Making your business resilient to economic fluctuations

The Australian Bureau of Statistics data shows the economy grew by 2.3 per cent over the year and 0.2 per cent in the December quarter – below market expectations and well short of Reserve Bank forecasts of 0.6 per cent (1).

‘Business conditions suffered their biggest monthly fall since the global financial crisis over December and have not improved in 2019, according to industry experts’(2).

Is that the sound of panic in the boardrooms of businesses around Australia? Could these be the early warning signs of a recession?

The usual business response is to trim the fat and weather the storm. Costs are slashed, in the form of staff, equipment or marketing cut backs.

What results is more work by fewer people with less or poorer resources. Ultimately, the outcome is poorer quality product and/or services. When things improve spend increases heavily again to regain momentum, if possible. Using this strategy many businesses in the past have never been able to regain the momentum and consequently have fallen by the wayside.

Is this the only way?

Einstein had three rules of work. “Out of clutter find simplicity; From discord find harmony; In the middle of difficulty lies opportunity.”

Before businesses start cutting back on the resources it may be worth following Einstein’s advice. The first consideration should be given the non value adding activities (interfacing activity noise) taking place in the workplace. These activities will be found at the operational level. It takes various forms depending on the type of business. Put concisely, it is simply dealing with ‘stuff’ that should not need to be dealt with if it all went as originally planned. This ‘stuff’ is costing the business money, reducing the efficiency of employees and ultimately impeding the service or quality of the product.

Bevington & Samson in their work (3)found that undocumented activities accounted for up to 3 in every 4 routinely performed. Furthermore, on average 33.6% of employees time is taken up by non value adding activities (interfacing activity noise).

This is the equivalent to 1.67 days per employee per week or around 80.2 days per employee per year. These figures are astounding. What a costly waste of resources. More importantly, what untapped potential is within grasp. No industry is immune. Large and small organisations incur similar levels of non value adding activities (interfacing activity noise).

Furthermore, every team and its members suffer from noise. Nor is it confined within any specific department or section of an organisation. No one in an organisation works in isolation. Everyone within an organisation is involved in numerous actions or steps in order to achieve a specific outcome. These processes cross over multiple areas or departments. They also come under the jurisdiction of multiple managers.

With the passing of time all processes become corrupt resulting in non value adding activities (interfacing activity noise) creeping in. It may start off as a quick fix to what seems an anomaly but soon these anomalies multiply turning rampant becoming part of the norm.

It is quite evident that before the axe starts to fall, and the slashing commences there are actions that can be taken that will make businesses more resilient to economic fluctuations.

Understanding that there are untapped resources within every organisation is the beginning but where to find them is the next step. They all exist at the operational end of the business. The key is to identify what is actually happening as opposed to what we think should be happening. The next step is to understand why these breakdowns are occurring and establish how they can be fixed. But most importantly make the changes and monitor the outcome. Without periodically keeping a check on the changes, one thing is certain the non value adding activities (interfacing activity noise) will mysteriously appear but in a new form.

Not surprisingly most of the answers will be within the organisation amongst the employees. These people understand where the strengths and weaknesses of the process lie and how they can be addressed. Taping into their insight will provide astounding dividends.

To make this happen requires support from management and an operational approach.

The impact on business is significant. Consider what a difference it would make to the bottom line of the business if each employee could improve their value adding activities by 0.84 days per employee per week or around 40 days per employee per year.

Clearly business has an alternative to just weathering the economic storm. The alternative is to take advantage of the downturn and treat it as an opportunity to lift productivity and start on a path which will enable the business to grow.

(1)‘Australia falls into per-capita recession as growth tumbles’, March 6, 2019 The Sydney Morning Herald

(2) Business conditions suffer biggest fall since the GFC and no signs of easing, 29 Jan 2019 The Australian Financial Review

(3) Bevington & Samson – Implementing Strategic Change – Kogan Page London 2012