9 “business practices” that organisations must avoid at all cost

In this article I want to highlight nine (9) things that organisation should avoid at all cost in order to avoid a public fallout with key stakeholders.

1.     Increasing salaries with the hope that business performance will increase- Avoid the temptation to increase staff cost with the hope that business performance or economic environment is going to improve. In many cases we have noted businesses that have gone this route and have failed to recover. You must only incur major costs especially staff costs once you are sure, supported by data, that the performance of the company is improving and its showing some consistency. Even in that case avoid the temptation to increase fixed staff costs. Instead focus on variable pay that is contingent on a certain level of performance.

2.     Avoid pampering your Board – Board members are the people who must exercise the highest level of discipline in all areas of governance. They should not be paid anything else other than sitting allowances or retainers. You must strive to have one payment item for the Board members; sitting allowance or a retainer. What is preferable is to pay them a retainer at the end of the quarter. This will make sure they avoid unnecessary board or committee sittings in order to gain a sitting allowance. Avoid all the other luxuries like company cars, allowances, loans, holiday, and cellphone allowances, transport etc. These are all unnecessary luxuries that will come to haunt the organisation. Avoid buying or offering a car to the Chairman. Surely the company should appoint a chairman who can afford a car. The Chairman is paid more than other members to cover for the extra duties and responsibilities if any.

3.     Avoid pampering your Executives – In this current environment with some employees who have gone for months without pay, please avoid anything that will suggest you are an irresponsible executive. Avoid purchasing luxury vehicles for executives at this time unless your business is doing extremely well and it’s justifiable in the eyes of the key stakeholders. If your company is struggling look for people who are willing to take sacrifices. People out there will never understand that you are entitled to those benefits even if they are contractual.

4.     Avoid unnecessary expenditure – Avoid holding your workshops in expensive venues when your business is struggling. Your employees will never understand such reckless expenditure.

5.     Reducing costs without a strategy for growing revenue – It makes sense to focus on reducing costs when you have no strategy to grow the business. Cutting costs will give your business temporary relief. This is precisely why companies that have embarked on massive cost cutting strategies still find themselves struggling. The problem is, they have anchored their survival strategy on cost cutting. 85% of all restructuring projects fail due to a wrong diagnosis of the problem or the wrong solution to a known problem they would require another solution.

6.     Regulatory cover – The regulatory cover provided by the government only gives businesses temporary relief (e.g. SI 64). This cover can be removed overnight; exactly the way it came. If you are enjoying success under the cover of this Statutory Instrument, you may need to think about whether you will be able to survive without it. If the answer is no, you need to go back to the drawing board very quickly. Your business must be able to compete under any circumstances.

7.     Depending on price to drive revenue – This strategy shows short term thinking. Revenue growth anchored on upward price movement will not take you very far. The market will get to a stage where it will resist and your business will suffer. Your strategy must be anchored on increasing volumes and focusing on efficient utilisation of all inputs or resources consumed in your business. If volumes of products sold is going down, you must reduce overheads very fast. Refocus your managers to concentrate on margins not just volumes.  If volumes increase maintain overheads where they are.

8.     Unnecessary processes – Re-examine your whole value chain from the sources of all resources consumed in your business to the delivery of your product to the customer. Are there no wastages in this whole process? Eliminate all sources of wastage.

9.     Unnecessary loss of productivity – Re-examine how much productive time is being lost in meetings, travel and other activities of questionable value. Challenge every manager on how they use their time. Managers are the chief culprits in creating unnecessary overtime. Every employee should have slightly more work than normal and that should not be treated as overtime. Most companies are reeling under the burden of unnecessary overtime payments. Change this thinking by implementing radical policy shift in how work is arranged and done in order to reduce overtime.

The above recommendations require radical changes in the way you manage your business. It may even require a culture change program for it to be sustainable. Staying with business models that are outdated will lead to liquidation.

Memory Nguwi is the Managing Consultant of Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. Phone 481946-48/481950/2900276/2900966 or cell number 077 2356 361 or email: [email protected] or visit our website at www.ipcconsultants.com