Adversity can forge strong alliances

 

All too often the focus on the current economic background accentuates the negative. However one of the benefits emerging from the current business climate is the value that can be placed on a mutually beneficial Customer/ Supplier relationship.

 

As increasing numbers of business operate on a “just in time” inventory basis it is vital that a good understanding exists between supplier and Consumer.

 

In as much as a Supplier will be prepared to go the extra mile to ensure that his Buyer receives his goods on time and in good order so it behoves a Buyer to ensure that he pays as required and is not abusing the goodwill of his Supplier by “pinching” some extra period of credit.

 

If both parties work together in a professional and commercial manner then it will strengthen the relationship and both will emerge from the current difficult situation with a renewed confidence in each other and a better based business for the long term.

 

 

 

Diversification can be disastrous

 

Without doubt one of the most difficult challenges a business faces is diversification. Very often a company is faced with the dilemma of diminishing revenue returns and a tired business model which is either irrelevant or obsolete.

 

Diversification is seen as the solution to this dilemma. However, the mechanism for achieving this objective can be particularly difficult.

 

The first step is examining why the current business model is not working. This requires an honest appraisal from the Management in respect of their performance.

 

Then the areas of diversification have to be closely considered, very often people plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies.

 

Thirdly one should always respect geography it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

 

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already embattled balance sheet.

 

 

Commercial post mortem – could we have done better?

 

All too often in the course of commercial post mortems, the Management and Shareholders of troubled organisations end up asking “how did that go wrong?”

 

It is an incontrovertible fact that many companies fail to address problem issues early enough to avoid an oncoming crisis. When in reality the causes of the problems were all too readily visible.

The signs of a troubled business are always apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc

Instead of grasping these nettles, often the preferred option is to engage in a variety of exercises ranging from ill judged acquisitions (think RBS/ABN), totally pointless projects such as rebranding or the launch of another product range destined to fail for the above reasons.

Inevitably the harsh realities come into play but for many companies it is at that stage too late in the day.

 

 

Customer service – a question of balance

 

The old adage the customer is always right has come in for a fair amount of scrutiny 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 accompanying revenue off of your hands.

 

Dereliction of duty

The UK Parliamentary Standards Committee on Banking Standards have published their report with the indictment - "too many bankers, especially at the most senior levels, have operated in an environment with insufficient personal responsibility.

"Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds.

"Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame - the Murder on the Orient Express defence."

It is fair to say that had the focus been on the needs of customers and shareholders as opposed to the size and division of the bonus pot, we would not have witnessed the calamity which befell the Banking system with all the attendant fall out.

It is not unusual for senior management to be detached from the business they purport to run. From my own personal experience I have worked in trading environments where totally unrealistic profit targets have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

The most spectacular financial disasters have always followed a period of ostensibly highly successful trading.

In the desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is.

Meantime as a sop to the general wish to see retribution, some of those down the food chain are now being called to account. Former UBS and Citigroup trader Tom Hayes has been charged by the Serious Fraud Office (SFO) in connection with its investigation into the manipulation of Libor.

Mr Hayes, 33, has been charged with eight counts of conspiracy to defraud these are the SFO's first criminal charges related to the Libor rigging scandal.

However the true architects of the Banking crisis remain by and large unscathed.

 

 

Avoid becoming an unsecured Creditor

From a supplier’s perspective the most important part of any transaction is to ensure prompt and satisfactory receipt of funds for goods or services provided.

When a company oversteps the mark by abusing agreed payment terms they are in fact using the Seller’s tolerance as means of providing an unsecured overdraft.

Put simply would you exchange a promise from your Buyer for prompt settlement conditional on your company providing the upfront funds enabling them to do so?

In reality by continuing to supply a persistent late paying account this is exactly what is happening.

It is a question of commercial judgment. In these present trading conditions business is hard won but if the transaction carries a disproportionate risk then it isn’t really worthwhile.

The time and effort spent chasing a recalcitrant account could be better spent elsewhere.

 

Effective management 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.