Businesses should beware of knee-jerk reactions

knee jerk reactionsBeing agile and responsive may be good business practice, but there is a fine line between this and knee-jerk reactions.

While the former can be described as considered responses to relevant data, the latter are more likely to be immediate, unthinking and emotional.

While some instant reactions may turn out to have been productive, overall the chances of such a decision working out well are not high and probably not the best way to run a business.

Knowing when prompt action is needed and when it is better to hold your nerve

Monitoring data on business performance, invoice payments, sales, responses to marketing initiatives and a wealth of other relevant information is, or should be, and integral part of running a business.

However, understanding what that data implies can be much trickier.

The key is to be aware of both the time frames and implications in order to draw reliable conclusions.

A good example is statistical information such as the monthly trends like the PMI/Markit index that reports on activity in the service, manufacturing and other sectors of the economy, or the daily ebbs and flows of the stock market.

Not only can statistics be selective, highly dependent on sample size and on the information selected for measurement, it can take several months before a trend becomes clear.

While some investors trade stocks on almost a minute by minute basis depending on the rise and fall of share prices for a company or commodity, this sort of short term approach to events is unlikely to work well for a business. Indeed, it is not the strategy pursued by investment guru Warren Buffet.

Another difficulty with the knee-jerk reaction is that it may rely on emotional factors, such as confidence or lack of it, panic, self-interest or a desire to win at all costs. This is when investors can lose by following the herd instead of holding their nerve and following the data.

The tools to use to avoid knee-jerk reactions

Any business that has done a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) to inform its business plan and goals will have some protection against unconsidered decisions. Although remember ‘SWOT SO WHAT’, the key to a SWOT analysis is use it as the basis for making decisions.

A second tool is the contingency plan that outlines possible actions and reactions for a variety of scenarios.

Using these in conjunction with analytical data gathered over a sufficient period, relevant to the nature of the business, will improve the chances of making decisions about change that will have the optimum outcome for the business.

SMEs should register an interest in big local infrastructure projects

cranes on the skyline at an infrastructure projectLocal businesses often complain that they are ignored as suppliers when big local infrastructure projects are in the pipeline, and this may have been true in the past.

Certainly, it was a complaint when the second nuclear power station, Sizewell B, was being built in Suffolk between 1987 and 1995.

However, with two new projects in the pipeline, at Hinckley Point, Somerset, and at Sizewell, Suffolk, that situation appears to have changed.

In both cases, the respective Chambers of Commerce are already engaged with main contractors EDF Energy and partners asking local businesses to register their interest as supplies to the project.

Both projects already have dedicated websites specifically for interested businesses to find out more and register their interest and provide details of what they supply so they can be invited to tender for works and mini-projects. There is a wealth of guidance, support and information on how to become suppliers. The information on both is available on the EDF Energy website.

No business is too small to become a supplier

Many local businesses may think they are too small to be involved in such projects.  While this may have been the case in the past there has been a change of emphasis to offer opportunities to local businesses, particularly those that provide quick response to mini-projects as they arise and those who provide service support.

Inevitably, there will be local labour opportunities for project managers, engineers, surveyors and construction workers with many of these being sourced from afar.

There are many opportunities to provide support for the non-local labour, such as accommodation, whether Bed and Breakfast, short term lets or portable buildings on site. Given that most sites are in rural locations, transport and catering facilities will also be needed. One example of the new initiative working is the catering at Hinkley Point C where a number of local firms submitted and won the tender to provide the on-site catering. Each firm including local bakers and caterers did not feel they could lead the contract by themselves but with support from the Hinkley Supply Chain Enabling Team and leadership from Somerset Chamber of Commerce they succeeded. Another example was the need to build a bridge to help conserve local badgers, this £350k contract was awarded to a small firm of local builders.

In addition to on-site opportunities the influx of a large temporary population offers scope for opportunities in the surrounding area. These include local shops, sports and leisure facilities, entertainment, healthcare and transport.

So, it is a mistake for any local SME to think it is either too small or its business is not relevant to a big infrastructure project.  The possibilities are many, and they are only limited by the imagination.

Investing in a struggling business – is it ever worthwhile?

the uphill battle to save a struggling businessWhile many people are attracted by the low cost of buying a struggling business where they believe they can do better – and reap the rewards – there is always the risk they are deceiving themselves or being over-optimistic.

It may be that there is a demand for its product or service but if a business is struggling, it is struggling for a reason.

So, it is important for the potential buyer to look closely and with care at why the business is in trouble and to ask themselves whether they honestly have the knowledge, skills, stamina and enough finances to be able to bear the loss if a turnaround should prove unsuccessful.

While a degree of self-confidence is important, confronting the reality of the situation is even more so.

Are there issues the struggling business is hiding?

When reviewing the circumstances of a struggling business a degree of scepticism is likely to be needed.

There may have been problems that can be remedied, such as poor management, poor organisation, a lack of funding or lack of financial control.

On the other hand, there may no longer be a market for the product or service, such as when technology has changed as has been the case with the transition from cameras using film to digital photography, or it may be too competitive such as the van delivery market, or the company’s reputation is severely damaged. Often the mountain is too steep to climb and it may be better to walk away.

Are the directors being honest about what has been happening? Are the suppliers who may also be angry creditors likely to be supportive of a restructure attempt? How many employees will have to be retained by the new owner under the TUPE rules and will this place an excessive burden on costs going forward? Will clients stay with you or even come back?

The answers to these questions, and many more, are crucial when considering buying a struggling business.

Are there better options?

If they would be useful to your existing business it may be better to buy the assets of a struggling business, which will be handled by valuers and surveyors.

In this way buying the database of a struggling business may be a more cost-effective way of increasing the customer base of an existing business than marketing to entirely new customers.

It may be safer to pay more for a profitable business with growth potential where the reason for sale is clear such as someone wanting to retire.

There is always a case of “caveat emptor” (buyer beware) so this route isn’t for the feint hearted and you can afford to make costly mistakes.

Get it right and the spoils can be huge, but you are warned.

Experiences, not “stuff” – the High Street is not dead

High Street experienceThe death of the High Street as simply a shopping destination has long been predicted, first due to the rise of the out of town retail parks, then to the growth of online shopping.

While it is true that consumer buying habits and focus have been shifting, the fact is that humans are social animals and will always seek places where they can gather and interact.

However, with each generation, interests, tastes and behaviours change to reflect identity and priorities. These are influenced by social change and new developments such as those offered by new technologies, new ways for social interaction, allocation of time, travel, the way homes are designed, and even the changing weather patterns.

Misread signals and lack of agility

As early as 2013, in one of its regular assessments of consumer behaviour and the role of the high street, Deloitte found that while undeniably consumers were changing “the high street will continue to be an important place where innovative, consumer-focused businesses will grow and thrive,” despite the undoubted challenges.

Other studies have since sought to define more clearly what has been going on and why retailers have been struggling.

Kantar Worldwide identified two specific aspects in the UK, a decline in seasonal shopping and shoppers “waiting for the sales and buying things out of season”.

Some retailers, say analysts, have been far too rigid, in sticking to their seasonal buying cycles then having to constantly discount to shed surplus stock.  Essentially, they failed to get to know their customers well enough. Not only that, but there have been no significant changes in “must have” fashion so that people can keep on wearing and recycling what they already own – an example being skinny jeans, still ubiquitous in clothing stores a decade since they were first launched.

Arguably, a second factor has been the merging of the seasons in recent years, certainly in the UK, where there have been several years of only moderate temperature and weather changes over the yearly cycle.

There are other, generational factors at work. Millennials, who are IT savvy and habitually online shoppers, have been shown to value experiences, and showing them off on social media, more than shopping. Millennials also don’t want to be ‘marketed to’. Despite this they buy food, clothes and household products, the subtlety for the High Street is that they don’t want to feel they are being manipulated by powerful corporations, they want to discover rather than be discovered.

The desire for shopping as an experience rather than simply shopping to buy goods is not confined to millennials and offers a real future for the High Street, one that can compete with shopping complexes that are clearly aimed at ‘marketing to’ visitors.

Offering experiences – an opportunity for the Service sector

Walk around any provincial High Street and you will find a plethora of places to snack and chat (coffee shops, bistros, wine bars), estate agents and travel agents, interspersed with the remaining clothes and department stores.  The latter have arguably survived by becoming more agile in offering not only physical goods, but also click and collect destinations and the opportunity to order online in-store if a product is not available.

But you will also find significant numbers of independent small, specialist shops for cheese, coffee, craft ware, home ware, nail bars, tattooists and, above all books. Then there are the pop-up shops where new enterprises can showcase their ideas or merchandise for a limited time and get a feel for their potential market.

That there is still confidence in the High Street shows in Amazon’s move into physical retail space with the opening of its book store in New York and several more planned. Google, too, has opened pop-up stores and is said to be increasingly focused on physical stores.

So, the High Street is evolving, not dying, but those in the service sector who can see a thriving future there will also need to see more agility in support from civic planners and regulators, who will need to move away from their rigid structures of what is permissible in urban High Street buildings and from charging high business rates and rents for those spaces.

 

Proof that, taught properly, cold calling really is child’s play!

child making a business callVery few of us actually like cold calling.

The idea of phoning a total stranger can strike fear and dread into the most competent SME owner. Who has not at some time been roused to rage by those ubiquitous call centre sales calls, where the caller is plainly working to a script, plainly not listening and not interacting with you?

Yet it is a crucial part of the sales and marketing activity and can be immensely effective if done correctly.

Working to a script is not the answer but there has to be a plan and a goal as this video on Linked In demonstrates. The video https://www.youtube.com/watch?v=nL5Iab45fSo was posted by my good friend Marcus Cauchi, an expert in sales management training. You can subscribe to get more.

It is worth watching it right to the end not only for the technique it demonstrates but also for the “surprise” revelation at its conclusion.

It shows that the key to effective cold calling is to listen and to interact with people, with a clear goal in mind. The goal does not have to be to make a sale.  It may be to plant a seed so that when a prospect is at the right point in their buying journey they remember the business’ name.

It may be, as in this video, to get people to think about the illogical excuses they make and commit to a meeting or appointment.

Cold calling is about creating trust and empathy so get permission to speak to your prospect, as you are effectively stealing their time.

The aim is to get them to engage in a conversation, leading them, with their acquiescence to your defined end point, in this case an appointment. So on this cold call focus only on arranging the appointment.

The call should last between 3-8 minutes. Any less and you have probably missed the mark with your 30-second commercial or blown the call with your tonality. Any longer and you are in grave danger of trying to make the full sale.

Employee training and development benefits business

an employee training sessionBusiness leaders are not the only people in an organisation who should pay attention to increasing their knowledge and expertise.

Everybody who works for the business is important to its continued success and growth, so a programme of ongoing training and continuous development for employees would be a worthwhile investment for the ambitious business.

It is no secret that the UK is suffering from a skills shortage that is already impacting on the ability of companies to recruit the people they need, especially at a time when employment is at its highest level.

While employers might be worried about the cost of investing in their staff who subsequently leave, they should be more worried about not investing in staff who stay.

What are the benefits of employee training and development?

Recruiting to fill a vacancy can be a costly and lengthy process, assuming that there is even someone out there with the desired skills.

There may be someone in the company already who has the potential do the job with some additional training. It may be that this would not take much longer than the recruitment process, and it would have the added advantage of money spent within the business rather than to an outside service. And it can save on expensive and time-consuming recruitment.

It may less risky training up a known person than gambling on whether a new recruit turns out to have the right qualities and soft skills, in addition to their qualifications, to fit into the organisation’s culture.

Training also brings flexibility through staff being able to do other jobs when colleagues are on holiday or off sick. Having several members of staff who can operate plant and machinery or work in different departments can be highly valuable. It can also bring in house work that might be subcontracted such as equipment maintenance, accounts or marketing.

A training programme brings other benefits, in that it ensures staff can see a way of developing their potential and their careers. At the same time, it will ensure that the capabilities of both organisation and people keep pace with new developments in their sector.

Training can help build employees’ confidence, so that they feel able to tackle unexpected developments, such as a customer complaint, professionally and constructively in a way that enhances the company’s reputation.

Confidence in knowledge and skills means employees can make a greater contribution to the benefit of all as does inviting suggestions for new ideas, products or ways of doing things.

The business that invests in its employees gives them self-respect and shows they are valued.  It is more likely to keep them and to be able to benefit from their motivation and contribution.

Why would a business leader need a business mentor or a consultant ?

Successful businesses need leaders who can make decisions. Input from others makes it easier to make the right decisions first time, instead of wasting time on rectifying the wrong decisions.

All the most successful business leaders, including Mark Zuckerberg, Elon Musk, Bill Gates and Warren Buffet reputedly practice what is called the five-hour rule, according to various articles on inc.com.

It was a practice started by Benjamin Franklin, one of the USA’s founding fathers and authors of its Declaration of Independence and its Constitution.

It involves spending an hour a day either reading, reflecting or experimenting in order to stay well-informed as a business leader.

While it is clearly a good habit for a business leader to follow, whether they are the head of a SME or a large corporation, it can be lonely at the top and there are times when it can be important to have another person with whom to explore ideas and perhaps refine them into something workable before making a key decision.

Which to choose – business mentor or a consultant

businessman with business mentorA successful business is never static so there will always be new problems or opportunities confronting the CEO and, no matter how much attention she or he pays to learning and developing their skills, knowledge and ideas, there will be times when it will help to get specialist expertise as well.

The business consultant is likely to be more focused on the business and its success. Their approach is likely to be more formal and structured so it is important to choose someone who understands or has worked in a similar business environment as well as someone you can be open with.

This means asking some pertinent questions before choosing a consultant who is right for you and your business, such as their experience in business, their experience of the issues you want to deal with, qualifications, and asking for examples of their work.

It is helpful to have a written agreement with a consultant that includes frequency of meetings, objectives, milestones with dates, confidentiality agreement, charges and payments and how either party can terminate the agreement.

Mentors tend to focus on the individual leader, on their wellbeing and personal development. An arrangement with a mentor can be less structured, although it is still wise to define the frequency of meetings and expectations of the relationship on both sides.  It could be someone you already know, whose expertise and judgement you respect and who is willing to act as a sounding board for ideas, or it could be a more professional business mentoring service. The good mentor asks questions and invites reflections.

Having a mentor can reduce risk when considering options and making decisions. Mentors tend to explore the rationale for any decision rather than giving advice in relation to the options or the decision.

Both mentors and consultants help focus a leader on the main issues to be addressed and bring clarity and process to decision making. Do you have one?

Uncertainty and change may be a feature of the business future for a while

managers hiding after announcing changeIn so-called “normal” times no business can afford to stand still and hope to survive.

In the current economic climate following the UK’s general election, a precariously-balanced parliament with no party having a majority, and with the negotiations on leaving the EU yet to start, business will be facing additional pressures and uncertainties.

However, regardless the prevailing circumstances, change is likely to be a constant feature in business survival.

Change can be unsettling, especially for employees and therefore has to be managed effectively if it is not to cause disruption, lack of focus, worry and a consequent drop in productivity.

The key actions for helping employees cope with uncertainty and change

It is surprising how often employees pick up on potential changes in their workplace, especially tension among managers, even if they have not yet been informed.  Watching and listening is important to gauging how unsettled they might be.

Managers demonstrating concern and understanding about people’s feelings can reduce the feeling of powerlessness and that things are going to be imposed on them.

Anxiety among staff can become a source of worry, so a key ingredient in calming employee fears is to give them as much information as possible as soon as possible about any proposed changes the business may be planning.

In fact, it may prove even more productive to consult with and involve employees in what is being proposed.  They are the people who will have to implement and live with the changes and they may well have innovative ideas about how to make them work.

If the changes are going to involve either some redundancies, changes to working conditions or re-deployment consulting with staff representatives or a union may be crucial in ensuring that they are accepted.

Be aware also of the procedures necessary to comply with employment legislation especially as it relates to redundancies or changes to terms of employment. An up to date staff handbook with detailed redundancy and grievance procedures can be a useful source of reference for both staff and managers.

Once the plan for modernisation, restructure, or modification of working conditions has been settled managers can help employees to adapt quickly by arranging briefings.  People are more accepting of change if they understand what is being proposed, why it is necessary, and when it will be implemented.

Finally, training and support will enable employees to feel both involved, valued and competent to handle the new situation.

The post-election Government must start listening to business

confusing signpostAs if the post-EU referendum uncertainty wasn’t enough, businesses now must contend with a Government that is far less “strong and stable” than it was before the General Election.

Portcullis Public Affairs, of which I am a shareholder and chairman, is a specialist consultancy advising businesses on government and strategic communications.  It has an excellent perspective on the election outcome for business which can be viewed in the News section of its website at www.portcullispublicaffairs.com/oh-what-a-night-and-what-it-means/

It is almost a cliché that businesses hate uncertainty, so the implications for businesses, especially for SMEs, are not good. This has been made worse by a Prime Minister who appears to be anti-business and a manifesto that offered no reassurance to business.

Companies were already holding back on investment decisions and, in some cases, struggling to keep afloat in the face of rising costs on imported raw materials and oil thanks to the post referendum devaluation in £Sterling.

Trading conditions have gradually become more difficult since the start of 2017 as inflation and wage stagnation have fed through into the economy and dented consumer confidence – not helpful where so many small businesses in the service sector rely so heavily on consumer spending.

Many have felt that the government was not listening to or considering their concerns. Among the issues and proposals they have highlighted have been:

  • The lack of provision of growth funding after 2020 when current EU Funding ends (FSB chairman Mike Cherry).  This particularly affects SMEs in poorer parts of the country.
  • Abandoning the customs union, which allows UK firms to trade in the EU without paperwork, tariffs or barriers.
  • Requiring businesses to disclose the numbers of foreign workers they employ and failing to provide any assurances that those already working in the UK will be able to remain.  This affects all businesses where there is a skills shortage, such as construction, engineering and seasonal work on farms.
  • Being prepared to walk away without an agreement if the EU does not agree to UK’s terms.

With barely a week to go before formal negotiations are due to begin businesses have been signalling plummeting confidence and urgently demanding more engagement, flexibility and pragmatism on their needs.

Immediately after the election the Institute of Directors (IoD) reported a significant drop in confidence among the 700 members it has asked. IoD Director General Stephen Martin said the current uncertainty could have disastrous consequences for UK businesses.

“The needs of business and discussion of the economy were largely absent from the campaign,” he said. “but this crash in confidence shows how urgently that must change in the new government.”

Portcullis’ briefing ends with the view that without specialist advice businesses face making strategic errors that could be costly, or even fatal, in the current uncertain political climate.

A leader’s lack of confidence can inhibit business growth

business leader standing on hilltop contemplating horizonWe recently explored the toxic effects on a business that can result where people in influential positions exhibit one or more extreme versions of the psychologists’ Dark Triad of psychotic behaviours.

All three, Machiavellianism, Narcissism and Corporate Psychopathy, could be described as selfish, arrogant and demonstrations of supreme confidence.

But what about the effects on a business of their opposite, a leader who lacks conviction and confidence?

Recently, venture capital company Highland Europe, carried out research among 173 European company leaders, of whom two-thirds were their companies’ founders. The respondents were from a mix of start-ups and companies that might be regarded as scale ups.

Highland Europe, founded in 2012, invests in growing European internet, mobile and software companies but their findings have wider implications than this sector only. They wanted to find out more about how these people saw themselves and their ability to adapt to the transition from founder to CEO of their growing business.

The research found that almost half of the respondents saw the founder’s ability to effectively manage growth and their ability to implement new strategy quickly as key risks.

Interestingly, among the start-ups UK respondents were consistently less confident than those in similar European companies.

Among the challenges mentioned by the start-up group were doubts about building sales, about finding the right senior talent, about establishing the right organisational structure and about access to capital.  For the scale-up group that were already on the growth track the same key issues cropped up but in a different order, with senior talent first, followed by organisational structure.

The components of lack of confidence

Lack of confidence can be the result of external factors, such as the uncertain economic conditions that have prevailed in the UK since the 2008 Financial Crash and, more recently, following the June 2016 decision for the UK to leave the EU.

As we have pointed out many times, an excess of caution has deterred businesses and investors from taking risks and investing capital in growth for some years.  In other words, lack of confidence can inhibit innovation and arguably business growth.

But lack of confidence can also manifest more personally in doubts about one’s own abilities and the research found that it was considered crucial for founders to be able to adapt and change as their business grew. Many cited this as their biggest challenge along with having difficulty in staying focused on the bigger picture rather than operational detail and in delegating effectively.

Plainly, while the extreme behaviour characterised by the Dark Triad can be toxic for a business, as we found, the same is true for its opposite.

A growing business needs a confident leader who has conviction in the business, who is able to take risks, to think strategically and to manage people.

It would be unrealistic to assume the founder of a small start-up automatically has all these qualities, even where they had the entrepreneurial vision to take the first step.

There is no shame in looking around for advice and guidance, whether from a mentor or a business coach, to develop the qualities – and therefore the self-confidence – to take their business to the next level or hand over to others who can.