September 2023
The focus of the August newsletter is all about reviewing business strategies, which is probably appropriate as illustrated with all the issues now facing Qantas.
The attachments with this newsletter
Kim is available to help with your questions and concerns if you need any assistance, and as always, the first chat is always free of charge or obligation.
“A focus on rewards can open workers up to overlooking other important values. Incentives can bring out the worst in us." by Taylor Telford in AFR 28/1/2023
Two of the worst outcomes for any business is to make an incorrect decision about rewarding employees which have achieved superior performances in their jobs. This situation can cause disharmony within the business which in turn, creates unnecessary problems for the business as it gives your business’s enemies advantages over your business.
The fact is that each business already has other real enemies, which includes competitors, slow payers, manipulative customers, plus dodgy suppliers, without creating further “enemies” within the business. You certainly don’t want to create situations which cause an “us and them” effect within your business.
The problem with inappropriate reward programs which only rewards specific groups within your business is that it destroys the element of teamwork which is so essential. In the current difficult economic times, teamwork creates efficiencies and the best possible outcomes across the whole business.
When the decision is made to only reward specific groups within the business, two negative outcomes occur.
The first is when the recipients start falsifying figures to achieve the bonuses and rewards because it becomes:
The second problem is that employees in the other groups which are not included in the reward programs, and have delivered, or at least in their eyes, a superior achievement. In this case the employees can:
As a consequence, in either case, negative costs for your business increase exponentially and unnecessarily. The last thing you want in a slowing business environment is to have employees which are not fully committed to the welfare and efficiency in your business.
History shows when all employees are treated equally in regard to achieving rewards and special benefits, they are more likely to operate as a team. Conversely, having an inappropriate rewards program for all employees will almost certainly ensure that the best team environment will never be achieved within your business.
There are many business examples where we see that money was not spent upfront to avoid a problem in the belief that any future costs, if a problem occurred, would be of a minimal cost. Unfortunately, as too often happens, this belief is soon proven to be incorrect.
A perfect example is a business’s terms of trade. In the past, and probably still happens today, money is not spent on your business’s terms and conditions upfront on the grounds that your terms of trade would be honoured by most customers. Reality often proved otherwise when the customer didn’t pay. In that case, the business has few legal options to seek redress for the unpaid invoice and to cover the costs of enforcement.
Today, I suggest that this situation still exists, where proper documentation drawn up is not prepared by appropriate legal experts. The same would also apply for the documentation covering special orders, return of product, change to existing contracts, etc.
Another prime example from the past was the introduction of the PPSR (Personal Property Security Register). It took a number of large dollar loss situations to be exposed in the first few years after its introduction, to convince business owners and managers of its worth.
Spending on risk assessment exercises is still lacking for many businesses in regard to new and existing customers, completing annual reviews, when customers seek increased account limits, employing and finding the best people as employees, etc.
The list goes on where spending on upfront costs is deemed to be of less importance than the actual costs in the future which are often overly minimised, yet prove to be far more costly over the life of the business.
One of the outcomes of any technology response relates to two major factors, quality of the initial data and human influence in the design process. There is now also a second problem with AI and ChatGPT. The same issue applies about the quality of the source information and whether it is correct or may be incorrect and skew the end result of the program.
It will be interesting for instance, when AI based programs start producing results, will these results be valid from the information sourced by the program. In addition, was any information which was used, identified as being valid and authentic, or was the information discredited and false, or biased towards a specific outcome?
There is a long way to go before AI programs can be relied upon without further investigations on whether the information produced is of value, or the basis of a future calamity.
In a digital world, access to power is, and will be, an essential factor to enable the digital and modern business to function. However, it appears there are many threats to the access of power in the future, especially in the coming months.
It is known already for example, not only do crypto currency mining and developing green hydrogen require a lot of power, additional users will be trying to access what power is available.
In addition, respected authorities are already suggesting with the pace of removing coal fired electricity generators and the slow pace of renewables, means there are likely to be blackouts this summer in Eastern Australia. The question then is, “… if this happens, how will your digital devices operate?”
A perfect example of the cost of a denial of service, albeit a system problem not caused by a lack of power, occurred in a regional Victorian town of Rutherglen in the week ending Friday the 8th of September. In this situation a town of nearly 2,500 without a bank, could not operate any digital payment system for most of that day, or access any cash.
The negative effect for all concerned without cash was a loss of business, embarrassment and further costs trying to find or obtain cash, or having to return to the town to complete their purchases later, or worse still, go without.
This will not be the only situation where a denial of service, irrespective of cause, will happen in the coming months. It suggests therefore, businesses should be willing to accept cash from their customers. In addition, consumers should consider carrying some cash in the future which may be a prudent action. In either case, it is a valid risk management policy to ensure businesses can sell and consumers can buy without the burden of unnecessary cost.
Credit Matters is a financial risk management resource centre for the Australian business community. If you are in business, Credit Matters is your ideal source of financial risk management solutions.
Credit Matters is continuing to grow and provide marketing and knowledge about financial risks to the Australia business community.
Futhermore, we invite marketing and knowledge ideas from our readers and contributors on how we can assist our respective firms grow. If you have any ideas, please contact me at info@creditmatters.com.au.
If you are interested in finding new ways to reach your marketplace, why not try Credit Matters. Our prices for advertising are very reasonable and advertising packages are on offer to make any cost, even more affordable. So if you are interested in reaching your customers at the right price, please contact Kim at info@creditmatters.com.au for options.