Managing effectively in troubled times

Working with companies over the past months there is a noticeable sense of demoralisation amongst many sectors of the work force. 

The causes for this are readily identifiable, many people are struggling with their own domestic finances whilst at the same time the need for increased levels of performance and efficiencies at work have rarely been as intense. 

It is the responsibility of the Management to ensure that during these times Staff members are encouraged to give of their best.  

Too many Managers are remote from the day to day activities of their Staff and appear to have the attitude that the people who report to them are lucky to have a job. 

This mentality is counterproductive. Staff need motivating and incentives do not necessarily have to come solely in the form of financial rewards. 

Some of the best run and therefore by definition most successful commercial entities are those where the workforce is engaged and feels part and parcel of the organisation rather than merely there to make up the numbers.

 

Storm brewing in the East

 

Since 1978, China's economy has doubled every eight years. Today, the average Chinese person has some ten times the purchasing power they had just a quarter century ago. 

China was the engine room powering the Global boom of the early 21^st century, however there are signs now that the Dragon is catching its breath.  

China's economy has grown at its slowest pace in three years as investment slowed and demand fell in key markets such as the US and Europe.

Several indicators have begun to point to an economic downturn in the country, including  sharp slowdowns in electricity demand and industrial production as well as in factory output and retail sales.

During the last three years, Chinese investors have poured their money into the country's property construction boom.

For example, many firms financed the import of raw materials such as copper, iron ore and aluminium for the building industry.

It also provided a roundabout way for them to speculate on the strength of the yuan.

But it seems they went too far. The unused copper shipments piling up in China's warehouses have become so great that  the overflow is being stored in staff car parks and driveways.

Meanwhile the construction boom seems to have ground to a halt.

Total property sales dropped 12% in the first four months of the year, compared with a year ago. In response, the number of new construction projects fell 15% in April, while purchases of land fell by more than half.

China has already been suffering for several months from the chill wind blowing from Europe - its biggest export market, even bigger than the US.

China accounts for about a fifth of the world's total economic output and any slowdown may hamper a global recovery. 

At the same time, many of Asia's biggest and emerging economies are becoming increasingly reliant on China as a trading partner.

Spot the fault line

The overriding lesson from the calamities in the global financial mess was that the monitoring systems were inherently flawed.

Exotic trading products and programmes were created which like the Frankenstein monster quickly became uncontrollable. Risks were taken on an unprecedented scale and those supposedly monitoring risk were “asleep at the wheel”.

Recklessness was encouraged and became the default position. There were no checks and balances – it became for the participants in the so-called casino bankers a safe bet.

What’s the worst that could happen following a spectacular flame out? Maybe you lost your job and had to move to another bank or institution. Get it “right” and the rewards were sky high.

Whenever there is a bonus culture unless the supervisory systems are rigorous there will be potential for abuse.

It is quite ironic that some years after the onset of the crisis we now have the FSA calling for a clampdown on bank, building society+ insurance company staff being paid commission on sales.

This follows years of obvious laissez faire when for example it was quite normal for people to borrow based on self-certification of earnings, a recipe for disaster if ever there was one.

Whether through greed or stupidity there will always be people willing to take potentially catastrophic chances. What is required is that the senior management spend less time forecasting their own bonus and more time scrutinising the bottom line and understanding how results are achieved. Until this balance is in place disasters in the financial system will continue to occur.

 

 

A true and fair view of the state of the company’s affairs? - or smoke and mirrors?

  

During the recent failures in the global financial system one group of participants have remained largely unscathed for their part in the train wreck, the Auditors.

Now a report published by the Association of Chartered Certified Accountants (ACCA) says the accountancy profession will continue to lose credibility if it fails to convince its stakeholders and the public of its value.
The ACCA said the industry must take steps to rebuild confidence in the accountancy profession after the report found that only 55% of the public trusted their members.

 

Essentially there are many instances of conflict of interest such as taking on consultancy work for Clients and becoming too cosy with management teams.

 

It is all too easy for companies to bully the young staffers sent in to do the grunt work .For example what chance has a newly appointed auditor walking around a factory warehouse to adequate value stock? In reality they have to rely on the company for “valuations” and this can result in a totally inaccurate picture being presented.

 

The validity of a company’s accounts reflects the integrity of the company which is being audited. As was demonstrated with the banking crisis in Spain an unrealistic valuation of the property portfolio either through deviousness or sheer incompetence will ultimately have ddisatrous consequences.

Keeping them happy – keeping them loyal

External factors over which little control can be exerted continue to buffet all business sectors. However, every organisation does have a potentially winning weapon in their armoury namely the opportunity to offer excellent customer service.

 

In these difficult times everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

 

It is a paradox that as trading conditions become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

 

From the frustrations of automated answering with the intensely irritating muzak accompaniment, to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

One of the best examples of poor customer relations in provided by the banking community, complaints at embattled Barclays in the first half of this year were up 76% on the same period in 2011. Royal Bank of Scotland had 128% more complaints.

 

Little wonder that customers choose to vote with their feet.

 

Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued, not just “one of a number” or even worse a nuisance.

 

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

 

 

 

Food price inflation rears its ugly head

The recent hikes in price of key grains such as corn, wheat and soybean have been  described by the World Bank president as "historic".

The bank warned countries importing grains will be particularly vulnerable.

From June to July this year, corn and wheat prices each rose by 25% while soybean prices increased by 17%, the World Bank said. Only rice prices decreased - by 4%.

In the United States, the most severe, widespread drought in half a century has wreaked havoc on the corn and soybean crops while in Russia, Ukraine and Kazakhstan, wheat crops have been badly damaged.

The World Bank said that the use of corn to produce ethanol biofuel - which represents 40% of US corn production - was also a key factor in the sharp rise in the US maize price.

Overall, the World Bank's Food Price Index - which tracks the price of internationally traded food commodities - was six percent higher than in July of last year, and one percent over its previous peak, in February 2011.

Livestock and milk related products will rise in accordance with the higher costs of grain based feedstuffs. 

Food manufactures are caught in a vice; the buying pattern for many has been “just in time” reflecting the need to keep inventories as low as possible. However without the safeguard of a “buffer stock” they are now more than ever exposed to the harsh reality of having to “pay up” in order to secure the raw materials to keep their facilities in production. 

They will continue to face the problem of operating in the current economic background with buyers seeking to delay payment, renegotiate contracts etc.

 

 

The value of Customer service

 

The old adage the Customer is always right has come in for a fair amount of criticism recently and there are many times when plainly the Customer is in the wrong.

Notwithstanding it is of paramount importance to the sustained growth of any business that the Customer is kept onside.

The key requirement that any Customer wants is to feel that his/her business is valued and appreciated.

In business securing the deal is only the start of the process and the repeat order very often stands or falls with the after sales service (or lack thereof).
Simple but effective measures such as ensuring all contracts are performed efficiently and within due time and that any complaints are handled promptly and with courtesy will go a long way to building and maintaining long lasting relationships.

We have all encountered the difficult Customer with whom it would be easier not to deal. However, in these difficult times there are many who would willingly take this “problem” and revenue off of your hands.