Don't reinvent the wheel, just hire experienced staff

'A company could have a long-term relationship with outside advisers'
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The Independent Online

When Skandia, the big Swedish insurance group, wanted to try to define how the world would change in the early part of the new century, it set up a series of internal teams. Each looked at different aspects of the future and how these might affect the group's business in the different parts of the world.

When Skandia, the big Swedish insurance group, wanted to try to define how the world would change in the early part of the new century, it set up a series of internal teams. Each looked at different aspects of the future and how these might affect the group's business in the different parts of the world.

Most big companies perform this sort of exercise from time to time. What was special about Skandia's project was the way the teams were constructed.

They were in groups of four to six people, chosen so each group had a blend of people from different backgrounds. Each team had a mix of men and women; each had junior and senior staff; and, crucially, each had someone who had just joined the organisation and someone who had been there a long time.

This last bit was extremely important. New people see an organisation with fresh eyes. They bring experience of the outside world (and maybe of how competitors organise things). But you also need people who understand an organisation, have worked there for a long time and retain a folk memory of how the business has developed. Without a folk memory businesses are unable to learn from past mistakes - there is no one around to remember what went wrong last time.

This presents a particular problem for two types of business: financial service companies and dot.coms.

Most financial service companies employ relatively few people under the age of 45. Wave after wave of amalgamation has led to wave after wave of redundancies.

For those who escape the culls, the increase in the length of the working day has made the jobs unattractive, particularly since the wiser 40-something-year-olds will have salted enough away to make semi-retirement an option. The result is that very few people have worked through the full economic cycle: they don't remember the last serious bear market, let alone serious external shocks such as the twin jumps in the oil price in the early and late Seventies.

So when there is a new shock - the East Asian financial crisis, or the Russian debt default - the markets are unprepared. This means that while the economic cycle may have become a bit more stable, the financial market seems to have become less stable.

The second group of companies where there is a problem is the dot.coms. Because the sector is so new, many of the people working there are also new to the business world. As a result, not only are the basic disciplines of normal business often not applied, but people running internet companies try to reinvent the wheel. They try to develop a new business model when there are plenty of tried and tested ones that would do the job.

The present disenchantment with internet start-ups is a result not so much of the failures of the concepts, but rather a lack of discipline in following them.

You can see this even in established companies. Take internet banking. When a bank or building society launches a conventional new product - a new type of account or a new loan scheme - it has an established way of testing it. The product is rolled out only when the bank knows it works, that it can be produced at an acceptable cost and there is a demand for it.

With Egg, the internet and phone bank set up by the Prudential, and with IF, the new internet bank of the Halifax, there have been serious hiccups. The Halifax has had to postpone IF's launch because of these.

There is a perfectly reasonable defence. The demand for such services is so large and the range of the internet so wide that the normal piloting procedures are difficult to apply. But a customer who cannot get into their bank account because of a software glitch is going to wonder whether internet banking is such a good idea. After all, the crucial commodity that all financial institutions sell is trust. Failure to let people have their own money undermines trust in a most fundamental way.

So what should companies do? The financial imperative to retire older staff is as relentless as ever and it would be naive to expect that to change. Maybe, as the workforce ages and as pension legislation becomes less rigid, the balance will shift to retaining more older workers. Until that happens, the business community will have to patch.

There are two main possible ways forward. The more promising is to soften the transition between full-time work and retirement. There are tax and other difficulties in retiring people, then re-employing them on consultancy contracts. But one way is to spin people into self-employment long before they reach retirement age and back them in business start-ups. The previous employer cuts its wage bill, retains the skills of the people and, if the spin-offs succeed, may even create an additional asset.

The other way forward is to out-source the custodianship of the memory bank. A company could have a long-term relationship with outside organisations that advise it on strategy, a firm of consultants or perhaps a university business school. When it wants to try something new, it taps into the minds of people who remember what went wrong last time.

There is another solution - don't sack older workers, but adjust working conditions and pay so both sides are happy to carry on.

But that would be too simple, wouldn't it?

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