Grow Your Business December 2008

Dear Business Leaders,

Welcome to the December edition of the Xenex Group Newsletter. 

You have been sent this as a client or associate of Xenex Group. We regularly provided an interesting mix of articles on management, leadership and business process, for senior executives and business owners to better manage their people and resources.  We hope you find these articles sufficiently stimulating for you to make a commitment to positive change within your business.

Best regards, 

Daniel O'Connor.
Consultant Principal.

Tactics for Harder times?

As national economies throughout the World start into a retraction cycle, it is good to remind ourselves of some practical and historical facts, separated from the media hyperbole. Some issues we need to keep clear in our minds:

1.       Economics is cyclic – there are always strong and weak growth periods in any economy and the smart operators are those that can rapidly adapt to the changes they are facing. This may require practical and un-emotive rationale, with no room for agonising over implementation. If it has to be done – get it done now.

2.       Any company that has been around for more than 22 years has experienced these before and understand what to do. Centuries-old firms have ridden these ups and downs for several severe cycles and survived.Market contractions are not the end-game for every business, usually just for opportunists or those that are not geared for the market changes.

3.       If you or your management team are under the age of 37, they have probably not worked through any “hard times” before and would only have business or history books to refer to. This may represent an opportunity for those who understand the difference between knowledge (as taught in business schools) and know-how (as learned by doing it). The latter has no lag-time and can provide immediate and accurate decisions in severe times.

4.       In tough times, larger companies tend to cull staff numbers to maintain profit ratios. The first to go are generally those that may not have a direct effect on the bottom line (such as sales personnel and estimators) and so small business operators should recognise that these times provide them with a greater opportunity to provide support to their competitors clients, at a time when their competitors can’t.

5.       In contracting markets, some people with throw the marketing rules out the window and “buy” their order book, just to keep production throughput. The impact of this will last well beyond the economic recovery – where they will find themselves classified as a cheap supplier and will have to labour hard to win any business at reasonable margins, for years after. We should always resist price competition and look to additional service as a competitive tool.

6.       We should be mindful of the horse race. The winner may only win by a nose, but will collect 80% of the prize-money, for that few inches. Tendering and quoting should be treated as the same, you only have to have a better offer than your competitor, not a substantially better offer. (my American friends refer to this as “not trying to out-run the bear – focus on out-running the other people who are getting away from the bear!”)

7.       My final word on the subject for this month..... The larger competitors who cull staff and lose business, will want to buy that business back after the economy bounces back. If they have delivered their clients to you (by not servicing them) in hard times, it makes economic sense to try to buy you out to get them back! Building your A-class client list in hard times makes your value especially appealing in the good times, when it is only an accounting ratio that determines if your trade sale price is affordable to the larger competitor.

Re-thinking Queensland?

There has been a trend since early September of returning business applications to Agents (and Applicants) and encouraging them to increase their commitments to the State. This is provided as a rejection, but with an encouragement of reconsideration if the benefits to the State are increased. In most cases (some Applicants have simply requested other States and have since been approved) these were approved after commitments were increased to a minimum commitment of $500,000 investment and employment of at least 3 new personnel.

This trend fulfils the key performance indicators for the case officer team, but substantially increases the risk to the Applicant. With this contract, the State could refuse a permanent resident application after 2 years, if the applicant meets the Subclass 892 requirements, but has underperformed on the agreed commitment. This could produce situations where Applicants could be operating a successful and growing business, but still not be eligible for permanent residency.

Another issue that is now surfacing is that States are preferring not to sponsor proposals which are substantially based on importing. This is now not considered of benefit to the State and several States are requesting adjustments to proposals where importing was the major or sole business function.

Has Your Applicant Visited Before?

The NSW Government now requires the Applicant to have visited the State to investigate their business opportunity, prior to making application. This may present some difficulty for genuine applicants who cannot leave their present business for a week or more, to visit their intended State. The States are aware of this and most (including South Australia) do not consider this a mandatory requirement. NSW is insisting on this as a requirement, since September.

Reducing the Risk of Getting Started

We have been able to assist several applicants in the past few months, with introductions to business owners for sales, equity purchases or franchise purchases, to enable the Applicants to mitigate their risks. We are not business brokers and we do not charge a fee for our service. We simply recognise that as we research opportunities for applicants we have been able to source better quality business opportunities than those that are advertised, which puts your Applicants out in front of the retail buyers out there. For further information on opportunities in most States, please contact Daniel on 08 9335 7724.

The average age of the workforce is steadily increasing.  For employers, that means the average age of their workers is steadily increasing. Baby Boomers, who make up the majority of the workforce, are now aged 45 to 62 years. Over the next few years more and more of them will be retiring turning a trickle into a torrent. In the past new hires would be found easily enough to replace them. In the future the shortage of replacement workers from among the younger generation, the so-called Gen-Y (currently aged 16 to 31 years old), may make finding the right, or any replacement a lot more difficult.

It’s not possible to get a handle on what issues an ageing workforce might present for your business until you have an understanding of the age grouping among your current workers and an idea of when they will start to retire, particularly those that are highly efficient, well skilled or just plain good workers. That can be discovered by carrying out a demographic study to show what percentage overall of employees will become retirement-eligible in the near future. A closer look will identify the key people whose departure would be a real loss to the business.

Next after that is to develop a strategy for tackling any problems the retirement wave might present. You can think in terms of hiring replacements and keeping current people on longer.

Hiring replacements

Most small businesses seem to prefer to hire from among Baby Boomers and Gen Xers with only a minority actually preferring to hire members of Gen-Y for their team. Enthusiasm, a willingness to learn and technological savvy are reputedly among Gen-Y's greatest assets but their unreliability, lack of experience, frequent job changing, know-it-all attitude and lack of team playing raise concerns for small business employers. But with Boomers going and increasing competition for the small pool of Gen-Xers there won’t be a choice. In the US, typical of advanced economies, the American Society Of Training And Development is predicting that 76 million workers will retire over the next two decades with only 46 million arriving to replace them.

Most of those new workers will be Gen-Ys. Employers will be faced with a multigenerational workforce among whom some real generational differences will exist.  Generational clashes in the workplace are nothing new. What is new is the size of the gap between their different values and work styles that could threaten to lower morale, increase employee turnover and reduce productivity. Getting them to work harmoniously will be a challenge demanding more focus on enabling and encouraging the ability of different generations to work in a collaborative manner.

It’s definitely time to start catching up on information about management techniques for bringing out the best in Gen-Y. On the other hand, employers will be repaid, through the better retention and integration of Gen-Yers into the workplace, for any investment in training they make relating to those basic skills that generation is perceived to be short on such as conflict resolution skills, communication, supervision skills, workplace etiquette and customer service.

Focussing on retention

Keeping on older workers provides an opportunity to retain organisational knowledge for a time and the opportunity to pass it on. Pairing older and younger workers together in a mentoring relationship, maybe guided by some formal training, builds skill level. Having new hires accompany more tenured employees as they perform their day-to-day tasks, (job shadowing), provides them with an insight into the resources, techniques, and short cuts that make experienced employees more efficient.

Of course, these schemes are predicated on having the old hands around still to pass on their knowledge or to just be doing their job. The fact that Boomers are reaching retirement age isn’t to say that they necessarily will retire. Longer life expectation, poor saving habits and a rising cost of living are keeping many people back at work well after they become eligible to retire. Circumstantial ‘push’ drivers like these may keep people at work but attractive ‘pull’ tactics based on more flexible and innovative working conditions, which suit their needs and circumstances, will ensure you retain or attract the best.

That’s why employees need to understand what will make employment continue to be attractive to older workers. For example, older workers tend to prefer a workplace that continues to offer them training, makes some workplace accommodations to suit their reduced physical capabilities, provides flexible scheduling (such as part time work and work from home), offers retirement and health benefits and a phased retirement package.

As the workforce continues to age, businesses that want to stay competitive  will plan to retain and use the knowledge of their older workers, as well as arranging for it to get passed on to the next generation.

Thinking about death is uncomfortable in itself – cold bloodedly sitting down and working out scenarios to deal with what will happen in the event of it actually happening is even more traumatic. That’s part of the reason why succession planning goes to the bottom of the ‘to do’ list for most business owners.

Even those who have gone to the effort of preparing a succession plan may not have constructed it to be in the true best interests of their spouse or the longer term viability of their business. Because of the tax benefits involved, estate and tax advisors commonly recommend leaving the business to the surviving spouse. While this makes perfect tax avoidance sense, it may not constitute a healthy family business succession planning strategy.

For a number of reasons, emotional and practical, a surviving spouse may want nothing whatsoever to do with the business in the absence of their partner. This is one reason why succession planning must begin with a frank family survey; it’s necessary to establish correctly two things - who wants to perpetuate the business and who can perpetuate the business.

The spousal partner may simply not want to take on running the business. Then the succession planning must take their reluctance into consideration. On the other hand, while many spouses have worked with their partner from the start-up of the business and involved themselves in its operations so that they have an intimate knowledge of it, many have not. Without proper knowledge of the organisation they may not be skilled enough, or lack the financial experience, to manage it. It’s not doing the spouse or the business any favours to pass on the challenges of running a business to someone who lacks the competence to do so.

If your business has more than one owner then you need to understand the risks you may face if you die unexpectedly without having a proper buy-sell agreement in place.  Looking at the situation quite objectively, if you were to make your spouse the heir of your share in the business, or, by default let that happen, would it be welcome to the other partners? Or to your spouse?

A successful partnership is a delicately balanced relationship and bringing on board a deceased partner's spouse can be difficult. Do they get along personally? Would they see eye-to-eye about the future of the business? In the absence of any special arrangement the remaining partners cannot force the spouse to sell them their share, and the spouse cannot force the remaining partners to buy his/hers. This sort of Mexican standoff can spoil a business and create a situation that is both unpleasant and unprofitable for your spouse.

Spousal interests might be best protected by turning your shares into cash through sale to the remaining partners. Again, lack of preparation here can have unfortunate consequences for your spouse – specifically, would they be able to sell your shares, and at a fair price, to the remaining partners? A buy-sell agreement can be structured to manage this by providing for an automatic buyout by your remaining partners upon your death. This arrangement is funded through the purchase of a life insurance policy (also called buy-sell insurance) to facilitate the buyout by them.

A written succession plan would detail how the business will be valued and what your spouse’s share will be. As a result, a business succession plan with buy-sell provisions provides all owners and their spouses with legal certainty should the unforeseen occur and reduces the risk of either side becoming embroiled in legal action over a valuation or payout figure.

It's important to realise that management (your power) and ownership (your assets) are for the purposes of succession planning, two distinct entities. You don’t need to transfer both to your spouse to protect their future. You may decide, for instance, to transfer management of the business to one of your children whose youth, enthusiasm about the challenge and skill makes them the person best suited to exercise management while maintaining an income stream for the spouse by transferring a share of business ownership to them.

Losing a partner is a dreadful enough experience in itself. Bequeathing your spouse an interest in your business that proves to be more of a burden than a support would be tragic.  The development of a business succession plan is crucial to making the business provide just the type of support you intended for them.

It can take hours of hard work creating and organising to publish your own email newsletter but if it doesn’t attract subscribers then all that work represents just so much wasted effort. One of the most important parts of email marketing is getting people to actually subscribe to your publication. Without subscribers, your enewsletter is pretty pointless, so promotion is worth every bit as much attention and effort as you devoted to creating it.

Here are some tips on how to build your opt-in list of subscribers

1. Put the subscription box in a prominent place on your webpages. Somewhere towards the top of the page is a good position to get it noticed. And yes, that is ‘webpages’ – not every visitor will make their first landing on your home page so provide the opportunity to subscribe from every page of the website.

2. Market your newsletter offline. Merely adding a link to your enewsletter subscription page on your website will not make it an overnight success. Passive list building just doesn’t work; it will need active promotion in other online and offline channels as well:

·       Send an email to existing customers

·       Issue a press release in the local paper

·       Send around a flyer

·       Mention it in any blogs, newsgroups, discussion lists, and forums you subscribe to

·       Mention it in the signature file at the end of your emails - anyone who receives an email from you will also receive your invitation to subscribe to your newsletter

3. Make it sound attractive. Write copy for your promotional materials that will attract the specific segment of customers/prospects you want to attract mentioning their particular needs, wants, and interests and the hot buttons that will motivate them to take action. Push the benefits of signing up to your enewsletter – what’s in it for them. They’ll want detailed specifics if you are to convince them to give up their email address to someone they don’t personally know.

4. Offer an incentive to sign up. This is very powerful. For example, you could offer new subscribers something substantial like a physical prize, a gift card or a coupon exchangeable for a product up to a certain value. Quite common is an offer of a free whitepaper and entry into a draw for a prize. Whatever it is, ensure you choose something that will resonate with the target customer demographic. Set up a special opt-in page for the contest and then go to work promoting it. There are many blogs and websites that allow free advertising of these types of contests and if you form a joint venture with someone else, you can widen the potential audience numbers even more.

5. Let them see a sample or current issue. People like to see what they're signing up for and whether it is likely to be of interest to them before they hand over their email address.

6. Make subscription easy. More subscriber information makes for a more qualified list and for better target marketing BUT being asked for a lot of contact information can be intimidating and will turn off many potential subscribers. Only ask for their email address at first. You can build up their detail by offering incentives to provide them in issues of the newsletter itself.

7. Make it safe. Put a link to your privacy policy next to the subscription box. Make your privacy policy clear so people understand exactly what you are going to do with any personal data they supply. One thing worth mentioning specifically – assure them you won’t share, swap with or sell their email address to third parties.

8. Let people know they can unsubscribe at any time. Add a link to your unsubscribe page right underneath the subscribe box.

9. Encourage referrals. If subscribers find your information useful they probably have friends or colleagues who would also. Put a ‘Refer a friend’ link in your enewsletter with a message like ‘If you enjoyed this, why not forward it to a friend’. Make it easy for people to forward your email on.

It’s all too easy to get people offside through poor communication – the careless remark that cuts to the quick, the dismissive answer. People make mistakes in how they communicate with others all the time. Managers are no different.

Ask yourself if you deal with your employees in any of the ways listed below. Every one of them demonstrates a careless indifference to the concerns of the other person or a gap between talking the talk and actually walking the walk. Any discrepancy between the talking and the walking will get you labelled as a bad communicator and a bad boss.

1.       Ask people for their opinions, ideas, and continuous improvement suggestions, and fail to acknowledge their contribution or provide a reason for why it can’t be implemented. Worse - acknowledge it was a good idea and then proceed to do nothing about implementing it.

2.       Tell them they are in charge of something because they have the most skills and knowledge then step in and micromanage how they do things. Worse - undermine or change their decisions without explaining why.

3.       Ask people for their input as if their feedback mattered even though you have already made up your mind about the final decision.

4.       Call a meeting and turn up late leaving everybody frustrated with the waste of their time. Worse – send in a message saying something more important has come up and you can’t make it after all.

5.       Bring the kids or pet dog in and let them run riot then ask an employee to clean up the mess.

6.       Badmouth employees to their colleagues. They’ll know they will be getting the same rubbishing from you behind their back in their turn. Just as bad – humiliate them in meetings in front of co-workers.

7.       Set a strict dress code for employees then turn up in your track suit. Worse (at least from a fashion statement point of view) – tuck them into a pair of Ugg boots.

8.      Fail to address behaviour and actions of people that are inconsistent with company policy. Worse – apply them inconsistently or make excuses for the shortcomings of favourites.

9.       Make your priority everybody’s priority by always getting people to drop what they were doing and help you out. Worse – then blame them for not getting their tasks done on time.

10.   Appropriate your employee’s idea and take credit for it. Worse – do it in a team meeting (at least some of the people there will know who really came up with the idea first).

11.    Change your mind frequently about plans and timelines without good reason. Worse - fail to communicate the changes to the people expected to do the work.

12.    Allow an employee to fail when you had information that he did not and which he might have used to make a different decision.

13.    Speak loudly and rudely to intimidate people. Worse - dominate all conversations so people don’t get the opportunity to respond to accusations and comments.

14.    Refuse to accept constructive feedback and suggestions for improvement.

15.    Ignore certain people and/or favour others. Worse – be inconsistent and make a person a superstar one day and a non event the next.

16.    Let your anger show by swearing, bullying employees, shouting at them on the phone and slamming doors on them.        

17.    Don’t return the calls or emails of employees – keep them wondering.

18.   Slap down questions, concerns and ideas that come up in meetings. Worse – belittle the person who dared to speak up.

19.    Cut off the employee you were talking to in order to take a personal call no matter how important the matter under discussion – or unimportant the personal call.

20.   Misrepresent or distort conversations with your employees when discussing them with a third party.

A penny saved is a penny earned - Benjamin Franklin

Be sure to read each article with the mindset "How could this apply to our business." Thinking of it that way will guarantee that you get value. Better yet, take notes as you read and commit to having the ideas implemented by the time the next edition arrives. Also, make copies for each team member. To really make sure something positive happens, work with your Xenex business development specialist to talk your team through the ideas and how to set a schedule for getting them implemented. We're here to help you get started.

While every effort has been made to provide valuable, useful information in this publication, Xenex Group and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.