You are here:

Let's go poll dancing

Created:
12 March 2008
Written by:
Alistair Blair

Last week I described the appalling mess that built up in Rentokil's City Link division after - a year ago - it simultaneously launched two profound changes to the business. The first was the integration of an acquisition which virtually doubled City Link in size. The second was the buyout of the independent franchisees who had previously run City Link depots, many of whom were reluctant sellers. Each of these projects represented by itself a disturbing potential source of disruption so, to run both together, was downright dangerous. No doubt the Rentokil board recognised this situation.

Advertising

Be that as it may, three weeks ago, Rentokil's boss Doug Flynn advised that he had recently become aware of some shocking problems at City Link, which had caused its customers to defect in droves and would result in a £50m profit wipeout this year. The share price has halved. The market capitalisation is down by £1.5bn.

The news was accompanied by a classic contribution to the annals of corporate denial: "The issues became apparent very suddenly and with no obvious warning... the business tracked budget until the beginning of October… despite regular reviews and updates, nothing untoward came to light or was expected."

This is so pathetic, it makes you want to spit. Mr Flynn, are you trying to tell us with a straight face that - with City Link attempting a complex transformation that demanded to be monitored in minute detail from the highest level - you were legitimately ignorant of the problems it was cooking up? For heaven's sake, it would only have taken a brief monthly telephone poll of City Link's customers to reveal, by last July at the latest, that they were deeply disgruntled and looking for the first opportunity to take their business elsewhere.

As I contemplated how a few hundred pounds a month tossed in the direction of The Gallup Organisation could have given Doug Flynn a surer grip on Rentokil, I realised I had stumbled upon a revelation: polling. Polling would not only consign a useful proportion of sick-making corporate denials to oblivion, but it would also solve other problems of corporate governance. Any substantial company such as Rentokil could spare itself a host of future embarrassments by handing Gallup or any other pollster a random 300 customer phone numbers every month from which to conduct an opinion survey.

Doh! As I examined the Gallup website and discovered it has a whole division dedicated to polling companies' employees and customers, the penny dropped. Rentokil may not be among them - but many big businesses do this or something similar as a matter of course. Nevertheless, I still believe I have a promising idea here. Corporate opinion poll results are private, but they do not have to be. Rentokil's institutional investors are in a position to throw their weight around a bit. They could easily make the group commission a simple monthly independent poll of the customers of each of its divisions, and announce the results to the Stock Exchange news service… "You see, Doug, this is really best for all of us… You'll know a lot more about what's going in your business, and so will we. And you won't be dropping any more £1.5bn surprises on us."

In fact, institutional shareholders could make all sizeable companies carry out a monthly customer satisfaction survey for public release. It would not be difficult to come up with a few conventions to create a useful, standardised customer polling system. The crucial thing would be to ensure that the polls were conducted and released in a genuinely independent manner, which would mean without the intervention of the company's management. The company's pollster could be appointed every year at its annual meeting alongside its auditor.

No manager would support such a proposal, of course. Anything that threatens management control of information will be fought tooth and nail. I can hear the litany before it starts: "Would diminish our ability to manage the company… would give valuable information to our competitors… would harm our position vis-a-vis private equity companies, who would not be releasing such information."

Which is why the surveys would have to be simple, like those purchasing manager surveys that comprise just one index figure a month, which builds into a series, the trend of which represents valuable information. Okay, so it might make management's life a bit more difficult to have this information routinely dropping into the public domain. But the disbenefit would be vastly outweighed by the gains to investors.

MORE FROM ALISTAIR BLAIR...

Read more of Alistair's columns at his IC home page.

You can add your own tuppence-worth using the YourOpinion form...

...or you can e-mail Alistair directly at: a7461blair@pobox.com

Alistair Blair is a past winner of the Business Writer of the Year Award, and has worked in investment banking and fund management.

You can get a FREE desktop alert the minute his column is published by registering with our alerts service. Click here for more details.

  • Back to top

Products and Services from Barclays Stockbrokers.

The UK’s No.1 Stockbroker

Stocks and Shares

Contracts for Difference

Financial Spread Trading

Gilts and Bonds

Funds Market

FX

Education Centre

Trading Simulator

Advertorial Feature

Take control of your investing with CFDs

Have you ever watched a move in the markets that you saw coming, but you weren't able to exploit?

by Dominic Picarda

Advertorial Feature

Spread your risks with spread trading

With so many big moves in the world's financial markets, there have seldom been more opportunities around for spread traders. Isn't it time you joined them?

by Dominic Picarda