Archive for the ‘Business’ Category
Roundtable: Working Capital in the Face of a Financial Crisis
Jamie Liddell asked:
At the Working Capital Management Forum 2008, held in London on October 23-24 at the height of the financial turmoil, SSON convened a roundtable debate to discuss the impact of the crisis on working capital practices – and on organizations in general. Hosted by online editor Jamie Liddell and attended by speakers and delegates to the conference, the debate was lively, wide-ranging and forthright, both painting a gloomy picture for many sectors and offering some suggestions for ways companies can limit at least some of the damage.
Attending were:
Simon Graham
Collection Sales
Atradius
Annie Guerard
former Finance Director
Diesel
Gavin Jones
VP, Treasury
Ahold Finance Group
Stephen North
Senior Procurement Manager
Royal Mail
Stuart Reynolds
Project Manager
Sainsburys
Brian Shanahan
Project Director
REL
SSON: Will the credit crunch and consequent recession lead to a fundamental rethinking of how to manage working capital – or is it more a question of doing the same things better?
Brian Shanahan: I’ve got some very strong views on that. There is an element, certainly, where some very simple things just need to be done well, and that was always the case, and that’s not changed. What’s changed is the urgency. Look at the classic case: “if it’s not on the first seven priorities of a business, it doesn’t get done”. You’re going to find that for a lot of businesses, working capital may always have been an issue to some extent, but it’s never been a priority; therefore nothing’s ever been done about it. That’s going to change. Why? Because margin pressures will continually increase; if you look at anybody who’s in the public sector, capital investment is going to become very difficult; for everyone in the commercial sector the idea that “I’ll just phone up the bank and get more money” has virtually stopped at the moment; anyone who’s got banking covenants that are in any way linked to asset valuations is going to be worrying himself sick right now, because December 31st is going to be the next time the covenants are going to get measured for most people. So we are seeing already in the marketplace people scrambling like lemmings looking for cash anyway they can.
But what it is going to do is refocus those businesses that did not have working capital as a priority over the last four or five years because of cheap money, to come back and say “we need to go and look at those simple, fundamental processes, those things that are intuitively right to do, and make sure we string it all together and actually do it better than we have done before”. We’re not just talking about supply chain and, specifically, purchasing, but also the bit about “where am I sourcing from? What are the lead times? What’s my investment in that working process that I’m now inventing?” And also on the customer side – because although there have been great improvements, not only in the UK but across all of Europe, in customer collections, it’s getting tougher out there. It really is getting tougher. And we’re going to see things getting worse before they get better.
Stephen North: What do you think the future is for some of the smaller businesses that we all deal with?
Annie Guerard: They will go down. I think Christmas is going to be a bloodbath. My experience is in retail; there are some business models that are based on cheap credit and because credit is going to be at a premium, those businesses – unless they change their business model – will not survive, because now the banks will have to rethink the way they operate. For example, a furniture company that only sells at sale time every four months, offering credit lines like “buy now, pay in 2010” will vanish because that’s not a business model that works – not that it was never working before, but money was cheap…
Brian Shanahan: A company like this is actually a financing business more than a retailer, because if you walk in there you can’t pick something up and say “I’ll have that today” – it’s all six to eight weeks. They’re make-to-order; they do so many things that are absolutely spot on, but actually they’re a financing business. It’s finance arbitrage.
Annie Guerard: We need to go back to basics; every company needs to find the right basic model where debtors should be on average, say, 45 days, and you can cope with suppliers if they’re between brackets – you have to have brackets as opposed to one guideline of KPIs. As people develop their business model, they need to develop their cashflow model – as in “this is what we need to do to survive” – and have a buffer. Now that takes finance people, not just an entrepreneur. I think this is raising a different type of finance animal to work in cooperation with the entrepreneurs.
Brian Shanahan: It’s requiring people who have a much more holistic knowledge of business than just the functional aspects.
Simon Graham: I was going to say with regards to the recapitalisation of the banks, the UK government have stipulated that they want the banks to make it easier and revert back to the lending policies of two or three years ago. Do you think that’s actually going to materialise?
Gavin Jones: Certainly not before the year-end. When you speak with the banks – and I do on a daily basis – they are so focused on their balance sheets for their year-end position, I can’t see – whatever pressure from either the UK or other government bodies across Europe, or in the US – that they’re going to want to kickstart their lending, particularly back to, say, the 2007 levels as has been suggested here in the UK. They’re just not going to want to do it. And you generally find that at quarter-end – or even in some cases at month-end – that banks don’t want to lend unless they have to over their reporting periods.
Brian Shanahan: The key thing for year-end this time is their lending ratios. Most of them are going to bust the hell out of them all, so they’re very heavily retrenching, basically making emergency repairs to their balance sheets. When you look at the drop in share prices, this is largely being driven by hedge funds at the moment who are desperately trying to make margin calls and that’s why they’re selling everything. Everything. Just for short-term cash. It’s panic.
Gavin Jones: Certainly when I speak to banks they look at the statements that have been made about returning lending to 2007 levels and they’re saying “it’s going to take time for us to do that; it’s not going to be an overnight thing. Just because we’ve got money from the government, doesn’t necessarily free up balance sheets.” It’s also a mindset now within banks; some of them have been badly burned – largely because of some of their own poor risk-management decisions – and it’s almost a complete swing to the other way now, becoming totally conservative.
Stephen North: Do you think that across all organisations against this background that there will be more pressure put on procurement within each organisation to make savings and to help the organisation work more efficiently – almost becoming commercial problem-solvers?
Brian Shanahan: My own opinion? I think the knee-jerk reaction is “what can I do to cut costs?” whether it be through procurement, headcount; that is always the knee-jerk reaction of today’s generation of business leaders, and unfortunately in the particular environment we’re in right now that is really just putting a small dent in the car.
Annie Guerard: And it’s not the solution.
Brian Shanahan: It’s not the solution at all.
Annie Guerard: When our business started to decline in terms of sales there was great pressure on me to find cost savings. Now, you have some cost savings that take a long time to materialise because it’s about business reengineering, and process reengineering. You can’t deliver them in the short-term like your boss is pressurising you to do. So what do you do? You go to your suppliers. Which again is not the solution. Also, if you start cutting headcount, you create a global problem of more unemployment, and raising taxes and so on. What we’re going into now will be a macroeconomic situation of less people working, with less resources, having to deliver to unreasonable targets, to fund the unemployed. At a macro level this is quite scary. What we should be doing – without wanting to be Keynesian – is refuelling the economy and actually encouraging companies to become more lean but in a constructive way. There are always ways to achieve cost-savings.
Brian Shanahan: I think that’s already happening. Governments worldwide – including, let’s face it, the neo-conservative government in the US – is just throwing money at this in the billions. And what I would predict over a 12-to-24-month period is that you’ll see the toxic debt that’s sitting out there amongst many of the institutions’ hedge fund slowly transferring into government debt. We’re going to see an enormous pile of government debt sitting out there in about two years’ time. It is Keynesian, and it is necessary, or the whole thing’s going to collapse.
But the follow-on from that – and to get back to working capital – what this is going to do long-term is drive up the cost of money, as more government bonds are issued – and this is one of the reasons why money has been cheap in recent years, because the biggest governments in the world, with the exception of the US, have been issuing very low levels of paper debt, historically. That’s going to change right around. The cost of money goes up; therefore there’s a simple mathematical equation between “do I take the cost-reduction or do I go after the cash?” Quite naturally the balance of that is going to change, and it’s going to change in favour of cash.
SSON: Moving on: might there be opportunities emerging from the downturn – increased mandate for change programmes, greater flexibility and value-add on the part of outsourcing vendors, for example – and if so how can organisations best position themselves to take advantage of these opportunities?
Brian Shanahan: I know what I’m seeing: we’re a working capital consultancy, and we’ve never been busier in our history. Never. I’m seeing some of the strangest things I’ve ever seen; I’m seeing industries like pharmaceuticals – where companies famously don’t care about working capital because they make so much money – these guys are focusing so hard now. Not just one of them: all of them. We’re looking at industries where they have huge cashflow deficits caused by asset-valuation drops, pension-fund requirements. This year-end is going to be huge – not just in terms of banking ratios, but for companies with pension funds with, now, the accounting standards that are there: these companies are going to be reporting huge shortfalls in pension-fund assets. It’s going to be a massive, massive problem…
But I would predict that once they get past the year-end – and there’s going to be some very, very painful bruising in the New Year when people have to report whatever it is they’ve got to report – then that will be the time when the dust settles and a lot of people will be out there saying “right: I’ve gone through the panic and I did the best I could; what am I going to have to do to make sure we never go through this again?” I think Quarter 1 2009 is a time when there’s going to be a lot of reflection going on, after the dust is settled. And it doesn’t matter what sector you’re in: even if you’re in a cash-rich public-sector business, the one thing you rely on government funding for is the capital investment.
Simon Graham: Is it over-panic?
Brian Shanahan: It’s a massive, massive overreaction.
Simon Graham: You don’t think it’s justified?
Brian Shanahan: Well, in some sectors it is. Take retail. I’ve just been working for a consumer electronics firm; I’ve just been in China. The way the cycle works is, their big customers in North America and Europe are placing their orders over the summer, with probably the last few orders coming in late August. They then go into manufacture in China, and they’re probably shipping already for Christmas. There are a number of major retailers out there – not in the foods market, but in the dry goods market - who are desperately trying to cancel orders at the moment. And these people aren’t at the high end, the Sony end of the consumer electronics market; they’re very much at the cheap end. But people aren’t just switching to cheaper alternatives; they’re stopping that kind of purchase altogether. You’re going to see some real blood on the floor.
Stephen North: From a retail perspective, this is going to be the absolute worst Christmas that retailers are going to have, without a doubt.
Annie Guerard: We saw it from 2003. We saw it in our brand. A slump in like-for-like. It was very difficult to convey to the group that when we looked at the fact we had ten years double-digit like-for-like and then started to fall into single-digits, you didn’t have to be an expert to see that there was a pattern. The problem with retail is that when you have this pattern you’ve stocked on an impetus of previous like-for-like. It’s not even your inventory: it’s your orders. It’s your forward commitments. You have an 18-month cycle in retail from conception to delivery in the shop, so you’re always 18 months behind in your ordering. This is how long it takes. But what the business is seeing is that you can’t commit to that long any more. You need to find a supply chain that allows you to have an offer to buy which instead of committing 90 per cent up front you commit 60 or 70 per cent and then the rest is repeats.
Brian Shanahan: The constraint has changed as well; especially in the electronics market it used to be that for your really cheap product you went to the Far East, with a long lead time, but cheap. Then if you had a fast need you had a secondary supplier somewhere like Hungary or Turkey, slightly more expensive but they can get it to you quicker. So you don’t make the same kind of margin, but you can top up: you’ve solved the old story that if it’s not on the shelf you can’t sell it. Now though big players have come into the market and they’ve driven the price down so much that there’s huge pressure not to use those secondary suppliers because the margin pressure is so hard that if you put the product made in Turkey, for example, on the shelf, you can’t possibly sell it – and this applies to fashion products as well – against products coming from Bangladesh or Burma.
Stephen North: Do you think though that the lower-end retailers will have a good Christmas because people will still be buying but spending less?
Annie Guerard: Yes, I think so.
Stuart Reynolds: Looking at the market at the moment, we’re trying to push from branded to non-branded – so Sainsbury’s own-brand. We believe that’s a really good move because you still get the quality but you save X per cent. There’s a lot of change in the way that we’re marketing.
Brian Shanahan: Going back to the original question about opportunities in the crisis: look at what Philip Green’s doing for example. There are opportunities here: the asset-valuation of companies is ridiculous. I could almost buy General Motors for $200 million. If you are an organisation with bundles and bundles of cash, and you don’t have these constraints – a minority of companies, but some of them – there are bargains to be had.
Stephen North: It’s like the housing market isn’t it?
Gavin Jones: Certainly in the US – we’re very fortunate because we sit on a large pile of cash as a result of a divestment programme from last year – we think there will be opportunities to take out individual stores from a competitor, or some of the smaller family-run operations that don’t have the same access to capital that they once did. But mostly it’ll be those like Philip Green who can profit; the credit for acquisitions that was there just isn’t going to be available now. It’ll either be share-based deals or cash deals for those organisations that have cash on their books.
Brian Shanahan: One of the things that’s very interesting at the moment is that if you look at the private equity market, they stopped buying stuff months and months ago, but if you look at the companies they have bought and taken private, often they’ve taken a company and split it up, and different organisations have taken different bits, and now as individual parts they don’t add up into sustainable companies because they don’t have full infrastructures. So they have to build a procurement function, build the finance function, get systems in, build or rent a head office, all that kind of stuff.
One of the things we’re seeing is that where once the private equity companies were getting their acquisitions to pay for this kind of investment themselves, now it’s the private equity companies paying directly for these improvements because of the capital constraints – capital for investment, working capital, margin pressure – all hitting at the same time. So the private equity guys are not only drained because they can’t get access to cash; the profits they’re built on they’re now spending on companies which there’s usually a three-in-four chance won’t make it from a profitability point of view.
SSON: Let’s move away to a more back-office perspective. What about companies that don’t have these great cash reserves, that are going to have to sink or swim over the next year, two years; what opportunities might there be within those organisations for actions which can protect them?
Annie Guerard: Going back to basics.
Gavin Jones: I think any change programmes will have to demonstrate cost savings. You’re not going to get away with a soft business case; you’ll have to demonstrate the real hard benefit of doing any project. We’re very big on ROI; sometimes in a bricks-and-mortar retail business the ROI isn’t as good as it should be, and now we’re going through an exercise across the company really identifying store formats asking, are they really generating the right kind of sales per square foot for the kind of investment we’re making. Do we really need to move refrigeration from here to here because it’s going to cost us a million dollar to do that; can we just leave it where it is and design the store in a slightly different way? I think there will be opportunities – subject to the resources becoming available, but you’ll definitely have to show very real benefits.
Stephen North: I’m seeing that also; I’m right in the middle of demand planning for next year, and a lot of the stuff we want to do around systems involve benefits around being slicker, having a better process, and there isn’t a really strong case on ROI so that’s a really tough one to get through right now. Before, it was fine; not now.
Brian Shanahan: I would add to that – talking about those change programmes and the difficulty of showing those hard benefits – one of the things that’s already happening in the consultancy market is the vast majority of the big players are hurting badly right now, because the problem is they’ve spent years and years borrowing your watch to tell you the time… But certainly in the consultancy market unless you’re able to show a real hard ROI it’s just not going to happen.
Stephen North: Fewer change programmes, less work for the big consultancies.
Annie Guerard: I’d like to bring in something that is very close to my heart. You are always under pressure to deliver profitability, higher ROI – which can be done, and there’s a very easy way you can do it: under-invest. You can get to a stage where you are showing great return on sales, and have a rocketing ROCE, but you’re under-investing in key things around systems and infrastructure. Often, profits go back to the shareholder, or go back into acquisition – but are never put back timely into the business where it’s most needed in the long term. So then when you most need it, there’s no access to the capital which can assist in stability in the long-term – and that’s why using KPIs can be so dangerous, because you get a tick and a bonus because you’ve hit x per cent ROI, but you haven’t indicated the actual solidity of the business.
Brian Shanahan: I think the opposite is also true in terms of KPIs; I use a phrase sometimes, “year-end heroics”. Everyone has their targets, be they sales targets, revenue targets, margin targets and increasingly working capital targets. But if I haven’t made the real change happen what am I going to do on December 15th? I’m just going to stop paying everybody. So the people at the top end of that cash chain will look ok, but a lot of people in the middle order are going to be hurt quite badly because those big monies that traditionally would have been used, for example, on Christmas Eve to pay salaries just aren’t there.
Annie Guerard: As well, there is often quarterly rent to be paid on the 23rd of December or thereabouts – at least in the UK. Christmas will be especially tough because if the like-for-like sales don’t hit the spot, people won’t be able to pay their rent. A big company went bust last year because it couldn’t renegotiate with its landlord to pay rent monthly up-front rather than quarterly, which would have eased their cashflow substantially. And that kind of change in business practice would be a very positive move the industry could make.
Gavin Jones: I think that highlights the point that there is going to have to be a change in mindset, in terms of if you’re a landlord of a retail outlet – or whatever it is – and accepting the fact that traditionally you’ve been paid upfront on a quarterly basis, and working with your tenant to renegotiate these terms, you’d rather move payment terms than have the store go dark because then you’re going to find it difficult to rent again especially in this climate. And particularly if that landlord has a group of properties in a particular location, one going dark – ie, closing – is not going to be good for footfall into the other properties. And the landlord’s need to pay off whatever financing he’s got for his properties leads us to the need for a change of mindset among the banks.
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At the Working Capital Management Forum 2008, held in London on October 23-24 at the height of the financial turmoil, SSON convened a roundtable debate to discuss the impact of the crisis on working capital practices – and on organizations in general. Hosted by online editor Jamie Liddell and attended by speakers and delegates to the conference, the debate was lively, wide-ranging and forthright, both painting a gloomy picture for many sectors and offering some suggestions for ways companies can limit at least some of the damage.
Attending were:
Simon Graham
Collection Sales
Atradius
Annie Guerard
former Finance Director
Diesel
Gavin Jones
VP, Treasury
Ahold Finance Group
Stephen North
Senior Procurement Manager
Royal Mail
Stuart Reynolds
Project Manager
Sainsburys
Brian Shanahan
Project Director
REL
SSON: Will the credit crunch and consequent recession lead to a fundamental rethinking of how to manage working capital – or is it more a question of doing the same things better?
Brian Shanahan: I’ve got some very strong views on that. There is an element, certainly, where some very simple things just need to be done well, and that was always the case, and that’s not changed. What’s changed is the urgency. Look at the classic case: “if it’s not on the first seven priorities of a business, it doesn’t get done”. You’re going to find that for a lot of businesses, working capital may always have been an issue to some extent, but it’s never been a priority; therefore nothing’s ever been done about it. That’s going to change. Why? Because margin pressures will continually increase; if you look at anybody who’s in the public sector, capital investment is going to become very difficult; for everyone in the commercial sector the idea that “I’ll just phone up the bank and get more money” has virtually stopped at the moment; anyone who’s got banking covenants that are in any way linked to asset valuations is going to be worrying himself sick right now, because December 31st is going to be the next time the covenants are going to get measured for most people. So we are seeing already in the marketplace people scrambling like lemmings looking for cash anyway they can.
But what it is going to do is refocus those businesses that did not have working capital as a priority over the last four or five years because of cheap money, to come back and say “we need to go and look at those simple, fundamental processes, those things that are intuitively right to do, and make sure we string it all together and actually do it better than we have done before”. We’re not just talking about supply chain and, specifically, purchasing, but also the bit about “where am I sourcing from? What are the lead times? What’s my investment in that working process that I’m now inventing?” And also on the customer side – because although there have been great improvements, not only in the UK but across all of Europe, in customer collections, it’s getting tougher out there. It really is getting tougher. And we’re going to see things getting worse before they get better.
Stephen North: What do you think the future is for some of the smaller businesses that we all deal with?
Annie Guerard: They will go down. I think Christmas is going to be a bloodbath. My experience is in retail; there are some business models that are based on cheap credit and because credit is going to be at a premium, those businesses – unless they change their business model – will not survive, because now the banks will have to rethink the way they operate. For example, a furniture company that only sells at sale time every four months, offering credit lines like “buy now, pay in 2010” will vanish because that’s not a business model that works – not that it was never working before, but money was cheap…
Brian Shanahan: A company like this is actually a financing business more than a retailer, because if you walk in there you can’t pick something up and say “I’ll have that today” – it’s all six to eight weeks. They’re make-to-order; they do so many things that are absolutely spot on, but actually they’re a financing business. It’s finance arbitrage.
Annie Guerard: We need to go back to basics; every company needs to find the right basic model where debtors should be on average, say, 45 days, and you can cope with suppliers if they’re between brackets – you have to have brackets as opposed to one guideline of KPIs. As people develop their business model, they need to develop their cashflow model – as in “this is what we need to do to survive” – and have a buffer. Now that takes finance people, not just an entrepreneur. I think this is raising a different type of finance animal to work in cooperation with the entrepreneurs.
Brian Shanahan: It’s requiring people who have a much more holistic knowledge of business than just the functional aspects.
Simon Graham: I was going to say with regards to the recapitalisation of the banks, the UK government have stipulated that they want the banks to make it easier and revert back to the lending policies of two or three years ago. Do you think that’s actually going to materialise?
Gavin Jones: Certainly not before the year-end. When you speak with the banks – and I do on a daily basis – they are so focused on their balance sheets for their year-end position, I can’t see – whatever pressure from either the UK or other government bodies across Europe, or in the US – that they’re going to want to kickstart their lending, particularly back to, say, the 2007 levels as has been suggested here in the UK. They’re just not going to want to do it. And you generally find that at quarter-end – or even in some cases at month-end – that banks don’t want to lend unless they have to over their reporting periods.
Brian Shanahan: The key thing for year-end this time is their lending ratios. Most of them are going to bust the hell out of them all, so they’re very heavily retrenching, basically making emergency repairs to their balance sheets. When you look at the drop in share prices, this is largely being driven by hedge funds at the moment who are desperately trying to make margin calls and that’s why they’re selling everything. Everything. Just for short-term cash. It’s panic.
Gavin Jones: Certainly when I speak to banks they look at the statements that have been made about returning lending to 2007 levels and they’re saying “it’s going to take time for us to do that; it’s not going to be an overnight thing. Just because we’ve got money from the government, doesn’t necessarily free up balance sheets.” It’s also a mindset now within banks; some of them have been badly burned – largely because of some of their own poor risk-management decisions – and it’s almost a complete swing to the other way now, becoming totally conservative.
Stephen North: Do you think that across all organisations against this background that there will be more pressure put on procurement within each organisation to make savings and to help the organisation work more efficiently – almost becoming commercial problem-solvers?
Brian Shanahan: My own opinion? I think the knee-jerk reaction is “what can I do to cut costs?” whether it be through procurement, headcount; that is always the knee-jerk reaction of today’s generation of business leaders, and unfortunately in the particular environment we’re in right now that is really just putting a small dent in the car.
Annie Guerard: And it’s not the solution.
Brian Shanahan: It’s not the solution at all.
Annie Guerard: When our business started to decline in terms of sales there was great pressure on me to find cost savings. Now, you have some cost savings that take a long time to materialise because it’s about business reengineering, and process reengineering. You can’t deliver them in the short-term like your boss is pressurising you to do. So what do you do? You go to your suppliers. Which again is not the solution. Also, if you start cutting headcount, you create a global problem of more unemployment, and raising taxes and so on. What we’re going into now will be a macroeconomic situation of less people working, with less resources, having to deliver to unreasonable targets, to fund the unemployed. At a macro level this is quite scary. What we should be doing – without wanting to be Keynesian – is refuelling the economy and actually encouraging companies to become more lean but in a constructive way. There are always ways to achieve cost-savings.
Brian Shanahan: I think that’s already happening. Governments worldwide – including, let’s face it, the neo-conservative government in the US – is just throwing money at this in the billions. And what I would predict over a 12-to-24-month period is that you’ll see the toxic debt that’s sitting out there amongst many of the institutions’ hedge fund slowly transferring into government debt. We’re going to see an enormous pile of government debt sitting out there in about two years’ time. It is Keynesian, and it is necessary, or the whole thing’s going to collapse.
But the follow-on from that – and to get back to working capital – what this is going to do long-term is drive up the cost of money, as more government bonds are issued – and this is one of the reasons why money has been cheap in recent years, because the biggest governments in the world, with the exception of the US, have been issuing very low levels of paper debt, historically. That’s going to change right around. The cost of money goes up; therefore there’s a simple mathematical equation between “do I take the cost-reduction or do I go after the cash?” Quite naturally the balance of that is going to change, and it’s going to change in favour of cash.
SSON: Moving on: might there be opportunities emerging from the downturn – increased mandate for change programmes, greater flexibility and value-add on the part of outsourcing vendors, for example – and if so how can organisations best position themselves to take advantage of these opportunities?
Brian Shanahan: I know what I’m seeing: we’re a working capital consultancy, and we’ve never been busier in our history. Never. I’m seeing some of the strangest things I’ve ever seen; I’m seeing industries like pharmaceuticals – where companies famously don’t care about working capital because they make so much money – these guys are focusing so hard now. Not just one of them: all of them. We’re looking at industries where they have huge cashflow deficits caused by asset-valuation drops, pension-fund requirements. This year-end is going to be huge – not just in terms of banking ratios, but for companies with pension funds with, now, the accounting standards that are there: these companies are going to be reporting huge shortfalls in pension-fund assets. It’s going to be a massive, massive problem…
But I would predict that once they get past the year-end – and there’s going to be some very, very painful bruising in the New Year when people have to report whatever it is they’ve got to report – then that will be the time when the dust settles and a lot of people will be out there saying “right: I’ve gone through the panic and I did the best I could; what am I going to have to do to make sure we never go through this again?” I think Quarter 1 2009 is a time when there’s going to be a lot of reflection going on, after the dust is settled. And it doesn’t matter what sector you’re in: even if you’re in a cash-rich public-sector business, the one thing you rely on government funding for is the capital investment.
Simon Graham: Is it over-panic?
Brian Shanahan: It’s a massive, massive overreaction.
Simon Graham: You don’t think it’s justified?
Brian Shanahan: Well, in some sectors it is. Take retail. I’ve just been working for a consumer electronics firm; I’ve just been in China. The way the cycle works is, their big customers in North America and Europe are placing their orders over the summer, with probably the last few orders coming in late August. They then go into manufacture in China, and they’re probably shipping already for Christmas. There are a number of major retailers out there – not in the foods market, but in the dry goods market - who are desperately trying to cancel orders at the moment. And these people aren’t at the high end, the Sony end of the consumer electronics market; they’re very much at the cheap end. But people aren’t just switching to cheaper alternatives; they’re stopping that kind of purchase altogether. You’re going to see some real blood on the floor.
Stephen North: From a retail perspective, this is going to be the absolute worst Christmas that retailers are going to have, without a doubt.
Annie Guerard: We saw it from 2003. We saw it in our brand. A slump in like-for-like. It was very difficult to convey to the group that when we looked at the fact we had ten years double-digit like-for-like and then started to fall into single-digits, you didn’t have to be an expert to see that there was a pattern. The problem with retail is that when you have this pattern you’ve stocked on an impetus of previous like-for-like. It’s not even your inventory: it’s your orders. It’s your forward commitments. You have an 18-month cycle in retail from conception to delivery in the shop, so you’re always 18 months behind in your ordering. This is how long it takes. But what the business is seeing is that you can’t commit to that long any more. You need to find a supply chain that allows you to have an offer to buy which instead of committing 90 per cent up front you commit 60 or 70 per cent and then the rest is repeats.
Brian Shanahan: The constraint has changed as well; especially in the electronics market it used to be that for your really cheap product you went to the Far East, with a long lead time, but cheap. Then if you had a fast need you had a secondary supplier somewhere like Hungary or Turkey, slightly more expensive but they can get it to you quicker. So you don’t make the same kind of margin, but you can top up: you’ve solved the old story that if it’s not on the shelf you can’t sell it. Now though big players have come into the market and they’ve driven the price down so much that there’s huge pressure not to use those secondary suppliers because the margin pressure is so hard that if you put the product made in Turkey, for example, on the shelf, you can’t possibly sell it – and this applies to fashion products as well – against products coming from Bangladesh or Burma.
Stephen North: Do you think though that the lower-end retailers will have a good Christmas because people will still be buying but spending less?
Annie Guerard: Yes, I think so.
Stuart Reynolds: Looking at the market at the moment, we’re trying to push from branded to non-branded – so Sainsbury’s own-brand. We believe that’s a really good move because you still get the quality but you save X per cent. There’s a lot of change in the way that we’re marketing.
Brian Shanahan: Going back to the original question about opportunities in the crisis: look at what Philip Green’s doing for example. There are opportunities here: the asset-valuation of companies is ridiculous. I could almost buy General Motors for $200 million. If you are an organisation with bundles and bundles of cash, and you don’t have these constraints – a minority of companies, but some of them – there are bargains to be had.
Stephen North: It’s like the housing market isn’t it?
Gavin Jones: Certainly in the US – we’re very fortunate because we sit on a large pile of cash as a result of a divestment programme from last year – we think there will be opportunities to take out individual stores from a competitor, or some of the smaller family-run operations that don’t have the same access to capital that they once did. But mostly it’ll be those like Philip Green who can profit; the credit for acquisitions that was there just isn’t going to be available now. It’ll either be share-based deals or cash deals for those organisations that have cash on their books.
Brian Shanahan: One of the things that’s very interesting at the moment is that if you look at the private equity market, they stopped buying stuff months and months ago, but if you look at the companies they have bought and taken private, often they’ve taken a company and split it up, and different organisations have taken different bits, and now as individual parts they don’t add up into sustainable companies because they don’t have full infrastructures. So they have to build a procurement function, build the finance function, get systems in, build or rent a head office, all that kind of stuff.
One of the things we’re seeing is that where once the private equity companies were getting their acquisitions to pay for this kind of investment themselves, now it’s the private equity companies paying directly for these improvements because of the capital constraints – capital for investment, working capital, margin pressure – all hitting at the same time. So the private equity guys are not only drained because they can’t get access to cash; the profits they’re built on they’re now spending on companies which there’s usually a three-in-four chance won’t make it from a profitability point of view.
SSON: Let’s move away to a more back-office perspective. What about companies that don’t have these great cash reserves, that are going to have to sink or swim over the next year, two years; what opportunities might there be within those organisations for actions which can protect them?
Annie Guerard: Going back to basics.
Gavin Jones: I think any change programmes will have to demonstrate cost savings. You’re not going to get away with a soft business case; you’ll have to demonstrate the real hard benefit of doing any project. We’re very big on ROI; sometimes in a bricks-and-mortar retail business the ROI isn’t as good as it should be, and now we’re going through an exercise across the company really identifying store formats asking, are they really generating the right kind of sales per square foot for the kind of investment we’re making. Do we really need to move refrigeration from here to here because it’s going to cost us a million dollar to do that; can we just leave it where it is and design the store in a slightly different way? I think there will be opportunities – subject to the resources becoming available, but you’ll definitely have to show very real benefits.
Stephen North: I’m seeing that also; I’m right in the middle of demand planning for next year, and a lot of the stuff we want to do around systems involve benefits around being slicker, having a better process, and there isn’t a really strong case on ROI so that’s a really tough one to get through right now. Before, it was fine; not now.
Brian Shanahan: I would add to that – talking about those change programmes and the difficulty of showing those hard benefits – one of the things that’s already happening in the consultancy market is the vast majority of the big players are hurting badly right now, because the problem is they’ve spent years and years borrowing your watch to tell you the time… But certainly in the consultancy market unless you’re able to show a real hard ROI it’s just not going to happen.
Stephen North: Fewer change programmes, less work for the big consultancies.
Annie Guerard: I’d like to bring in something that is very close to my heart. You are always under pressure to deliver profitability, higher ROI – which can be done, and there’s a very easy way you can do it: under-invest. You can get to a stage where you are showing great return on sales, and have a rocketing ROCE, but you’re under-investing in key things around systems and infrastructure. Often, profits go back to the shareholder, or go back into acquisition – but are never put back timely into the business where it’s most needed in the long term. So then when you most need it, there’s no access to the capital which can assist in stability in the long-term – and that’s why using KPIs can be so dangerous, because you get a tick and a bonus because you’ve hit x per cent ROI, but you haven’t indicated the actual solidity of the business.
Brian Shanahan: I think the opposite is also true in terms of KPIs; I use a phrase sometimes, “year-end heroics”. Everyone has their targets, be they sales targets, revenue targets, margin targets and increasingly working capital targets. But if I haven’t made the real change happen what am I going to do on December 15th? I’m just going to stop paying everybody. So the people at the top end of that cash chain will look ok, but a lot of people in the middle order are going to be hurt quite badly because those big monies that traditionally would have been used, for example, on Christmas Eve to pay salaries just aren’t there.
Annie Guerard: As well, there is often quarterly rent to be paid on the 23rd of December or thereabouts – at least in the UK. Christmas will be especially tough because if the like-for-like sales don’t hit the spot, people won’t be able to pay their rent. A big company went bust last year because it couldn’t renegotiate with its landlord to pay rent monthly up-front rather than quarterly, which would have eased their cashflow substantially. And that kind of change in business practice would be a very positive move the industry could make.
Gavin Jones: I think that highlights the point that there is going to have to be a change in mindset, in terms of if you’re a landlord of a retail outlet – or whatever it is – and accepting the fact that traditionally you’ve been paid upfront on a quarterly basis, and working with your tenant to renegotiate these terms, you’d rather move payment terms than have the store go dark because then you’re going to find it difficult to rent again especially in this climate. And particularly if that landlord has a group of properties in a particular location, one going dark – ie, closing – is not going to be good for footfall into the other properties. And the landlord’s need to pay off whatever financing he’s got for his properties leads us to the need for a change of mindset among the banks.
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How Can You Recession-proof Your Business?
Kate Mercer asked:
How are you feeling about the downturn? Governments may not yet officially have declared a recession, but the media and millions of ordinary people have. A knee jerk response for many businesses is to ‘batten down the hatches’, cut budgets and let people go.
But no matter what the economic climate, people will still buy what they want and need. The real battleground will be the value people see they are getting for what they spend. And the winners will be companies who take the opportunity to build a really strong organisation. The biggest risk you can take is to try to survive doing business as usual!
What is the Opportunity?
While there’s still a demand for goods and services, there’s still a market. Badly-run companies will tend to go under which will mean less competition and more real demand. Take advantage of this and your business could well end up even more profitable!
You will certainly need to manage credit control and cash more tightly than ever. But don’t take action that may damage your business in the longer term. Don’t immediately cut all external costs – a typical ‘knee-jerk’ response to recession. Cutting all your marketing spend, or staff development costs for a period is at best a ‘quick fix’. But you’ll pay for it in the longer term when your customers have forgotten you and your best staff have left! Keep some healthy cash in the business and use it wisely.
How Can You Profit from the ‘Downturn’?
1. Market yourself: Get out there and really market your product or service – make sure people know you are there. Find out what your competition is doing and better their offering. But don’t panic and immediately drop your prices – people will sense your lack of confidence.
2. Communicate: engage your staff fully in the game of thriving in this more competitive period. Give them clear targets and goals. Work with them to build tight budgets and make them accountable for delivering them. And talk to them – find out what they need to be motivated and fired up, and provide it!
3. Negotiate to maintain healthy finances. If times get tougher for you, you can do deals with your suppliers, the VAT man and your bank – as long as you talk to them in good time, and keep them well-informed.
4. Focus your resources on sales – new business and account development. If necessary adjust your marketing mix to respond to the new market conditions.
5. Enhance key people’s skills: provide just-in-time training and coaching so staff are comfortable and credible discussing the current economic situation with customers. Train them to focus on the customers’ specific recession-related challenges, not their own! Make sure they know how your products and services can contribute to your customers’ bottom line and how to create specific value propositions that will compel customers to listen and then to buy.
6. Build a strong, cohesive management team to provide direction; the most common reason successful people leave their organisations is poor leadership. You must show great leadership: take a look at the Shine Blog, where we are currently exploring the seven levels of leadership.
7. Measure and improve your effectiveness: plan rigorously around your key metrics, and monitor and refocus regularly. Inspire and focus your staff with common goals, and reward the behaviour you seek. Staff who weren’t productive in a good economy are very unlikely to be productive during a recession. You know who they are; give them clear targets and focused training and coaching, but if they still don’t buy in to or work towards your goals, let them go. If you keep them aboard, especially now, the drag on your organisation will be multiplied.
8. Take extra care of your customers: lastly, and by no means least, provide exemplary customer service. It will never be so important to keep the customers you already have!
Bomb-Proof Your Business!
There’s nothing new here; this is what companies should be doing all the time. The opportunity here is that many companies don’t.
It is not easy; it requires visionary leadership, a courageous attitude and a healthy organisational culture to provide an environment where employees can deliver what the organisation needs not just to survive, but to thrive.
Some businesses thrive in every recession and come through stronger than ever. Make sure yours is one of them!
How are you feeling about the downturn? Governments may not yet officially have declared a recession, but the media and millions of ordinary people have. A knee jerk response for many businesses is to ‘batten down the hatches’, cut budgets and let people go.
But no matter what the economic climate, people will still buy what they want and need. The real battleground will be the value people see they are getting for what they spend. And the winners will be companies who take the opportunity to build a really strong organisation. The biggest risk you can take is to try to survive doing business as usual!
What is the Opportunity?
While there’s still a demand for goods and services, there’s still a market. Badly-run companies will tend to go under which will mean less competition and more real demand. Take advantage of this and your business could well end up even more profitable!
You will certainly need to manage credit control and cash more tightly than ever. But don’t take action that may damage your business in the longer term. Don’t immediately cut all external costs – a typical ‘knee-jerk’ response to recession. Cutting all your marketing spend, or staff development costs for a period is at best a ‘quick fix’. But you’ll pay for it in the longer term when your customers have forgotten you and your best staff have left! Keep some healthy cash in the business and use it wisely.
How Can You Profit from the ‘Downturn’?
1. Market yourself: Get out there and really market your product or service – make sure people know you are there. Find out what your competition is doing and better their offering. But don’t panic and immediately drop your prices – people will sense your lack of confidence.
2. Communicate: engage your staff fully in the game of thriving in this more competitive period. Give them clear targets and goals. Work with them to build tight budgets and make them accountable for delivering them. And talk to them – find out what they need to be motivated and fired up, and provide it!
3. Negotiate to maintain healthy finances. If times get tougher for you, you can do deals with your suppliers, the VAT man and your bank – as long as you talk to them in good time, and keep them well-informed.
4. Focus your resources on sales – new business and account development. If necessary adjust your marketing mix to respond to the new market conditions.
5. Enhance key people’s skills: provide just-in-time training and coaching so staff are comfortable and credible discussing the current economic situation with customers. Train them to focus on the customers’ specific recession-related challenges, not their own! Make sure they know how your products and services can contribute to your customers’ bottom line and how to create specific value propositions that will compel customers to listen and then to buy.
6. Build a strong, cohesive management team to provide direction; the most common reason successful people leave their organisations is poor leadership. You must show great leadership: take a look at the Shine Blog, where we are currently exploring the seven levels of leadership.
7. Measure and improve your effectiveness: plan rigorously around your key metrics, and monitor and refocus regularly. Inspire and focus your staff with common goals, and reward the behaviour you seek. Staff who weren’t productive in a good economy are very unlikely to be productive during a recession. You know who they are; give them clear targets and focused training and coaching, but if they still don’t buy in to or work towards your goals, let them go. If you keep them aboard, especially now, the drag on your organisation will be multiplied.
8. Take extra care of your customers: lastly, and by no means least, provide exemplary customer service. It will never be so important to keep the customers you already have!
Bomb-Proof Your Business!
There’s nothing new here; this is what companies should be doing all the time. The opportunity here is that many companies don’t.
It is not easy; it requires visionary leadership, a courageous attitude and a healthy organisational culture to provide an environment where employees can deliver what the organisation needs not just to survive, but to thrive.
Some businesses thrive in every recession and come through stronger than ever. Make sure yours is one of them!
The Bad Guys Are Phishing For Your Personal Information
Tim Knox asked:
Do you know what “phishing” is? No, it doesn’t mean you grab a phishin’ pole and head to the nearest phishin’ hole to catch some phish.
Phishing has a much more sinister connotation. The official Webopedia definition of “phishing” is as follows: The act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The e-mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user’s information.
Phishers are also on the prowl for your business information. Your business credit card number, for instance, is like gold to a phisher. Same for your bank account number, lines of credit information, financial data, purchase order numbers, etc.
Phishers prey on ignorance, fear, and emotion. They also play the numbers game. The more bait they email out, the more phish they’ll catch. By spamming large numbers of people, the “phisher” counts on his email being read and believed by a percentage of people who will volunteer their personal and credit card information.
One group that is constantly baited by phishers is the eBay community, i.e. the tens of millions of people worldwide with eBay accounts. There’s not a day that goes by that I don’t receive an email supposedly from eBay asking me to update my account information. I know better than to fall for this scam, but I have to admit, the latest scam email is pretty convincing. Even this old Powerseller did a double-take before realizing that the phishers were at it again.
The sender of this email is listed as: eBay Member and the email subject line reads: Question from eBay Member. The email begins: “Question from eBay Member — Respond Now. eBay sent this message on behalf of an eBay member via My Messages. Responses sent using email will not reach the eBay member. Use the Respond Now button below to respond to this message.”
The email then takes on a threatening tone. It reads: “Question from rivernick: I’m still waiting payment for my item for about 7 days. What happened? Please mail me ASAP or I will report you to eBay.”
The recipient is then prompted to respond to this rather disturbing email by clicking a “Respond Now.” button.
Listen to me: DON’T TOUCH THAT BUTTON! Of course the email was NOT sent by an eBay member or sent via eBay’s messaging system, as it appears. Doing so will take you to a website designed to look like eBay where you will be prompted to login using your eBay user name and password.
Once you pass this point you will be asked to update your account information before proceeding. Unknowing souls will offer not only their eBay password, but personal and credit card information, as well, without even knowing that they are about to have their identity stolen.
The one thing that makes this scam so effective is the threat by the supposed eBay member to “report you to eBay.”
The email preys on the fear of most eBay members that they are in danger of receiving negative feedback. Many eBayers would rather have you cut off a pinky than leave them negative feedback. It is this emotion that the new phishers are hoping to hook and I expect it is working well.
The phisher is betting that most people will either be horrified by the threat of being wrongly reported to eBay or they will be ticked off that some jerk is threatening them by mistake. Either way the phisher is counting on a percentage of people to have a knee-jerk reaction and login to the phisher’s fake eBay website to clear matters up.
I’ve never seen statistics on the percentage of people who take the bait after receiving phishing emails, but if a phisher gets a mere 1% of recipients to turn over their personal information, he will consider his phishing expedition a success.
I’ve warned you about these phishing scams before, but let’s review it one more time.
NEVER reply directly to an email that appears to have come from eBay, Paypal, Amazon, or anyone else asking you to click a link in the email to update your account information. If there is any doubt in your mind whether or not the email is really from eBay, for example, open a browser and type in the URL http://www.ebay.com. NEVER click a link within the email to respond.
NEVER believe that an email supposedly from another eBay member is for real. Again, do not click an email link to reply. Open a browser and go to eBay directly and log in. If the email was from a real member, there will be a record of the inquiry in your My eBay account.
You must be aware that there are bad guys out there who do nothing but spend time trying to come up with new and innovative ways to steal your personal and business information.
Be paranoid. Be aware. But don’t be fooled.
The phishers will cast their line, but you do not have to take the bait.
Here’s to your success,
Tim Knox
Do you know what “phishing” is? No, it doesn’t mean you grab a phishin’ pole and head to the nearest phishin’ hole to catch some phish.
Phishing has a much more sinister connotation. The official Webopedia definition of “phishing” is as follows: The act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The e-mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user’s information.
Phishers are also on the prowl for your business information. Your business credit card number, for instance, is like gold to a phisher. Same for your bank account number, lines of credit information, financial data, purchase order numbers, etc.
Phishers prey on ignorance, fear, and emotion. They also play the numbers game. The more bait they email out, the more phish they’ll catch. By spamming large numbers of people, the “phisher” counts on his email being read and believed by a percentage of people who will volunteer their personal and credit card information.
One group that is constantly baited by phishers is the eBay community, i.e. the tens of millions of people worldwide with eBay accounts. There’s not a day that goes by that I don’t receive an email supposedly from eBay asking me to update my account information. I know better than to fall for this scam, but I have to admit, the latest scam email is pretty convincing. Even this old Powerseller did a double-take before realizing that the phishers were at it again.
The sender of this email is listed as: eBay Member and the email subject line reads: Question from eBay Member. The email begins: “Question from eBay Member — Respond Now. eBay sent this message on behalf of an eBay member via My Messages. Responses sent using email will not reach the eBay member. Use the Respond Now button below to respond to this message.”
The email then takes on a threatening tone. It reads: “Question from rivernick: I’m still waiting payment for my item for about 7 days. What happened? Please mail me ASAP or I will report you to eBay.”
The recipient is then prompted to respond to this rather disturbing email by clicking a “Respond Now.” button.
Listen to me: DON’T TOUCH THAT BUTTON! Of course the email was NOT sent by an eBay member or sent via eBay’s messaging system, as it appears. Doing so will take you to a website designed to look like eBay where you will be prompted to login using your eBay user name and password.
Once you pass this point you will be asked to update your account information before proceeding. Unknowing souls will offer not only their eBay password, but personal and credit card information, as well, without even knowing that they are about to have their identity stolen.
The one thing that makes this scam so effective is the threat by the supposed eBay member to “report you to eBay.”
The email preys on the fear of most eBay members that they are in danger of receiving negative feedback. Many eBayers would rather have you cut off a pinky than leave them negative feedback. It is this emotion that the new phishers are hoping to hook and I expect it is working well.
The phisher is betting that most people will either be horrified by the threat of being wrongly reported to eBay or they will be ticked off that some jerk is threatening them by mistake. Either way the phisher is counting on a percentage of people to have a knee-jerk reaction and login to the phisher’s fake eBay website to clear matters up.
I’ve never seen statistics on the percentage of people who take the bait after receiving phishing emails, but if a phisher gets a mere 1% of recipients to turn over their personal information, he will consider his phishing expedition a success.
I’ve warned you about these phishing scams before, but let’s review it one more time.
NEVER reply directly to an email that appears to have come from eBay, Paypal, Amazon, or anyone else asking you to click a link in the email to update your account information. If there is any doubt in your mind whether or not the email is really from eBay, for example, open a browser and type in the URL http://www.ebay.com. NEVER click a link within the email to respond.
NEVER believe that an email supposedly from another eBay member is for real. Again, do not click an email link to reply. Open a browser and go to eBay directly and log in. If the email was from a real member, there will be a record of the inquiry in your My eBay account.
You must be aware that there are bad guys out there who do nothing but spend time trying to come up with new and innovative ways to steal your personal and business information.
Be paranoid. Be aware. But don’t be fooled.
The phishers will cast their line, but you do not have to take the bait.
Here’s to your success,
Tim Knox
Get Your Team Moving; Get Your Business Moving
Kate Mercer asked:
How Familiar are these Situations to You?
- An organisation adopts a new strategy. While paying lip-service to the change, key staff are still resisting the new direction, complaining and hoping that things will go back to the way they were before
- A team regards itself as a group of individuals who ‘happen’ to report to the same person. Though they are each doing their own job effectively, the synergies, economies of scale and innovation that it was hoped would come from bringing them together are not happening
- A layer of management is taken out of an organisation to empower the next level of managers to make quicker decisions, interface directly with their own customers and produce enhanced results. However, they aren’t stepping up to the new challenge, and are waiting for direction and seeking permission, just as they did in the old structure
- Two functional heads whose roles require that they work together closely, clash to the extent that they do their best to avoid each other. When they do have to work together there is friction, resulting in inefficiency and poor outcomes
- Conflict and ‘fingerpointing’ are arising because team members are not clear on the exact boundaries of their roles, and tend either to ‘tread on each other’s toes’, or to miss targets and deadlines altogether because it is not clear who is accountable for their achievement
Sound Familiar?
Do you see similar issues in your own business? They cost hassle and sleepless nights. But have you ever stopped to calculate what they are really costing you? The real cost is a brake on business results which, if not tackled head-on, becomes permanent because it becomes the norm – ‘just the way things are round here’.
Typically, the knee-jerk reaction is to fire people, move them ’sideways’, re-structure, tell ‘them’ to get their act together, hope it gets better by complaining enough, put them on ’special measures’ at appraisal time, or call a ‘cards on the table’ meeting – all expensive, risky and ultimately ineffective.
What does not usually happen is that all the people concerned with the issue get together and surface it fully in a series of face-to-face conversations in which they explore in depth how things got to be this way, and agree new actions and behaviours which permanently prevent the issues from arising again. This approach to creating great, results-producing teams, in contrast to the knee-jerk response, is inexpensive, very fast, and if done properly always produces outstanding long-term results.
Why does the Approach Work?
The approach works because it creates a necessary forum, managed by a facilitator, to identify and surface issues that have not been expressed before. If the platform for doing this had existed before, organisational issues would have been resolved already, or would probably never have become problems in the first place! A valuable outcome of this approach is the creation of a long-term organisational process for dealing with team issues whenever they arise in the future – ‘just the way we do things round here’!
The second reason the approach works is that it is based on consistent research findings showing that, with very few exceptions, individuals are always capable of producing outstanding results given the right skills and mindset. If individuals don’t have the necessary skills, organisations are very familiar with the process of identifying and addressing skill gaps through training. However, people quite frequently still don’t produce the results they are capable of. This is because what gets in the way is not just their level of skill, but equally importantly their mindset and the groupthink in the team – this approach tackles these head on.
What Is the Key to Success?
The key to the approach’s success is the toughest bit: telling the truth. The experienced facilitator encourages participants to uncover and face up to key, relevant truths that will unstick the team and enable it to move on. They might otherwise shy away from these issues, leaving them forever buried from view, but causing unacknowledged blocks to progress. The team cannot do this without the impetus from an outside facilitator; it would be like doing brain surgery on yourself!
You may or may not have the ‘right’ strategy, the ‘right’ product, the ‘right’ appointment, the ‘right’ new computer system, but as a business leader, whatever you give your team to work with, you need their full, unconditional commitment. The process I outline uncovers very quickly any barriers in the way of every member of the team providing this, and leaves the team with a new ability to surface and resolve issues quickly and permanently in future.
How Familiar are these Situations to You?
- An organisation adopts a new strategy. While paying lip-service to the change, key staff are still resisting the new direction, complaining and hoping that things will go back to the way they were before
- A team regards itself as a group of individuals who ‘happen’ to report to the same person. Though they are each doing their own job effectively, the synergies, economies of scale and innovation that it was hoped would come from bringing them together are not happening
- A layer of management is taken out of an organisation to empower the next level of managers to make quicker decisions, interface directly with their own customers and produce enhanced results. However, they aren’t stepping up to the new challenge, and are waiting for direction and seeking permission, just as they did in the old structure
- Two functional heads whose roles require that they work together closely, clash to the extent that they do their best to avoid each other. When they do have to work together there is friction, resulting in inefficiency and poor outcomes
- Conflict and ‘fingerpointing’ are arising because team members are not clear on the exact boundaries of their roles, and tend either to ‘tread on each other’s toes’, or to miss targets and deadlines altogether because it is not clear who is accountable for their achievement
Sound Familiar?
Do you see similar issues in your own business? They cost hassle and sleepless nights. But have you ever stopped to calculate what they are really costing you? The real cost is a brake on business results which, if not tackled head-on, becomes permanent because it becomes the norm – ‘just the way things are round here’.
Typically, the knee-jerk reaction is to fire people, move them ’sideways’, re-structure, tell ‘them’ to get their act together, hope it gets better by complaining enough, put them on ’special measures’ at appraisal time, or call a ‘cards on the table’ meeting – all expensive, risky and ultimately ineffective.
What does not usually happen is that all the people concerned with the issue get together and surface it fully in a series of face-to-face conversations in which they explore in depth how things got to be this way, and agree new actions and behaviours which permanently prevent the issues from arising again. This approach to creating great, results-producing teams, in contrast to the knee-jerk response, is inexpensive, very fast, and if done properly always produces outstanding long-term results.
Why does the Approach Work?
The approach works because it creates a necessary forum, managed by a facilitator, to identify and surface issues that have not been expressed before. If the platform for doing this had existed before, organisational issues would have been resolved already, or would probably never have become problems in the first place! A valuable outcome of this approach is the creation of a long-term organisational process for dealing with team issues whenever they arise in the future – ‘just the way we do things round here’!
The second reason the approach works is that it is based on consistent research findings showing that, with very few exceptions, individuals are always capable of producing outstanding results given the right skills and mindset. If individuals don’t have the necessary skills, organisations are very familiar with the process of identifying and addressing skill gaps through training. However, people quite frequently still don’t produce the results they are capable of. This is because what gets in the way is not just their level of skill, but equally importantly their mindset and the groupthink in the team – this approach tackles these head on.
What Is the Key to Success?
The key to the approach’s success is the toughest bit: telling the truth. The experienced facilitator encourages participants to uncover and face up to key, relevant truths that will unstick the team and enable it to move on. They might otherwise shy away from these issues, leaving them forever buried from view, but causing unacknowledged blocks to progress. The team cannot do this without the impetus from an outside facilitator; it would be like doing brain surgery on yourself!
You may or may not have the ‘right’ strategy, the ‘right’ product, the ‘right’ appointment, the ‘right’ new computer system, but as a business leader, whatever you give your team to work with, you need their full, unconditional commitment. The process I outline uncovers very quickly any barriers in the way of every member of the team providing this, and leaves the team with a new ability to surface and resolve issues quickly and permanently in future.
From Dissatisfied Carrier to Multi Million Dollar Business Online
Dennis Alexander asked:
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Jon
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Jon
Rich Jerk – Who is He?
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Cara
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My own book is certainly what was familiar with their new ways to improve on solid proven formulas and many of strategies in reading the name and overbrbrit is brilliant method of.
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Cara
The Rich Jerk Review
Anna Allen asked:
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Caleb
My years of research my years of helpful information in his book the howard.
My top choice for money online highly recommend the rich while you with excellent customer support and has just been on howard stern has big following many are scams have yet to copy the bush hes very well this by doing very well this is the howard stern of the howard stern of internet marketing or other payperclick userbrbrafter your successbrbranna allenbrbr.
An adwords or you can and to make friends hes very same unique strategies that can do this is the rich quick and he hurts your feellings.
Caleb