A wise manager shares the good, the bad and the ugly

Businesses around the world are facing uncertainty as a result of the global economic crisis. Now, more than ever, employees need reassurance; affirmation from top management which supports the ability of the organisation’s business model to weather the downturn. Anton van Heerden, MD of Softline VIP, is a champion of open and honest communication in addressing employees’ concerns. An ostrich mentality, he says, will only work with mediocre employees. To retain prime talent, you need to face reality – together and head on.

All business leaders have to know what is going on in the world and today that means acknowledging that the world’s economy is in turmoil. The realities have hit home in South Africa and although they may not understand it completely, employees are anxious about what this spells for their livelihoods. This leaves management with the challenge of conceding that times are tough but still ensuring their offices are filled with truly motivated and energetic people. This is a difficult, but crucial, balance to strike.

There seems to be two extremes in terms of how businesses are dealing with the recession. In the one corner you have the “Pollyannas”; those who believe that simply talking about 2010 and all the things that make South Africa unique means things are not that bad. In the other corner sit the naysayers; people who hone in on adverse press, embellishing it still further with their own doom and gloom predictions.

And, although it is difficult to understand, there are those who are simply flat-out ignoring what is going on – the classic ostrich mentality. I think this is almost worse than having an unbalanced view because it creates uncertainty amongst your workforce.

The fact is, the world economic crisis is a very complex issue that affects different countries and markets in different ways and nobody knows exactly what is going to happen. I do believe that opportunities can be found in almost any situation and with the right attitude our businesses can not only endure, but prosper.

Use all the negative press as a motivating factor by firstly acknowledging it and then by channeling your staff’s energy into ways to achieve success. Managers who don’t strike this balance will lose credibility with their workforce.

My advice to managers is to:

• Acknowledge the facts and discuss these openly with your staff (I have been surprised at how little some of my staff knows about what’s going on in the economy). Don’t assume your people know what’s going on – it’s your responsibility to inform them if they don’t;
• Explain to your workforce that although the news is negative, as a business you can decide how best to react to it and;
• Turn this negativity into a motivating factor by challenging your staff to come up with innovative ways of ensuring continued success. It is commonly accepted that the best ideas are born in positive environments, so it’s important to create and maintain that positive environment.

Your money-maker can’t function without the necessary cogs

Opting to start your own business certainly offers a sense of freedom and power, and allows you to determine your own income. MD of Softline VIP, Anton van Heerden, believes one of the cornerstones of success is having the right systems in place – from day one. Without the proper insight into your business, its processes, and its people, the next sale you make may very well be that of your own business. Here he discusses some of the fundamental mechanisms which can help a new business thrive.

Accounting software

Selecting the right accounting software for your particular business is important for streamlining financial management. Having a handle on your accounting, inventory control, and the availability to generate powerful reporting are useful when meeting the challenges of today’s business demands.

What you must have is a system that will ensure that ALL sales are recorded accurately, and that can do this while differentiating between cash and credit sales. VAT should also be recorded separately. An invoicing module would typically do this for you if you use accounting software. Then, a bank reconciliation must be done monthly to ensure that all cash sales and payments (according to your accounting system) are actually reflected on your bank statement. Monthly debtors and creditors reconciliations should also be done.

Payment systems

Set a system in place that ensures payments are properly authorised. This can be done by setting up multiple signatories on a cheque account or multiple passwords on an Internet banking profile.

Stock systems

You need to have adequate physical control over all stock. All stock movements should be recorded on stock sheets by a responsible person. Regular monthly stock counts must be done and actual stock must be reconciled to the general ledger stock balances. Variances must be investigated.

Management accounts

Capture your income statement on a spreadsheet every month and build up this history over time. This will enable you to analyse the financial performance every month and identify trends in revenue and expenses. This spreadsheet should also be used as a forecasting tool. A business should re-forecast its revenues and expenses on an ongoing basis in order to know what to expect. It is critical to have a realistic idea of what results to expect because investment decisions are often based on future expected cash flows, like capital expenditure decisions. A regular forecasting system forces you to take a longer-term view of your business.

Human resources

Ensure that your employment contracts are comprehensive and that they deal with all the relevant HR and labour issues within your business - leave, overtime, working hours, etc. Ensure that disciplinary and grievance procedures are in line with the Labour Act. Put a performance management system in place where it is clearly communicated to people what is expected of them and where regular feedback is given in terms of their performance. This can be an informal system but it should, preferably, be documented.

Payroll

Use a reputable payroll system to pay your salaries and wages. Not only will this ensure you deduct the correct amount of income tax and other charges, but also that your business complies with the many statutory requirements relating to payroll.

Other important issues:

Vision and direction

Decide what your goals are with the business and communicate these clearly to your staff.

Change management

People don’t like change. Don’t make too many changes too soon, except if it’s really necessary. Too many early changes will create uncertainty amongst staff, so give people time to get used to the management and business procedures.

Communication

Clear and regular communication across the company is very important. It is easier to get people motivated when they know what’s going on. It eliminates uncertainty and makes people less dependant on the “grapevine” as their main source of information. Regular meetings during which minutes are taken and then distributed to everyone can serve this purpose well.

Recognition

Design a recognition system whereby people are rewarded for exceptional performance.

Placing the new Companies Act under the spotlight

Note:VIP Seminars hosted a special seminar about the new Companies Act in 2009 but unfortunately this will not be repeated in 2010. The accompanying seminar literature is still available on request. Click here for contact details

South Africa’s new Companies Act, 71 of 2008, which is expected to be come into operation on 1 July 2010, brings changes which will affect every existing company, its directors, and shareholders. Softline VIP has been at the forefront of educating businesses about the new Act through a series of seminars across the country, facilitated by the author of The New Companies Act Manual, Piet Delport.

Delport says the new Act is the most important company law development since 1973. It replaces the current Companies Act, No 61 of 1973, and amends the Close Corporation Act, No 69 of 1984. Amongst the most significant changes is that close corporations will cease to exist as a new form of enterprise. While existing close corporations can retain their status, no new close corporations will be registered after the Act comes into operation.

New types of companies under the Act include the Non Profit Company (NPC), the “RF” company and the State Owned Company (SOC).