Fun, Funds and Fundamentals

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In an era of cuts, rationalizations and restructures, the following article cuts to the core. Figuratively, it speaks about the unspeakable. The issue need to be brought onto business agendas. Therefore, we invite you to share it with those in your network.

Be careful of what is cut.

The unintended consequences of brutal cost cutting, restructuring and outsourcing decisions throughout the corporate sectors and around the world are conspicuous. They are evident in inadequate stock levels, lower staff member totals, insufficient IT infrastructures, poor and spasmodic customer service standards, as well as many other profiling characteristics.

Most devastating are the instances of despondent staff morale, negative self images and dysfunctional corporate cultures.

One common thread in too many such instances is the outright ownership or dominating control of funds managers, hedge funds and private equity investors.

During the last decade of the twentieth century and the first decade of the current one, the broader finance industry assumed top mantle of international, national and local business. As a consequence key performance indicators were oriented to financial ratios. Financial gearing, debt and fiscal instruments have become the overriding drivers and measures of business productivity, competiveness and worth.

With the changes in philosophies and focus, past corporate values, histories, achievements and beliefs were and are not recognised, respected or valued. Sustaining corporate cultures were dismantled or fractured. In short, many entities became and often remain soul-less.

Long term strategic plans, goals and objectives have been discarded. These financial-geared corporate leaders typically had and have trading horizons of two, three or, at a push, possibly five years.

The targets of such senior management actions centre on stripping out excess "fat" and infrastructure, complemented by increased transaction volumes, margins and profit, often underwritten by reduced inventory and tighter cost controls.

Brand names appear to be the only constant. However, behind the signage, billboards, advertising and positioning statements it was a very different atmosphere and working or business environment.

Correspondingly, funds and funds managers have become increasingly mobile. There is a seeming perennial pursuit of optimal returns, capital growth and the liquidation of equity in specific entities, products and services.

In the wake of these broad trend-line are the littered remains of undercapitalised, highly geared corporations, retail investors who carry book losses for investments in restructured public listings and IPOs (Initial Public Offerings) and a deep pool of disillusioned executives who were previously dedicated professionals with a strong commitment to specific industry ideals.

National governments appear to be in tail spins, their taxation offices bewildered by "Barbarians" who are no longer at the gate or located in the head office, but rather long departed for locations, opportunities and prospective investments beyond country and regional borders.

Consumers, clients, the media, suppliers, investors and political leaders need not look far to be confronted by the ubiquitous presence of such case studies. Few, if any, sectors appear to be immune. Examples are evident in retail department stores, fashion and food networks, engineering groups, property development, commercial shopping centre investment vehicles, construction, human resource practices and yes, even funeral directors.

ALTERNATIVES PREVAIL

For those business owners, leaders and managers who choose not to be involved or overwhelmed by this all too common trend, there is considerable scope available to establish distinctive presences in the marketplace, recruit and retain professional staff members who are dedicated to certain positive corporate cultures, values and philosophies and to foster closer, mutually rewarding relationships with manufacturers, distributors and supply chain management groups who assign considerable value to belief systems in which satisfaction, service, professionalism and respect are immutable foundations to sustainable success.

A NEW LANDSCAPE

The new order or subset of corporate owners and leaders cannot be ignored. It is assertive, focussed, driven and often well resourced to pursue and achieve short term financial outcomes.

However, its success ratio is not high. The root causes of many liquidations, mergers, acquisitions and floundering business entities can be traced back to the emergence on shareholder listings and ownerships of fund management, hedge funds and private equity ownership.

As the green shoots of new business growth and opportunities appear on the corporate landscape it is significant that a re-emergence of the small entrepreneur, females in particular, is apparent.

Creative and widespread use of the countless forms of low cost social media is impacting on the value and nature of brand names and images. Everyone, it seems, has an opinion to express and a point to be made. They simply need a channel and a platform.

The balance of power is hanging.

Marketing power is shifting to consumers, networks and entreprenours. Corporations and business entities are being made to participate and engage with customers and non customers, or to suffer the consequences.

High energy, expressive and open entrepreneurs have the capacity to avoid or overcome previous impediments of size, worth and established presence by ongoing use of social media, like You Tube, Facebook and Linkedin.

Significantly, the attributes which appeal to and most influence on-line savvy consumers are the philosophies, values, cultures and beliefs of the people behind the brand. It can be fun.

Callous, disciplined adherence to objective and detailed financial ratios, benchmarks and goals appear to have little market appeal.

Behold, the evolving presence and competitive advantage of "local". That includes delegated authority to corporate executives, greater commitment by local members of buying, marketing, supply chain and franchise networks.

Flexibility, adaptability, engagement with local customers and direct responsiveness will be the foundations of sustainable development in the ensuing months and years.

There is a new growing force in the marketplace and it is not dependent on capital, debt, gearing and financial ratios.

May the force be with you.


About

Barry Urquhart, MD Marketing Focus, Perth, is the author of Australia's top two selling books on customer service and is an internationally recognised authority on consumer behaviour and creative visual marketing.

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