When British Airways asked its 40,000 staff to work unpaid, by yesterday only 800 had accepted the unwelcome invitation. I don’t know if the 800 included Willie Walsh, BA’s chief executive, who agreed to forego his £62k – but whether it’s 799 or 800 - I’m not going to split hairs.
At least five per cent of BA’s employees have read the signs - the most obvious of which was the £401m annual loss posted in March this year. And a further 6,000 workers have signed up to one of the company’s euphemistically labelled ‘cost-saving schemes’ to plug the gap partially left by the executives who have been dragged kicking and screaming out of their seats in business class - to join the rest of us listening to the baby screaming and kicking in economy.
And yesterday, in the criminally insane world of football, Southampton was the latest club to give its staff unpleasant news on payday. But again, this was hardly surprising as the football club’s holding company, Southampton Leisure Holdings, went into administration in May.
In this new reality (PR speak for recession) we find ourselves in we are going to have to make tough decisions for some time to come. Whether the new reality is ‘L’ or ‘W’ shaped there will doubtless be more bloodshed. But the businesses that prosper will invariably strengthen on the back of committed and motivated people.
But cutting salary costs without putting the wind up your employees needs to be carefully executed.
- Start early. You need to manage your money on a daily basis, but understand your cash flow for the next twelve months.
- Communicate your plans to your people with transparency and honesty. They will stay loyal and motivated if you discuss their contribution to the company’s sustainability before they read about the business in the press, or take a call from an angry creditor.
- In a unionised environment engage with the union representatives in meaningful consultation.
- Have a clear strategy to ride out the storm, and always with a plan B.
And if you get to the stage where you’re asking people to work for nothing, it might just be too late. Goodwill is one thing, expecting your workers to forage for berries is quite another.
….. And speaking of frugality - was anyone else tutting at those cheeky scamps at RBS scoffing £300k worth of (our) strawberries and champagne in the hospitality suites at Wimbledon this week? A spokesman for the belligerent bankers said that the corporate jolly was for customers not staff – and anyway it was a contract that they couldn’t get out of …. yeah right.
I thought selling a deal on at a discount, or collapsing it and taking a loss was standard banking practice these days. Silly me.
I must admit that I haven’t read Shepherd Mead’s 1952 book, ‘How to succeed in business without really trying’. I can’t help thinking that he was either too young to remember the Great Depression of the 1930s or that he’d inherited a brewery the day before prohibition was abolished, or maybe it was a parody.
Either way, the title of the book doesn’t really tempt me to read it. In contrast, somebody else once said that if you don’t have to work hard for something it’s probably not worth anything. I suppose that’s why the endless stream of talent show contestants on TV feel obliged to tearfully implore that they’ve ‘worked so hard’ (presumably by wailing into a hairbrush in front of the bedroom mirror since the age of thirteen).
The truth of the matter is that business is tough - and particularly so at times like these. But simply working hard in a downturn isn’t a guarantee of survival. You also need to analyse every single aspect of your business to extract maximum value from your efforts. Businesses that survive and strengthen during a recession are those that have learnt from the experience and adapted.
At Axis we have gained a lot of experience and knowledge of what our clients are going through, and how many of them are working differently to guarantee sustainability.
And we are supporting businesses by reviewing their internal systems - streamlining and discussing ways that they can reduce costs, whether in areas such as telephony and broadband or the more traditional tax arena. Business owners need to be aware what the best of their competitors are doing; and by benchmarking their own performance against the industry they can form a progressive strategy.
The banking sector has achieved enough column inches, but while the banks continue to shore up their own balance sheets we must find ways of protecting ourselves from the fallout of their tribulations. Two-month old cash flow forecasts won’t hold any water with the banks; they need to be right up to date. And they must be as accurate as humanly possible, subject to the vagaries of the market. Gone are the days that a two month slippage in cash flow figures would receive a helpful flex from the bank. You’re more likely to be met by, ‘It says here that you don’t need an overdraft now’.
And we need to guard our own cash with the same ferocity. If I had a pound for every time I’ve advised clients to credit check their debtors I would have had shares in Experian. But now everyone’s doing it, in the knowledge that a big bad debt can have a nightmarish domino effect – and the banks know that more than most.
Good debts are covering bad debts at the moment, but surely the credit control approach that we are adopting now would stand us in good stead when things improve.
And they will improve. But we can’t expect it to be next week or even next month. Some businesses are hibernating in the hope that they’ll still be here when it’s all over. But others can see the opportunity to inwardly strengthen, firstly to defend the imposing threat, and then to be in a position to attack when the sun starts to shine.
The strongest companies are led by calm directors who have confidence in their ability to make the right decisions.
And it’s only a guess, but I don’t think many of them will have read Shepherd Mead’s book. Maybe I should pick a copy up.