Leadership

The truth is in the cash flow

But t’was a famous Victory!

But t’was a famous Victory!

This is an article I wrote about CPA Australia on behalf of the Association of Virtual CFOs, and which was published by Smart Company.

I had watched with horrified fascination as CPA Australia tore itself apart over the last 12 months, egged on the by the Australian Financial Review.

Emotion had clearly over-whelmed reason, and in this article, I wanted to take an impartial look at what was happening.

The conclusions I came to were quite startling.

Financially, on a per member basis (itself a contentious subject) there was very little difference between CPA Australia and its major rival, CAANZ.

Yet, there was so much heat and noise from a dissident group of CPA members about how money was being spent.

And, when the dissident group “won”, they were not prepared. There was no plan, no clear idea as to the changes they wanted.

I think CPA Australia will rue the last 12 months for the next 12 to 24 months.

They will lose existing members, and if it is more than 7,500 then in all likelihood they will make a loss.

Fewer new members will join because of the damage to CPA’s reputation.

It will take time for the new board to take control, appoint a new CEO and in the meantime, the organisation will drift.

So, what are the lessons for business owners from CPA Australia’s implosion. Here are a few:

  1. Make considered, not emotional decisions.
  2. Before embarking on a course of actions have a plan.
  3. In fact, before embarking on a course of action, have several plans – Plan A, Plan B, Plan C etc.
  4. Never take your customer for granted. If you do, you invite disruption, like Uber and Taxis.
  5. Recognise that every threat is an opportunity – sometimes you need imagination to do this.

I hope you enjoy reading this article. It is fair to say that it was the one that received the most feedback and discussion when it was published.

If you think that impartial and thoughtful advice could help you take your business to the next level then please make Contact.

I can help.

T’was a famous Victory!

 

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The Consequences of Choice

The Consequences of Choice

This is the third, and for the moment, final piece that I wrote on the subject of Murray Goulburn, on behalf of the Association of Virtual CFOs and published by Smart Company.

In it readers will discover how the problem of a budget with no basis in reality was compounded by a decision to make the most important stakeholder (their farmer suppliers) bear the brunt of that problem by unilaterally cutting their milk prices.

The consequence of these choices were:

  1. A collapse in Murray Goulburn’s milk supply as farmers left the industry or moved to another processor.
  2. A blow out in the cost of production as a consequence, impacting on Murray Goulburn’s competitiveness.
  3. Closure of three surplus milk factories.
  4. A loss of 360 jobs.
  5. Unwinding Murray Goulburn’s attempted clawback of milk payments and recognising it as an expense.
  6. Write downs of $410m, weakening Murray Goulburn’s financial position.

Business owners who read this case study will discover many lessons. Among them:

  1. In a crisis, work out which stakeholders are most important to the survival and recovery of your business.
  2. In a crisis, acknowledge your mistakes honestly/identify the core issue accurately.
  3. Formulate a plan to address the now accurately identified issues.
  4. Go to most important of those stakeholders with your plan and get their agreement to it.
  5. Move on to your next most important stakeholder with that plan and support in place.
  6. Recognise a crisis for what it also is – a chance to make needed changes to your business.
  7. Understand the key drivers of your business. The less you can control, the less risk you can take.

A Virtual CFO can help you with impartial and objective advice.

Unlike your external accountant, we work with you and your business regularly. We’ll help you make better, more informed choices.

If you’d like to find out how we can help, please Contact Us.

The Consequences of Choices

 

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Leadership and SME Culture

Leadership and SME Culture

In my very first post (It’s Not Rocket Science) I outlined four major issues faced by small and medium business, as discerned by Enterprise Connect. One of them was Business Ecology, which I take to mean the workplace environment / organisational culture.

A recent article I wrote on the usefulness of KPIs (The Emperor’s New Clothes) received a comment from a reader, which put forward the proposition that an organisation’s culture is responsible for whether employees deciding to game or not game their KPIs.

Considering the foregoing, I’ve been mulling over business culture, particularly since the exchange with that reader of my earlier article. What is the nature of an organisation’s culture? How does an owner of a small or medium-sized business created a good business culture? What is the benefit of doing so? What qualities does an owner of a small or medium-sized business need to create the best business culture?

For the purpose of this article, and in the context of SMEs, I am going to define an organisation’s culture as being the relationship between an SME owner and their staff. Later in the article, references to “leader(s)” are interchangeable with “SME owner”.

So, what then of the other questions? I found three particularly insightful articles on The Conversation web-site.

The first, Why autocratic bosses are a dying breed, by Morgan Witzel provides fascinating insights into the nature of business leadership. This is more an opinion piece than research, but the author does back up his opinion with numerous examples of high-profile business leaders. Witzel’s central point is that the best that leaders can hope to do is bring people together and try to persuade them to work together.  He makes a couple of other points for SME owners to consider:

  • Leaders (SME owners) need to learn humility.
  • Leaders (SME owners) need to work in partnership with their organisations (people).
  • Leadership is something best done with people, not to them.

The second, Productivity Push should focus on frontline managers, by Daryll Hull offers insights into the qualities of an excellent workplace leader. It references previous academic studies in this area, and provides the links to those studies. In this article you will find a range of characteristics, sourced from research carried out by the article’s author on behalf of the Business Council of Australia. Some of the characteristics of an excellent workplace leader include: fairness, accessibility, ethical, empowering people, giving recognition where due, building trust and no bullshit.

This article also addresses the primary benefit from creating a good culture through leadership, being improved productivity. And to be clear, productivity in this sense is the amount of output per unit of input. To do this well, the author recommends that the business develop the leadership skills of their supervisors and line managers through training. My own view, in the context of an SME, is that the owner should undertake this sort of training first, and then follow it up with training for their supervisors / managers. This will ensure they have a “common language” when working on the business culture.

The final article, How individual firms can solve the ‘productivity paradox’, by Danny Samson is research orientated and offers an insight into the benefit of creating a good culture. It’s a great article which sets out in stark terms the scale and nature of the problem in terms of labour productivity, and then offers a solution, which is for the business owner to ask the workers on the “floor” to identify the activities that create noise in their day, engage them to find the supporting data, work with them to find a solution and empower them to implement that solution. In my opinion, an SME owner that follows this process will go a long way to creating a great workplace culture.

For my own part, I would add the following practical suggestions on how an SME owner can create a strong culture:

  • Smile.
  • Take an interest in your people.
  • Explain how their activities contribute to the success of the business.
  • Treat people the way you would like to be treated.
  • Listen (hard) to your staff.

In summary, the owner of a small or medium-sized business who treats their employees as people first, explains to them the importance of their role, demonstrates that their efforts are valued, engages with and empowers them will reap the benefits of a highly productive workforce.

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