Survival of the fittest

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Stephen Goderski, Partner and Head of our Restructuring team, with over 35 years’ experience in crisis stabilisation, identifies what a ‘good’ business really looks like.

We find ourselves in an uncomfortable position where there is widespread dissatisfaction with the government but a lack of confidence in both the opposition and other political parties.  This makes the run up to the next general election (to be held no later than December 2024) potentially damaging in view of the inherent uncertainly of its outcome.

Reading the excellent survey of owner managed businesses recently published by The Association of Practising Accountants, the following points struck me:

  • 77% of businesses rated government support as either poor or very poor – this in a post-furlough landscape where government support for businesses could not be faulted. This makes me wonder whether businesses quite like being nannied – as long as they don’t have to pay for it of course
  • Half believe that the government could do more to tackle inflation – Only half! What do the other half think that governing entails?
  • One in three felt that a change of government would be good for business – surprisingly low when you consider the previous points. Nonetheless the fact that we have had three prime ministers in the last four years (that after the turmoil of the Brexit years) may simply indicate that what businesses really want is stability
  • Half believe they are in better shape than twelve months ago – dare I say the proactive ones?
  • Almost four out of five were confident that they could deal with further interest rate rises over the next 12 months – which again indicates a level of confidence in their ability to survive
  • Almost 70% were unlikely or highly unlikely to make significant capital investment in the next 12 months – not surprising given the looming general election.

The survey publishes a selection of very interesting quotes from business owners and is well worth a read.

As everyone realises, it is tough out there and has been for some time.  Regardless of your feelings about taking control of our sovereignty, Brexit has not been good for the economy on a number of levels (loss of market, loss of workforce leading to wage inflation, increased bureaucracy in selling into the EU).  To compound this, we have had COVID, the ongoing Russo-Ukrainian war, and now trouble in the Middle East. The knock-on effects of these events for the UK include significant debt levels, leading to a reduced ability for the government to invest in future-proofing the nation’s infrastructure, and increased energy costs, which affect all of us many times over.

And yet 50% of the APA’s respondents believe they are in better shape than they were 12 months ago.  We live in Darwinian times and it really is survival of the fittest, the fittest being those businesses which have vision, are strategic and who understand what is needed to drive their businesses forward.

What does that business look like?  I would suggest that it incorporates many if not most of the following elements:

  • Strong leadership
  • Clear values
  • Operational flexibility
  • Great systems and controls
  • Recognition of what is important to their business
  • Motivated workforce
  • Accountability at all levels

Let’s dig a little deeper into some of these elements. Tone at the top is important and progressive leadership is essential; that means dismissing your leading salesman/fee earner if they fail to adhere to the firm’s values – otherwise what is the point of having such values? 

Operational flexibility speaks for itself, and great systems and controls allow for real time monitoring and are an effective early warning system for things going wrong (or right of course).  What is important to a business may change over time. At the moment I would suggest that for professional services firms their employees are more important than their clients (please note that I am not saying that their clients are unimportant!). I know that at PKF we put considerable effort into making life as comfortable as possible for our teams in the context of delivering great service and results and I know that we are far from alone.  Unlike many of our competitors, we recognised this in 2018 and had implemented a new regime by 2019, so working from home was already being actively encouraged by us prior to the pandemic. 

Keeping all of your team, regardless of age or experience, motivated is clearly desirable for any business and is not something where one size fits all.  What is important to trainees is not what is important to the director who has been with you for 30 years, but both need to feel valued and be kept happy.  That can be challenging but is not impossible.  A very simple way of gauging satisfaction levels is by regularly asking people how they feel and what would make their work life better.  Some suggestions will be unworkable but as long as there is dialogue and the reasons for not taking up a particular idea are explained, you may be surprised at the number of good practical ideas that you receive and the engagement of your team when they are implemented.

Finally, accountability.  Who is responsible for what.  Something which, unlike the result of the next election, there should be no uncertainty.  If everybody is clear on the direction of travel, their role in the journey and they believe that they have had some input into the route and means of transport, that should be a very happy and motivated workforce and great financial results should follow.

And after all, that is predominantly why we all work in the first place.