The Consequences of Choice

Posted by on Oct 30, 2017 in Leadership, Lessons from the Big End of Town

The truth is in the cash flow

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