Credit Matters

Surviving the Recession

Episode 05. 4th Key Factor – Employees and Contractors

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Kim Radok19 May 2020

5th Episode - 4th Key Factor – Employees and Contractors

PEOPLE, make or break businesses.

Within your business, from management to the warehouse, maintenance or accounts employees, the best of these people will be working to keep your business going. Those with vested interests, the disenfranchised, the Marvellian types and those with alcohol, drug and gambling problems, will be causing damage.

Other people from outside your business will attempt to undermine your business at every opportunity. These people include the do-gooders of the world, bureaucrats and legislators who have never operated a business, slow paying and manipulating customers, suppliers who never deliver and fraudsters who just want your money.

It is therefore critical in a recession period that you employ good and honest people throughout your business. It is these people who will strive to do the right thing by the trading entity and people who employ them. If your business succumbs to the temptation of employing people who are cheap, or to underpay those that are employed, or people who leave their brains at the front door of your business, then this not a good recipe for survival in a recession.

What is especially important is to employ people as appropriate for the size of your business. In my view and based on many years in the real business world, employing contractors from your own country, can be the difference between smaller businesses surviving and growing or failing.

In larger businesses, all people involved in the business should be, in the majority of situations, direct employees. At the end of the day, no person can serve two bosses properly. This applies particularly to sales, customer service and accounts people. After all, these are the knowledge workers and key front-line protectors of your business.

Cheap upfront employment options, such as outsourcing critical tasks, especially to people from an overseas country, is fraught with trouble. When you employ mercenaries to guard the safe, you cannot complain if they steal the safe or let a higher bidder take your money. Likewise, if you allow outsiders manage your customers and suppliers, you cannot complain when they leave if they take your customers and suppliers with them.

Even in the good times, we have seen many employees and contractors do the wrong thing. I would suggest in a recession, this situation will only get worse. All people are tempted at some stage, if under enough pressure, to do the wrong thing. Counteracting the desire to do the wrong thing, can only be achieved, in most situations, by employing the right people under the best possible employment conditions.

In a recession, people employed for the right reasons and with the right intentions to do good, can be positively motivated to complete other work to help the business survive. These people also add value by already knowing the business’s customers, suppliers, operating systems and where efficiencies can be gained. This knowledge is worth dollars in the bank to your business and is gold in the hands of your competitors. The importance therefore of managing these people through tough times cannot be overestimated.

This concludes the fourth key factor; cash protection. After a short break we will review the next key factor, the right suppliers.

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