 1998 there were 421 registered credit unions. Today numbers here have reduced by barely 3% to 409. In comparison numbers in the United States have declined by 34%. Similarly, Canadian and Australian credit union consolidation has gone hand in hand with substantial ongoing investment in providing high quality financial services.

Had Irish credit unions evolved as their international peers have, they would have, generated the funding required to modernise operations, provided more extensive products and services and accumulated the capital buffers to withstand the losses they now face. Regrettably, along with losses in their core unsecured consumer loan business, they have also lost millions in high risk investment instruments they should never have invested in and in business loans that should never have been made.

While credit unions collectively have close to €14bn in assets, less than €7bn is out in loans. The balance is either on deposit with Irish banks, invested in bank and government bonds or risk instruments. Though funded by €11.5bn in household savings less than a third of their 2.65m members are active customers. At this level of market penetration, credit unions should have deepened existing relationships by making available better quality products and services long before now.

But they continue to offer the same basic products first introduced fifty years ago. With less than 1% of total income generated from fees, for many their undiversified, high-cost labour intensive business model is failing. With the majority of credit unions too financially vulnerable or too small to survive, the sector must achieve three important goals.

The first is to consolidate down to a realistic number. There are many ways in which to reconfigure a financial services retail network. As a credit union’s income earning assets are determined by the average amount borrowed which in turn is funded by the average amount saved by their customers, the most meaningful mechanism is to focus on the numbers of customers served. If a credit union was to say service 50,000 customers, which is about the size that allows for operational efficiencies to be achieved, then it’s possible to model a new network. 


Using Central Bank data, I modelled a network of 57 credit unions ranging in size from €180m to just over €300m in assets. Interestingly it would re-configure credit unions along county lines rather than the current, far too narrow, parish common bond.

But such a re-configuration of itself would not be enough. Two other things are required. To work, larger credit unions would have to adapt to a new business model. Designed along international best practice lines, they would need to operate at higher standards of governance and managerial competence. Such “new” larger credit unions would first focus on excelling at their core business of “savings and loans” while augmenting this core business with associated fee earning products. At this scale, they would also be capable of making small business loans. In time they would develop the competencies to provide a full range of consumer financial services.

However the larger “new” credit unions would still not be big enough. Credit co-operatives evolve as full service providers by leveraging off the financial power of their combined balance sheet and pooling resources. To succeed, they would have to collectively modernise IT systems, standardise processes and products and pool spare cash and capital. To do this they would need to establish a shared services organisation similar to those found in mainland Europe, North America and Australia, where central organisations owned and operated by credit co-operatives are critical to achieving the economies of scope and scale required to excel at offering affordable financial services.

While but one model for a new credit union system, given the scale of losses, credit unions are highly unlikely to be able to fund consolidation and transformation from their own resources. The Government may be required to provide funding but only if credit unions demonstrate a willingness and capacity to change. 

A version of this article appeared in the Irish Examiner, Business Section, Monday 18th July 2011.

Mortgage strike threat might just force a response

Measures to alleviate mortgage distress are failing badly, writes Bill Hobbs.

So far mortgage crisis loan modifications have been about as effective as using a foot pump on the Titanic. Solely designed so that banks can delay owning up to their losses, it’s a hopeless “delay and pray” strategy given the sheer scale of homeowner financial vulnerability and growing insolvency.

With almost 100,000 home mortgages in trouble, close to 350,000 homeowners in negative equity, 200,000 variable rate mortgage holders paying twice the interest rate they should be paying and 290,000 tracker rate mortgages about to increase, it was only a matter of time before someone would float the notion of an organised civil disobedience campaign.

Last week’s call by the INMO (Irish Nurses and Midwifes Organisation) on ICTU to support its notion of a mortgage strike might be a damp squib or it could morph into a social movement comprising tens of thousands of beleaguered homeowners. It seems that the strike’s promoters intend setting up an offshore-hosted website and inviting people to register interest in threatening to temporarily withhold mortgage payments. It appears the objective is to force Government to channel some of the billions earmarked to fund banks’ mortgage losses directly to mortgage holders.

Without an organised national mortgage debt forgiveness programme that allows people rebuild their lives, most people realise that current steps to alleviate mortgage distress are not working. While mortgage strike promoters are looking for written-off billions to be targeted directly at mortgage holders and not channelled through the banks, there is a case to be made for a statutory intermediary that will objectively assess troubled mortgages and order binding solutions on both banks and borrowers.

By last March, 90,000 loans totalling €15.4bn were dangerously in arrears or had been modified. These numbers include 64,000 modified loans mostly re-set on interest only terms. Of these nearly 26,000 are non-performing after modification. The “at risk of repossession” group is close to 50,000 loans of which 35,000 are in arrears for over 180 days. Homeowners in this category owe €9.5bn on properties that have halved in value. On average they each owe almost €90,000 more than their home is worth. Given the upward trend in arrears numbers since September 2009 when they were first published, it’s expected that these numbers will worsen through this year. As the full effect of the universal social charge and interest rate increases hit home, it’s highly likely the 100,000 troubled loans milestone will be breached well before this year is out.

The Central Bank’s recent PCAR home mortgage loss rate on four covered bank’s €74bn mortgage book, if extrapolated to the full €116bn residential mortgage market, results in potential bank losses of about €6.7bn over the next three years. Ominously the banks’ expert consultants’ expected life-time or longer term loss rate translates into losses of over €16bn. Were it not for the moratorium on repossessions and hopelessly optimistic “delay and pray” loan modification strategy, repossessions would be running at well over 9,000 a year. No doubt many people in trouble would willingly hand over the keys to their home and move on if the balance owing was written off. And many others could keep their homes if their mortgage was written down to the value of their property.

Delaying and praying for property values and incomes to recover is delusional nonsense. House prices have fallen through the floor and may not recover for decades to come. The drop in values is estimated at close to 50% but with the bottom yet to be felt it could reach Professor Morgan Kelly’s prophesy of 80%. Any bank repossessing and selling today will recover less than forty cent per euro on loans owed at this time. While bankers do not want to crystallise such losses, the Central Bank is set to force them to recognise not only losses as they arise but anticipated losses as well. But recognising losses on a balance sheet does nothing for mortgage holders.

Would the threat of a mortgage strike work? Probably not. But given the pent-up anger at consistent failure by two governments to respond to the mortgage crisis, should people to sign up simply to register their support, its promoters might just get the numbers they are looking for.

For some it’s a daft idea but who knows, perhaps the threat of a mass mortgage strike will galvanise the Government to expedite a debt forgiveness programme. With people experiencing what deflation means as the rising cost of mortgage debt repayments and increased taxation reduces their disposable income, they are looking for a way to voice their anger. The idea of a mortgage strike could well become a call to action and create a social movement that addresses one key issue – how will this society protect people from becoming indentured debt servants for decades to come.

A version of this article appeared in the Irish Examiner, Business Section, Monday 11th July, 2011.

Disparity amongst mortgage holders unsustainable

Variable rate mortgage holders will be paying €1.25bn more in interest than people living elsewhere.

Is it is grossly unfair and inequitable for one class of mortgage holder to effectively subsidise another as banks struggle to keep their doors open? Is there a case to be made for capping interest rate margins on variable rate annuity mortgages?

The distortions within the housing mortgage market continue to be acutely felt by those who are on variable interest rates. Of the €138bn or so of household mortgage debt about 36% or €50bn is either on a variable rate or a short term fixed rate that will shortly reset at higher margins.

Once the mainstay product, the plain vanilla variable rate annuity mortgage has become a trap few, if any, are able to break free from. Someone with a €200,000 variable rate annuity may by the end of this year pay almost 2.5% more than they would pay if living elsewhere.

Amounting to an additional €5,000 a year it represents an additional citizen’s burden. It’s a hidden, exploitative, discriminatory tax on after-tax income amounting to close to €1.25bn a year.

The gap between what should be paid and what is being demanded by zombified banks is growing.  Yet there is no sign of any move to control the upward only movement of variable mortgage rate margins by lenders. And we could be seeing a shift to a permanent high margin non-competitive marketplace where most consumers are so marginalised they cannot shop around.

Mortgage rates and other consumer lending rates will be significantly higher than other Eurozone states for some considerable time to come.

Not only is this state ploughing €70bn into the domestic banking system to keep it alive but tax-payers disposable income will also subsidise banks through higher interest rates, fees and charges. In the absence of a working banking system, banks hold their customers captive. Captivity is amplified by the lack of market participants as mortgage lenders shut down or withdraw from making mortgages. The number of lenders has shrunk from nine principal firms and a clutch of sub-prime operations to three highly conservative lenders.

These remaining banks can abuse their oligopolistic power to increase rates without fear of competition. Given the scale of economic depression it’s highly unlikely that any oversees banks will be interested in entering the mortgage market. If they do they will do so by selectively cherry picking better quality loans. The implications for consumer protection are obvious.

Right now one class of mortgage holder is subsidising another class who opted for tracker mortgages. There are two sub-classes within the tracker brigade - those who bought homes and amateur landlords. Both are effectively being subsidised by variable rate mortgage holders.

To make matters even more unpalatable, many amateur landlords are in receipt of two additional tax payer subsidies. They are receiving social welfare rent subsidies amounting to about €500m a year and are also able to offset loan interest costs against rental income.

One category of borrower is directly through higher interest payments and indirectly as a tax-payer, subsidising others.

The wider problem is one of a severely depressed property market coupled with its continuing decline, now estimated to have fallen 50% from the peak. There is no sight of a bottom being reached as recent fire sale auctions demonstrate that clearance prices are far lower than real long term value. Economists use differing methodologies to assess fair value.

While none of these can predict where prices will level off, they do indicate that the have some way to go before the bottom will finally be reached.  The problem with desk top macro analysis is it fails to account for buyer confidence. If people are unwilling to buy at any price then how can you attribute any value at all?  The consensus if it can be called that is prices may fall by over 60%. With limited credit availability and only cash sales possible in many cases, the negative shock of recent fire-sale auctions hints that the bottom is still some way off.

Without an active property market and absence of any mortgage competition, it looks as if variable rate annuity mortgage holders have become the most discriminated against group. And as long as banks struggle with as yet unaccounted for loan losses, it seems that the hidden tax implicit in higher margins will continue unless some effort is made to protect consumers through price controls.   

A version of this article appeared in the Irish Examiner, Business Section, Wednesday 6th July 2011.

Small businesses must be allowed to think big

SME’s need help to compete with rivals in Europe, writes Bill Hobbs

The dramatic decline in domestic banking activity illustrates the need to redirect banking activity to funding the development of an export-orientated, medium sized indigenous businesses sector.

While the savings rate is increasing, household deposits are declining. The savings rate measures the percentage of disposable income not being spent on consumption. This money is either being stored as bank savings or used to pay down debt. And if borrowing to fund consumption drops the savings rate increases.

Since January 2010 household deposits have dropped by €7.3bn and household borrowings have declined by €10.2bn. These show that households are using less credit than before and paying down debts at a faster rate. This is also seen in the drop in spending at retail tills, with, for example, credit card usage declining by 6%.

The fall in business levels is even more dramatic. Deposits which are down €8.3bn and business loans have collapsed by €54bn, largely due to NAMA.

Overall the domestic banking loans to deposit ratio which peaked at 215% in May 2008 has dropped to about 155% but remains far higher than 2003 when it was 133%. The old adage applies: loans create deposits. As banks must continue to shrink their balance sheets, their capacity to make new loans is almost non-existent.  

Furthermore given that about a third of short term consumer and small business loans need to be rolled over every year, any contraction in new lending adversely impacts on all important interest income and associated fee income. Perversely the drop in demand for loans causes prices to rise rather than decline, as banks are forced to increase interest rates to make good the fall off in new lending.  

Of greater concern in terms of economic recovery is the continuing contraction in business lending and savings volumes. Businesses are not accessing longer-term loans, are increasing short-term borrowings and burning up savings in their struggle to trade through an economic depression. The drop in savings and increase in short term borrowings, principally overdrafts is indicative of worsening cash-flow pressures. 

The decline in bank borrowings is a factor of two things at play. The financial stress many are experiencing as turnover drops and bank reluctance to lend to struggling but viable businesses. However credit access alone will be insufficient.

If economic recovery is to be built on exports, then it’s abundantly clear that indigenous business performance needs to exponentially improve. With the SME sector only generating only 11% of turnover and less than 5% in revenues through exporting, in comparison to other similar sized economies, Ireland has quite a poor record in building a vibrant cohort of medium sized businesses capable of competing internationally. We have too many small businesses employing less that fifty people and not enough medium sixed businesses employing between fifty and two hundred and fifty. The business sector is missing some vital ingredients.

The first is access to affordable credit and capital. The overreliance on bank credit and lack of any other market for capital hinders the best from expanding. There must be a comprehensive small business loan guarantee scheme and a supporting investment programme to fast track them to larger medium size export oriented size similar to those found in Britain and Germany whose medium sized businesses are the drivers of export activity. This could be supported by a new dedicated development bank specialising in business lending.

The second is allowing for business bankruptcy. Truly entrepreneurial societies do not penalise risk taking. If a business fails the entrepreneur is allowed to dust themselves down and start again.

In the past this country nearly failed as an independent economic entity with its policy of promoting import substitution and trade protection tariffs. There is no going back to the small closed economy that nearly failed in the 1950’s. In the same way there is no going back to the small open economy that created and sustained an explosive asset bubble.

Today the challenge is to understand that buying and selling stuff on credit – consuming goods and services won’t cut the mustard. Unless we find a way to export things that others value and are willing to buy, then we will not achieve economic independence again.

The impetus for recovery will be demand driven by international growth, which it at risk of flagging. Unless we find a way to fund and drive international export-orientated medium-sized businesses then the chances of achieving long term sustainable economic independence are slim. Maybe this time we will discover how to thrive as a small nation state by finally building meaningful sized, internationally competitive indigenous businesses. 

A version of this article appeared in the Irish Examiner, Business Section, Monday 4^th July 2011.