|
|
Take
a good look at yourself
By Jeremy Priestley, Managing Partner of
The P&A Partnership and Managing
Director of P&A Receivables
Services plc.
It is always tempting, when writing a review of
a past year either to blame the economic scene, if it's not been
good for business, or to praise well thought out plans, if it has
been a success. If it has been a bad year then it's always fine to
blame the Chancellor! But I will not get into that argument this
time - enough financial journalists have already done that for me!
Most businesses fail because the owners don't recognise what's happening
around them - and if they do, they often fail to make changes to meet
the world that they now operate in. Whether that's a shift in the market,
a shift in processes, a shift to assembling bought in components, to
importing a final product made for them somewhere cheaper across the
world. Each one of these factors requires an owner manager to looks
at the business and its performance from a different perspective.
It's no secret today that business success largely revolves around
people and not capital. Many traditional manufacturers are now essentially
services businesses, and in most industries people costs are much higher
than capital costs and yet the owners more often or not, still use
the ratio of return on capital employed rather than the a return on
employees costs to drive performance. Not only are capital ratios likely
to be misleading, they are also likely to be irrelevant.
But focussing financial information on employees costs and productivity,
can show how the business is truly doing and suggest ways to improve
performance. Instead of asking how much capital is used in the business
and what the productivity of that capital is compared with its cost,
you ask how many employees work in the business and what their productivity
is in comparison to their cost.
Only by highlighting the productivity of people rather than capital
in financial terms can you isolate the main drivers of people performance
and enable the identification of meaningful levers, as well as the
value destroyers, and focus management's time on profit creation.
A concept not easily tackled in a short news article, but one your
auditors can help you with to assist your business growth in the
coming year. Of course if your business needs some recovery solutions
you are always welcome to speak to me for advice.
Jeremy Priestley can be contacted on 0114 2755033.
December 2005
< back
to News headlines
|
|
