Macho management style – rather passé

 
The media like nothing better than to bombard us with negative news in respect of job losses, scale of personal and government indebtedness etc.

A case in point is the recent reporting that cereal firm Weetabix are being consulted over possible cuts to pay and working hours.

Management are planning a 10% cut in production staff wages and a wage freeze for other staff.

The company said it needed to be able to "adapt to meet the changing needs of today's modern families".

From interaction with companies across a broad spectrum of business there is no doubt that negative news is having a significant impact on morale and therefore impacting bottom line results.

It is important that managers take on board the effect of these outside inputs on staff and wherever possible reduce the "fear factor".

All too often the default position from management style is to rely on pressurising people to attain often unrealistic targets. Far from improving performance it has the opposite effect.

It is time for a rethink - instead of relying on the stick approach, how about hitting with a carrot?

 

The person on the spot is baffled, whereas the onlooker sees clearly

 
Based upon my experience across a variety of sectors and businesses one observation holds true – whilst some companies are doomed to fail there are many whose survival and future profitability could be secured from a fresh input.

Many companies fail to adapt to changing developments in the market and find out too late that their business model is tired and obsolete.

It is particularly hard for owners of SME’s to change direction. When you are personally involved it is not always easy to pursue a new path or take appropriate remedial action.

This is where an “outsider” can be of assistance – an objective appraisal can  often mean the difference between merely drifting as opposed to decisively moving forward.

 

Who's taking advantage?

 

There is a growing tendency on the part of companies to actively delay payment to their suppliers.

Slow payers monopolise profits and starve creditors of much needed cash which makes policing of receivables critical.

When a customer exceeds the agreed payment terms, they are in reality using the supplier as an alternate (unsecured overdraft).

Left unchecked this situation can easily spiral out of control so that in a worst case scenario the supplier is forced to keep “supporting” the errant customer for fear of realising a bad debt.

Think of the parallel to the Greek bail out situation – it is a slippery path.

Take a long hard look at your accounts receivable – are you happy to see 30 days drift into 60 and beyond? Have you considered the damage that is being done to your company’s financial position?

Ask yourself “who is getting a free ride?”

It may well be that you conclude that an overall appraisal of your business is overdue -this is where I can help.

Why not get in touch with me at gordon.blackburn1@btinternet.com and I’ll help you take back control.

 

Up close and personal

Business practises have changed markedly in recent years.

Although many operations are completed electronically in this virtual world we should never forget that essentially commerce is about people trading together.

The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot be achieved solely via a computer terminal.

It makes sound economic sense to foster and maintain good customer relationships.

It has been determined that it costs up to five times as much to win a new customer as it does to retain one.

There is an old adage “know your customer,” this dictate has never been more important than in these competitive times.

Food price inflation

 

Various inflationary factors are pushing up the costs of food.

Following drought conditions in Brazil Coffee prices have risen by 70%, in the US Pork prices are up 40% in the past 12 months. Similarly Fruit has risen by 10% and Vegetables 5% over that period. In the UK this is translating into an annualised rate of food price inflation of 3.8%.

By 2018 it is estimated that the average UK Household will be paying an extra £850 per year for food. 

As affluent consumers in China and India demand a more Western style diet we are seeing the effects on the price of meat and other foodstuffs.

In the longer term the growing world population now around 7.25 billion is forecast to rise to 9.6 billion by 2050 further fuelling demand.

Food manufacturers are caught in a vice; the buying pattern for many continues to be “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.

At the same time suppliers will continue to face the problems of operating in the current economic background with buyers seeking to delay payment, renegotiate contracts etc.

The era of cheap food has long passed and with consumers still having to closely watch their expenditure companies will now more than ever be required to ensure they are operating at optimum efficiency.

 

Cheap food – who foots the bill?

In a market where prices are squeezed to the absolute and in order to protect margins suspect practices and questionable ethics will inevitably come to the fore.

Some operators will attempt to cut corners whilst the purchasing policies of local councils can also be blamed for driving down food quality with cheap food contracts for schools and hospitals.

The current economic reality will continue to underpin the demand for cheap food but in satisfying this demand as was evidenced in last year’s horse meat scandal there will be accompanying risks.

For supermarkets focussing on market share food prices must be kept down, at all costs. But in the case of farming it is such a long cycle and there is little account taken of retrospective costs for the producer.

Looking back 25 years ago, British people probably spent about 22% of their disposable income on food.

Now the spend is roughly between 4 and 8%, so food has actually become cheaper.

The reality is that the 'bog-offs' - the buy-one-get-one-free deals are not actually sponsored by supermarkets. They are paid for by the producer who has to agree to them under tight terms and conditions.

 

Greek recovery a slow and painful process

 

Eurozone ministers have signed off the next 8.3bn euro (£6.8bn; $11.4bn) instalment of Greece's bailout.

A first tranche of 6.3bn euros will be paid at the end of April, with two more payments of 1bn euros being made in June and July

The latest bailout announcement comes amid renewed optimism about Greece's economic recovery.

Greece has wiped out its deficit, except for interest on its debt, and is forecast to exit six years of recession this year.

The Greek government hopes the progress will spur the Eurozone to consider debt relief in the coming months, by lowering the interest rate on its loans or extending the repayment period.

Whilst the recovery continues there has been a very high social cost. Greeks have lost about one third of their disposable income over the past 4 years. Unemployment is currently standing at 27% with many people in Greece seeing a decline in their living standards due to the effects of spending cuts and austerity measures implemented under the bailout terms. In the past few weeks a further 11,000 public sector workers were sacked. 

There is serious pain accompanying the economic gain.