Furlough is no holiday

Six months ago, most people in the UK would have no idea what “Furlough Leave” was. Since the UK Government introduced a Job Retention Scheme in response to the COVID19 novel coronavirus pandemic, being “on Furlough” has become a commonly-used term.

The idea is that, whilst businesses are experiencing reduced or even no revenue as a result of the restrictions put in place to manage the response to the pandemic, the Government will step in and pay a proportion of an employee’s wages/salary, within limits.

It’s up to the employer whether they will make up the difference between the Government allowances and normal income but the principle is simple:

Even a profitable and otherwise sustainable business can be destroyed by a reduction in cash flow. By making use of grants to subsidise wage/salary costs, businesses can keep cash in the business and avoid redundancy or even complete failure.

Placing staff on Furlough Leave doesn’t mean that redundancies won’t be required later, or that a business will not eventually fail, but the intention is to avoid otherwise healthy businesses from being wiped out whilst their trade is adversely affected by the pandemic response – for example through enforced closure or though non-payment of invoices by others who are forced to close.

For a business, taking advantage of Furlough payments is not so different to an employee taking a payment holiday on a mortgage. If you think that you may fall on hard times later, why would you not take advantage of financial support? It may cost more in interest payments but, if that 3 months’ mortgage payment is in the bank, that’s an opportunity to keep paying the bills if you do find you need to look for another job. Similarly, if the Job Retention Scheme means that a business sustains its cash flow, then it’s served its purpose.

The trouble with this system is that there will be some fundamentally unsound businesses that are propped up for a few weeks or months before failing anyway. Similarly, there will be business owners who will take advantage of the situation and simply rely on the government to pay their staff costs for as long as they can (one observation I made in the town where I live was that major brands stayed closed for longer than independents, who found different ways to offer their services during “lockdown”). Unfortunately, the system is not perfect and these are some of the side-effects. They are also the reason that a number of changes were made from July 2020, to try and wean companies off the scheme and back onto a solid footing, in preparation for the eventual closure of the Job Retention Scheme.

The impact of Furlough on staff (including managers)

Furlough impacts staff in different ways:

  • Some may feel aggrieved that they were not “chosen” for Furlough Leave.
  • Some may see those “on Furlough” as getting “a free paid holiday” whilst they have extra work to do.
  • Some may feel anxious that, by being placed on Furlough Leave, their job is at risk.
  • Some may experience challenges as a result of not being “at work” – and the impact this has on them as they deal with the hole left in their day.
  • I’ve even heard (anecdotally) of people experiencing financial difficulties as their credit risk is affected by the presence of Furlough payments on their payslips.

It’s no secret that my employer used the Job Retention Scheme. In a company blog post about putting people first, Charlotte May referred to “a number of individuals on furlough and the entire organisation pulling together to enable us to get to [the] other side of this safely”. That means that I have some experience of Furlough, both as a manager and as an employee.

Without compromising confidentiality, I can say that we had criteria for determining who would/would not be placed on Furlough and those criteria were applied without favouritism. That’s part of the reason I was Furloughed for a few weeks – the criteria used were just as applicable to me as a part-time manager, part-time Architect as they were to any other Consultant. I had to put myself on the list.

I can also tell you that Furlough is no holiday. Staff are allowed to take part in training and development activities whilst on Furlough Leave. I was only too aware that this represented an opportunity – there was no point wasting it and then asking for time to study for exams or to attend an event later in the year – so I made the most of my enforced time away from my normal work. Publicly, it was a fantastic development opportunity. Privately, I still struggled.

You see, whilst on Furlough, staff are also allowed to be in contact with their line manager. But they can’t do anything that provides a service to the company. That meant that whilst I was on Furlough Leave, I couldn’t manage my team (colleagues did that for me) or do any other internal work. There were times when I knew something was happening that I could help to influence/resolve but I was simply not allowed to. And there were times when I was asked to do something and I had to say “no”.

I was also uncertain about my future. I knew that the use of Furlough was a prudent measure for all the reasons I mentioned above but no-one can take anything for granted as the UK enters recession, maybe even depression.

Apparently, I wasn’t much fun to live with either. My family were glad to see me go back to work. It seems that I don’t do “not working” very well. Actually, I do, when I’m on a proper day off – but I struggled with the “not being allowed to work when there are things to be done” (as mentioned above).

When I returned to work, I was desperate to bring back team members who had been out of the workplace for several weeks/months. They have skills that we need, they can contribute as part of a team but I need to be sure I can keep them busy too. Thankfully, the introduction of part-time Furlough Leave helped there.

What does this mean?

The UK’s Job Retention Scheme cannot continue indefinitely. As a country, the costs are huge and I’m increasingly of the view that we should be looking towards some form of Universal Basic Income to support individuals, rather than propping up businesses (but that’s a whole topic of its own).

So, the next time you hear that “all those people on Furlough are just having a free holiday”, maybe think a bit more about the effect it’s having on their lives, the lives of those around them, and their future employment prospects.

COVID19 will have lasting effects – not just on people’s health – but on the way that we work, shop and play and what that means for our future economy and society at large.

Those most affected may not be knowledge workers like me but the many retail staff displaced as businesses that had been limping along as they failed to transform finally fold. Then, as offices become undesirable (and some may say unnecessary) there’s a whole section of the economy that relies on office workers spending money in town and city centres every day. I’d like to think that those empty offices can be converted to apartments, helping to address the housing crisis. That will bring people back into cities and new businesses will grow and thrive. But that will take time. Years, maybe.

Weeknote 11: The link between consultant utilisation and beer! (Week 8, 2018)

Two weeks ago I commented that I was hoping to see Wales beat England in the Six Nations. We put up a good fight but, in the end, Eddie Jones’ team continued their unbeaten record at Twickenham. Then, this week, Manchester City got knocked out of the FA Cup by Wigan, who play in League 1 (the third tier of English football), so it’s not been a good month on the sporting front for me. Still, I have been enjoying the Winter Olympics!

Thankfully, work has been a little more successful – and my return from half-term “holidays” has seen me get properly stuck into my Modern Workplace project (though I do need to step out of it again for a few days next week). I also had the opportunity to spend some time with Microsoft in an “AI envisioning session” today.

On Monday though, I made the journey to Long Eaton, to hear a former colleague and Fujitsu Distinguished Engineer, Ste Nadin (@SteNadinFJ), give his views on “Demystifying DevOps” at the Nottingham and Derby branch of the BCS. I was pleased to hear Ste start his talk by saying that he wouldn’t talk about tools very much (which is good – because culture is far more important in a DevOps strategy) and even more pleased when he used the medium of Lego to bring his presentation to life! Ste also made some interesting observations on measuring utilisation – something that’s close to my heart as a practicing consultant.

Taking a beer glass as an analogy, the glass may be seen as better when it’s fully utilised. Empty is 0% full, a short measure is 80%, and we really want it to be 100% full.

Some people see consultant diaries in that way – aiming to be 100% busy all the time.

But let’s take another analogy – if a road is 100% utilised, that’s not so good – it’s not efficient. With infrastructure (like roads) we don’t really want to fill them to capacity but instead to focus on flow!

So, are people (not resources!) empty vessels to be utilised (like a beer glass) or more like a road where work flows?

I’d argue that I’m not very efficient when I’m filled with beer – and it’s the same when utilisation is driven to 100% for an extended period too!

It all comes down to wait time, which is a fraction of %busy time over %idle time. After about 80% busy-ness (or even business?), wait time really spikes and, as utilisation increases, the ability to respond to change and priority decreases. At 100% there is no flexibility and it’s difficult to prioritise (or respond to business change/demands).

This is shown in the diagram below, described in Nabil Hashmi’s post about The DevOps Handbook (and it reminds me I really must finish reading The Phoenix Project):

Wait time vs percent busy

When I was a business manager (in my role as a Head of Practice when I worked at Fujitsu), my operations manager would ask me why I was forecasting that I would run a “bench”. I didn’t know about wait time then – but I knew I needed some flexibility to cope with unplanned work – not just a team that was maxxed out on planned work.

A consulting business is never constant – we live in a world of peaks and troughs and, whilst someone suggested to me that, during quiet times, Consultants will drink from the proverbial pint pot and that, conversely, they need to fill it up in busy times, that’s not the whole picture. I’m fortunate that my manager understands my limits, my constraints and that I can’t be productive when constantly running at 100% but unfortunately there are many in this industry who don’t see things the same way…

Right. I’m signing off now for what I hope is going to be a relaxing weekend… back soon!

Excel formula for calculating a price, based on a known cost and margin percentage

A couple of years ago, I blogged about the difference between margin and markup. Since then, there have been a number of occasions when I’ve wanted to know the formula to take two cells in Excel, one with a cost and the other with a margin percentage, and then calculate the price. I’m sure I’ve blogged that too, but I can’t find it now – so here it is (after I worked it out again this afternoon)…

Using the example above, the formula to calculate the price in cell C2, based on cost in A2 and margin in B2 is =A2/(1-B2).

Please be honest…

It’s appraisal season where I work and I spent a significant amount of this morning writing feedback on various colleagues’ performance.  One that did amuse me though, was the annotation on one colleague’s form:

“Please be honest. Feedback is a gift, like a woolly jumper from your auntie at Christmas. You might not like it but you take it with good grace and remember that it was sent with the best possible intentions.”

Nice one. Many people take constructive feedback as a negative (and it can be hard to give). At least this approach encourages others to provide honest opinions.

Business intelligence required…

Up and down the country, businesses are running on Excel, instead of using a proper business intelligence (or even management information) system. The one I look after is no different but, as I pieced together yet another spreadsheet last weekend, I learned a few Excel tips that might be useful to share…

=SUMIF()

I’ve been trying to pull together a resource forecast in order to work out how quickly to grow my team. The approach I look was to list all the projects we have coming through, with headcount requirements split out by grade, then to total each column based on the grade of staff required.

Seems fair enough, but the trick to making this work is reading a cell and then only including its value in the total if a condition is met (e.g. the indicated grade matches the one I’m adding up).

Stack Overflow came to my rescue, describing Excel’s SUMIF() function

In my case, the formula was something like:

=SUMIF(E4:E148,E154,F4:F148)

Where E4:E148 contained the grades of people for each identified project, E154 contained the grade I was looking for (e.g. Exchange Designer) and F4:F148 were the numbers of people needed for each project that month. Repeat for each grade, and then for each month, and a table of resource requirements can be built up…

There may be better ways to do this, but it will save me some time adding up the totals each time I revisit the task list…

More margins…

Of course, knowing how many people I need is one thing – making some crude assumptions about the likely revenue they might attract to see if I’m close to my numbers for the year is the next question I’ll be asked.

Last week, I blogged about the difference between mark-up and margin, and this week I needed to put that into practice.  I found a forum post that explained the formula (sale price = 100/1-margin * original cost), so I put that into practice, multiplying by a day rate, an assumed number of working days in the month and the total of that grade of person:

=(D165*(1/(1-D174)))*D175*F154

Which translates to:

=(dayrate*(1/(1-margin)))*number of days*number of people

Displaying data in 1000s

The last part was displaying data. Some of the revenue numbers I ended up with are big – and I’m only interested in 1000s of pounds, so I needed to adjust the formatting of the results.  The trick here is to use a custom number format on the cell of 0, (zero comma) for thousands (or 0,, can be used for millions). Add a K or an M on the end for units, and a currency symbol up front too. You can also add a decimal point using 0.0, (e.g. £0.0,K for £1500 to be displayed as £1.5K) or, if the numbers get into the millions, then try something like £0,000,K.

Margin, or markup?

A big chunk of my current role involves trying to convert a capability unit (with some great skills in the team, it has to be said) into a profitable business. That’s not necessarily easy – changing a culture created over years where utilisation was king – as long as we were busy, life was good – to one where we need to be busy but only if we’re doing the right things to keep projects profitable: get in; deliver a defined work package; avoid scope creep (Project Managers like to grab hold of good people); move on to the next thing.

That means that, in addition to managing a team of my own for the first time, this technical manager is also on a very steep learning curve as he grapples with being a business manager too (but I can’t forget my technical roots – I’m also Messaging Lead Architect – and I’ve got a number of technical activities to juggle as we improve our capabilities, standardise our delivery, and drive out further efficiencies).

I learned an important business lesson a few weeks ago, when my Manager sent me a “handy cheat sheet” for calculating margins on our day rates.  “But it’s wrong”, I exclaimed – “look, if I put 10% margin on £100 it says the answer is £111.11 – that’s 11% margin!”. “No Mark, that’s not how it works” explained my, extremely patient, Manager (let’s call him Alan because, well because that’s his name…).

Alan explained that I was applying mark-up, not margin (“Doh!”, thought I).

Alan went on to explain that margin requires working back from the price to work out the difference from the cost – whereas markup is simply adding a value on top of the cost to reach a price. So, if something costs £50 and is sold for £100 – that’s 50% margin but 100% markup.

That was an important lesson for me – thankfully one that I learned on a £25K piece of consulting, rather than a multi-million pound managed service…

Now onto the next challenge, making sense of revenue and margin flowing through umpteen cost centres…