2016 Business Challenges and how to Deal with them

2016 is unlikely to be different from 2015 if not worse for most businesses. Events in the last quarter of 2015 were telling as most businesses closed with no hope of opening. Other notable events that have a bearing on 2016 are the events from the government side, notably the discord around the amendments to the Indigenisation Act and how that should be handled. Without much details about the going ons in government and how the government operates, the layperson’s interpretation is that the government is in a crisis and the leaders who are supposed to drive the economy differ on strategies to turnaround the economy.  The discord was so pronounced that it is difficult to inspire hope of an economic revival. Too many government ministries are doing their own things the way they want with no coherent direction.  This is one thing the government can address and it does not need FDIs. They need to be consistent in terms of policy issues especially on such an important topic. Instead of taking amendments to the act as defeat, they should look at that as being pragmatic and they will win many friends if they were to do that.

The other issue that tainted and made hope of economic revival evaporate is the constant shift in the pay dates for civil servants and the inability to pay bonuses as previously promised. I hope the government is learning that you cannot pay more than what you produce. A lean and well paid civil service will be more efficient. These are hard decisions the government will have to take, difficult as they may seem.

The other challenge is that it seems that every Minister is a spokesperson for the government. You would expect that only matters agreed at cabinet level should be communicated to the public, but the Ministers are out to see who appears in newspapers more. This does not bode well in building business confidence. Hopefully this can be corrected soon to promote business growth.

There are many other issues that the government would need to deal with from a policy point of view. So where does that leave industry? 2016 will be a very difficult year for most business unless there is a significant change is how the government conducts its business.  This leaves the business community to shift their focus to their individual organisations. While it makes sense to lobby government for policy shifts that promote business growth, the truth is that that route is slow as the government rarely takes industry input seriously. Industry must decide to go it alone and focus on things that are within their control.

 While it’s all well and good to criticise the government on policy issues, I feel strongly that the business community has a lot of soul searching to do and needs to address its own internal issues that have nothing to do with government policy.

 One of these issues is the call to reduce salaries across the board in order to make companies competitive.   This is a very noble idea but the challenge is that the captains of industry calling for such a policy shift are not clean themselves on this issue. My advice to captains of industry is that if you want the lower level employees to believe in this call, then you need to start at the top. We have struggling companies flaunting all sorts of luxuries in executive perks and these are visible to struggling employees who are made to sacrifice a few dollars to save the company. One area the captains of industry can reduce immediately is the luxury vehicles that executives drive. Put together, the new vehicles which companies continue to purchase for executives are enough to recapitalise some of these businesses.  In talking to unions and lower level employees across all industries, I see anger as a result of the luxuries displayed by executives. Before we even go to cut wages for lower level employees, why don’t we cut executives’ salaries and perks by 50% as a starting point? If we were to do that across every company in Zimbabwe and assess the impact, I am sure there would significant benefits for the companies and the country. The next phase would then be to cut salaries for lower levels staff by 20% as an example. That way you will get buy in from the Unions.

 Another area that industries can gain significant cost savings are on the headcount.  Our observations are that most organisations are overstaffed at the top. There are just too many managers.  Trim the numbers, the reporting levels and increase the span of control. That way there would be significant costs savings.

Another area that business need to work on in 2016 in order to survive is governance. Most organisations will not be revived as long as they continue to get useless Board members who are there to milk the organisation for benefits. Most Boards have no capacity to turnaround any business due to their inability to confront reality, especially unpleasant reality. Most companies that are doing well and have survived have better run Boards than those that are struggling. If you find that the company is struggling, look at the Board first before addressing anything else.  To survive, shareholders need to make sure the right people are put in the Boards. The Board members who are running down organisations are doing so knowingly. You need people who are knowledgeable and have high ethical standards to run businesses. I know a lot of organisations have invested a lot of money in governance training which is fine but this will not solve the problem of unethical conduct. The solution is not to get people who have the propensity to commit unethical conduct in the first place.

The quality of our executive management is a cause for concern. We have highly educated but incompetent executives presiding over these failing companies. The majority of them want to blame the government and not themselves. Some are crooks who should never get close to a formal business. They look for every opportunity to defraud the organisation.

A word of caution though; all the above strategies will not have a lasting impact as long as the individual companies do not have strategies to grow revenue and market share. A cost cutting strategy without a revenue growth strategy is unlikely to yield long term benefits. Our observations are that a lot of the businesses so far have put more faith in cost cutting strategies with no concrete revenue generating strategies.

Memory Nguwi is the Managing Consultant of Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. Phone 04-481946-48/ 481950/ 2900276/ 2900966 or cell number 0772 356 361 or email: [email protected] or visit our website at www.ipcconsultants.com