I am being asked by directors in private and family owned companies about any consequences rolling down to small compnaies as a result of the recent High Court ruling on the directors of James Hardie.
My attitude is that directors of private companies should take careful note of the issues. As a director you have responsibilities and accountablilities under the Corporations Act and, although some of the high profile court cases involve directors of listed entities, every director has common responsibilities no matter your size. Just because your board room might be the kitchen or the lounge room table it does not excuse you from the Act.
It just makes common sense that you should run your business on a professional basis and that you comply with any laws impacting on your company. If your objective is to best the best at what you do then it should start at the top and that is by running effective board meetings. You cannot claim ignorance as you have a statutory duty as a director.
Thre are a number of common law and statutory duties of directors such as :
Duty to act in good faith in the best interest of the company
Duty to act with care and diligence
Duty to aviod a conflict in the position of a director
As a director you owe a fudiciary duty to the company
How many directors of private companies can say they pass the test on this limited list ?
It seems that director's lack of due diligence in private companies only gets found out when there is a financial crisis and the company is wound up. My advice is to bring an external board advisor or a non-executive director who understands compliance and risk managemnet and who can ask the hard questions at the board table.
You don't have to be a James Hardie to implement formal and professional disciplines at the most senior level of your business.
Executive Accelerators have established a Rountable Group for business leaders in a small, confidential and supportive environmment where successful CEO's, MDs or emerging leaders from non-competing businesses meeting every month in greater Geelong.
This group is in collaboration with G21 - Geelong Region Alliance and is modelled on two very succesful groups currently operating in the City of Kingston in Melbourne and include the City CEO and the leaders of a number of successful local business and social entities.
The primary focus of the Geelong group is business model innovation and accelerating the potential and growth of business and leaders. In today's fast changing business environment everyone should be challenging their current business model and seek to create innovation as a core business culture.
G21 is the alliance of a variety of independant organisation with a shared vision for the Geelong Region and inlcudesfive local councils and I strongly believe this rountable fits within their goals of sustainable development for business and leaders in the region.
The groups will meet once a month for a breakfast session for two and a half hours.
According to an article in today's Australian Financial Review by Fiona Smith, high-performing workplace are 12 percent more productive and up to three times more profitable than their low-performing competitors.
There is plenty of research to back this claim and my own experience, working in and with small to medium sized companies, is that most private business owners do not understand the importance of understanding reward for effort when it comes to winning the hearts and minds of employees.
The large coporations measure their employee engagement and are able to benchmark against some reliable numbers that have been established over many years. The lowest score I come up aggainst was in 2008 when I became the interim contract COO of subsidiary of a well known listed entity. The parent company had set a target of 65-70 as the engagement score of this business unit recorded a score of 28 %. Productivity was in the pits and I calculated they were invoicing less than fifty percent of the direct time on the shop floor.
Over two years, with the help of a great support team of five key managers, we achieved an engagment score of 62 percent and, just as important, we turned the financial result around. There were a number of initiatives that were implemented, the most important being that people had targets and we engaged them in what we were trying to achieve. We created a whole new focus on leadership that recognised those who wanted to be involved and understood the end goal.
We had the dream-stealers and the those who wished that nothing would change as it was easier before the changes. We made the changes in spite of them and worked around them. We set about changing behaviours and allowing employees to have pride in their work. We created a whole new OHS environment and started to implement a lean culture with the initial implementation of 5S. Initially we did this with one hand tied behind our back from head office personnel who were from a past culture. Fortunately we had new champion appointed at head office who encouraged and backed our ideas and passion to improve behaviours and workplace culture.
Employee particpation and involvement were critical. Can you say that in your workplace ?
Yet again Victorian business in rural regions are bracing to recover from flood damage.
Its the third time in two years that they have experienced a dispruption such as this. Recently I have been travelling through regional Victoria and spoken to business owners who are still trying to recover over a year later and they express concerns that they cannot see how they will ever fully get back to where they were before. The research shows that over 80% of business never fully recover.
I have also seen first hand that 95% of private business owners do not have what is known as a BCP plan. ( Business Recovery Plan ). And, unfortunately, many still have their head in the sand on this issue which is surprising to me given the floods and bush fires we have had in recent times.
I would recommend that you visit the SES web site and download their documentation on the emergency tool kit and they also have a a book titled Business Floodsafe Toolkit and Plan. If you cannot find it on the web site call them 1300 842 737 and ask for a copy. The kit applies to storms and other disasters.
If a diaster hits your business do you have a check list prepared that covers:
Your family, communications, staff, IT systems, customers, suppliers, cash flow, debtors, creditors, automatic debits from your bank account etc. Do you have a check list that details all your documentation and policy numbers on contracts etc ? If you are seriously injured or actually die, where is your will and who has power of attorney on matter with your personal health and/or the continuation of your business.
It's time to address this issue. You have an obligation to your family, staff and yourself. Also, if you are a legal director of your company , you are not meeting your legal obligations to properly manage your business under the Corporations Act.
This has been another week where the press is covered in stories about companies putting staff off.
So, it was refreshing to attend a breakfast briefing this morning put on by Matthews Steer, Chartered accountants and hear a successful private business owner tell his story. This family business, is in high-tech engineering and surface coatings.
They survived the impact of the last four years without having to put one person off and, in fact, employed some new staff. They had a typical successful family business attitude that their staff come before higher profits. The family believes that persistance is the key ingredient to their success and decided to just work harder to get through tougher times.
They understand the value of innovation, partnering with institutions such as universities and the CSIRO and seeking outside assistance where they have identified a weakness.
Finally, judging by the presentation I heard this morning, they understand the vital leadership attribute of humility.
I was involved in a discussion today about culture within a business or a Not For Profit and the question revolved around who drives and/or leads the culture within an organisation.
As usual, this monthly group had some different points of view. That's fine because it makes for a robust discussion and enables us to consider different aspects instead of having a one-sided debate. The real question was what role directors play in influencing a culture that ensure success.
I once saw a great definition of culture that stated Culture is what people do when no-one is looking. I believe that the culture within a business needs to be pervasive as everybody embraces the principles that make a business standout from the crowd. It the way people in an organisation behave, their over-arching beliefs, the unwitten rules, the respect for each other and the ability to work towards a common and shared objective.
I also personally believe the standards are set from the top of the pyramid in a traditional heirarchy type business structure and the directors must be more involved in the business in way that they can see and understand the behaviours and actions at grass roots level. After all that is where our customers experience the culture within a business. Just as the Chairman of board can set the standard for board effectiveness, the CEO sets the standard for the management team who in turn can make or break what filters through the whole organisation. A poor CEO will result in a poor culture throughout. Therefore the Chairman has a responsibility to manage and mentor the CEO as well as the board.
Two reference points worth looking at is a book titled The Maverick written by Richardo Semler and the other is a book titled The New Gold Standard by Joseph Michelli. The first will challenge you on a different business model and the second will explain how The Ritz-Carlton Hotel Company have a culture of customer service that is ledendary.
In my experience, over a number of both large and small to medium businesses, the great ones are those that have been successful in winning the hearts and minds of all employees and everyone is on the same bus heading in the same direction. They don't need to be told or micro managed. Everyone just does it.
You put a frog in a pot of boiling water and it will jump out. Put it in a pot of cold water and then gradually turn up the heat the frog will eventually boil to death.
This is how I relate to most of us with regard to having regular health check ups. We go along putting up with the minor creaks and pains and before we know it - Bingo , a heart attack. The same applies to bowel cancer, without regular checkups we wake up one day in pain, go the specialists, have a colonoscopy and find we have bowel cancer.
This is so for those over forty. You would'nt let your car go without servicing for a couple of years yet this is the way you treat your inner health, you never get it serviced.
As someone who believes in acting the minute something sounds or feels wrong, I would have had open heart surgery by now if I had not noticed a minor change in my efforts at the gym a year ago. One of my sisters would still be with us today if she had gone to the sepcialist when she first had pain. No, she was a nurse and knew better. She chose to ignore it, thought it would go away and she died too early. Again, I would have had the same issue had I not had regular tests.
You are no use to your family and your business if you are out of action due to your own stubborn atttude and do have regular check ups. I don't mean just going to your GP, go and have an echo stress test on your heart, have a colonoscopy, get you skin checked by a specialist, have your eyes checked, get your hearing checked and measure your various blood levels for potential early warning signs.
If you don't then your are not only a dill, but also selfish. Just make sure your life insurance is paid up.
Late last year Grant Thornton published a paper on private food companies in Australia. For me, the key issue that came out of that survey is that innovation is a core success factor in growth and profitability.
I often see private companies who have their head in the sand when it comes to taking a proactive stance on innovation. They believe that what has worked in the past and been successful will get them through in these ever changing times.
Jack Trout wrote a book that should be a must read for all business owners. It is titled Differentiate or Die although written in 2000, it is even more relevant in today's highly competitive business world. The only difference is the impact of the web in 2012 an some of the examples mentioned are no longer in existence due to mergers , takeovers etc.
Consumers are faced with thousands of choices on a daily basis. They research on the internet before making a purchase and are able to access product from all over. For example, my daughter is expecting her first baby next month and I have watched with interest how nearly all the new baby gear has come via research on the internet.
Innovation has to be part of your DNA and be a constant core activity in your business. Your competitors will copy you and that requires you to be leading the way. My experience is that the greatest change is in packaging and making convenience king.
What are you doing to ensure your clients will chose you and your products over your competitors ? If you have an advantage now, is it sustainable ?
Just look at McDonalds menu today compared to ten years ago and their sales are still growing.
This photo was taken after last year's flood in Ipswich. If this was your business would you survive and be able to recover ?
The building belongs to the Peter McMahon Swim Factory, a successful swim centre for kids and learners. Back in 1974 Peter's father also operated a successful soft drink company from the same site and it was completed flooded in those at that time as well. It took a long time to recover from that closure in the middle of their peak sales season.
So, this time around Peter knew to prepare and removed all his motors, papers. computers etc out when he saw the signs that a flood was heading his way.
Pre-planning enabled him to recover quickly and be back in business within ten days. The reseach says that 80% never fully recovery from such a disaster.
Where is your your recovery plan ? Contact us if you want some help in developing a business continuity plan.
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