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.

 

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.

 

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.

 

The South Australian Government has passed new legislation under the title SA Small Business Commissioner Bill.

Part of this change introduces new obligations for franchisors in the franchising industry operating in that State and has generated some some remarkable whinging by some in the industry. I read an article from a well known franchise commentator in a blog today that made me think he must have lost an arm or similar due to the new legislation.

My background in franchising over the years is based on being involved in the industry as an advisor, franchisor, franchisee, strategic planner and as an accredited  mediator for the franchsing Code of Conduct. I support any action that helps eliminate the opportunity for a franchisor to take advantage of a genuine hard working franchisee. I know that there are also good and poor franchisees in some systems but my experience suggests that where there are troubles in a franchise system you can generally trace it back to a number of fundamental business system faults at the franchisor end. Backed by poor recuitment systems and poor ongoing communications.

It should also be recognised that there are some great systems operating in Australia and I bet they are not concerned about regulation as they just get on with it without crying "poor me " over red tape and government rules.

You only have to listen to the comments made by some at franchise shows when talking to prospective franchisees to undertand and wonder if the truth is sometimes streached as to future success. At a recent show I posed as a potential franchisee for a book I am writing and was shocked at some of the comments about particluar systems by their represenatives.

In franchising,  the franchisor has all the control and many prospective franchisees do not realise that they are really only renting a name and a system for a set period of time. This is fine but it's when franchisors abuse that control that disputes are likley.

The Franchise Code of Conduct does not , in my opinion, go far enough in ensuring  that all information provided is truthful and acurate to enable a potential franchisee to make an informed decision. Sometimes you have to protect people in our society from themselves and often a decision to buy a franchise or small business is made through the heart and not through common sense and proper due diligence.

On a final note, the franchise consultant who asked me during a meeting one time that does it really matter if the numbers are not entirely true as franchisor needed to find more franchisee to ensure he had enough capital coming in through up front fees to keep the business viable. That's one reason we need tighter regulation.

 

Over the years in both private and listed entities I have seen and been exposed to behaviour that is now out in the open and clearly identified as bullying.  My experience is that it has devistating effects on the internal culture and especially on the individual at the receiving end.

 Bullying comes in many forms in the workplace and it is the not so obvious behaviour that can cause the most damage. It is seen at all level of  a business, from the board room down.

The accepted definition of bullying is repeated, unreasonable behaviour, directed at an employee, or group of employees that creates a risk to health and safety.

Social and workplace isolation of an individual is one of my greatest concerns. This can be achieved in many ways, but generally it is premeditated and vicious in nature. I have seen employees deliberatly excluded from meetings, placed at a desk or in an office that is unusuitable, had their vehicle downgraded, not inlcuded on projects where they subject matter experts, and left off common internal communications etc. It is well documented that the effected individual is in a no win situation and can lead to suicide at a time in the future. You only have to talk to a workplace psychologist to understand the impact. 

Most disturbing off all is that the bully often gets away with it. They are cowards and you will find that they are also treating their partners and family the same way as they know they have control of weaker individuals or that their victim will not report them or seek help.

It takes leadership from the top to create a positive culture that is pervasive throughout a company and, if that is missing, performance from everyone will drop. Some cowards see it as badge of honour to be seen as tough. That might have been accepted in the 1950s and 1960s but it's not acceptable in 2011.

 

Every month I meet with a variety of business in regional Victoria and experience first hand the mixed results that they are having.

There are some great businesses in regional areas and, just like those in the capital cities, its the ones who are managed and lead by those who have a passion and a clear vision of success who are getting the right results. On the other hand, its those who are doing what they have always done in the past, who are wondering where their sales have gone.

Walk down the main street of towns like Colac, Warrnambool, Hamilton and Horsham and you will see a mix of shops that are all similar and some that are empty. Close your eyes and its hard to tell which town you are in.

There is a book titled Differenciate or Die written by Jack Trout that really points out what I see. In every town there will a couple of business that have many customers and the rest looking out the window wondering when someone will come in.

I do agree that you must sell a service or product that actually solves people's need. In Horsham it's the Telstra T/Life shop that's an example of a successful business just as the Apple store in Chadstone shopping centre is always packed with cutomers. Passionate staff, flexible working environment, right products for a consumer demand that knows no age barrier right now.

To be successful you must be a destination for whatever reason, you must continuously train your staff, offer exceptional cutomer service and satisfy customer's requirements.

Only yesterday I experienced terrible customer service in a well known coffee shop in Geelong. Two staff members were having an argument over who was going to serve the customers, there were four of us waiting to be served and, if  looks could kill, then I would be dead. Conclusion, poorly trained staff and poor management.

I repeat  Differenciate or Die

The press is currently full of stories about the increase in business failures and many are saying that it is a result of the economic conditions over the last three years, high dollar, the internet  etc.

Over the last month I have meet with many small business owners ( twenty eight in total ) in both city and rural centres. In addition I have spoken at an industry association conference. The feedback and observations and my past experience mixing in this small business community have formed a personal point of view on what under-performing have in common.

I have no doubt that the biggest reason for a business to underperform is due to poor management. Usually this means that there is lack of strategic direction, no budget process, a lack of a business plan and no way to measure and benchmark performance on a monthly basis. In fact I was guilty of some of these failing when I had my own business, I sometimes think we were successful in spite of ourselves.

The overall business community is far too competitive and fast moving  not to have systems and processes in place and a vision of where you are heading with all your staff on board with you. There are many successful operators out there who are doing the right thing by themselves, their business and their clients.

It's a waste of time listening to  those who won't listen or accept that they need to change.

If you are struggling in your business then seek help and be prepared to listen to constructive advice.

This week we have seen the last US shuttle space venture take off from Cape Kennedy to deliver material to the International Space Station.

One can only imagine the innovation that has been developed over the years as this program has been in place and the hundreds of thousands of people employed over that time and now it has come to an end. Why did it run out of momentum ? The answer, in my mind is simple, there was no vision in place to drive the program.

It like playing a game of football without a scoreboard and we take away the goal posts. What are we doing on the field if we cannot see a result at the end of time allowed ? We soon lose interest and there is no need to have a game plan for we will just waste time.

Its the same in business, how can you achieve success if you do not have a vision of what the end looks like. And, that vision has to be shared with employees, customers, suppliers and stakeholders. Just as you will not get on a bus that has a blank destination on the front, why would you want to work in a business if you don't know where it's going in the future ?

" Vision without action is merely a dream. Action with vision is simply passing time. Action with vision is making a difference "
Joel barker

On Friday last forty company directors in Geelong attended a briefing session with the AICD on the Boards Role  in OH&S. Most of the attendees were from private companies, professional firms and NFPs.

It is important that directors of companies are up to date with the new Act and Regulations to comence  1 January 2012 with the national uniformity of OHS legislative framework.

The presentation by Sue Bottrell of Piper Alderman and Simple OHS Solutions certainly made the attendees refocus their attention on the need to understand the issues and the possible consequences for directors and officers of companies. 

The Act applies to Persons conducting a business or undertaking.

It is worthwhile answering the question of what is an officer . I quote from the presentation here.

"Officer" of a corporation means:

• a director or secretary of the corporation :or
• a person:
  •  who makes , or participates in making , decisions that affect teh whole, or a substantial part, of teh business of the corporation ; or
  • who has the capacity to affect significantly the corporation's financial standing; or
  • in accordance with those instructions or wishes the directors of the corportaion are accustomed to act

Directors should expect the following to generally be officers:

• CEO
• CFO
• CIO
• General Managers
• other could include;
  • Financial controllers
  • HR managers
  • OHS managers

As a company director you must take steps to:

• To acquire and keep up to date knowledge of OHS matters in relation to the workplace
• Gain an understanding of the operations and hazards
• Ensure appropriate resources, inlcuding advice, and processes to identify risks and then minimise and eliminate those risks

To sum up Ignorance is no excuse

Today I head off to Warrnanbool to facilitate a workshop for Small Business Victoria and the local council  titled Business Planning Basics and this week I have also commenced a Grow Your Business project, part funded by The State Government, for a successful family family business outside Ballarat.

The Victorian State Government is doing all it can to help SME's start and run successful business yet many business owners have their head in the sand ignoring the support that is available from many quarters.

I hear business owners question why they should bother doing a business plan as it can be out of date in a short period of time and generally sits in a draw somewhere. My experience is that business planning is essential as part of the startegy to ensure you can achieve your vision of where you want to be in the future.

It's not necessarily the document you produce at the end of the exercise, It's the identifying of  issues, concepts, ideas, and the robust discussion that take place in the process that are invaluable to you achieving future success.

As the age old saying states If fail to plan you plan to fail .

Over the years I have worked for large listed entities, owned my own business and worked with many private business owners. I can guarantee that those who had a process for regular planning workshops and a process to monitor the plan and make changes to adjust to changing conditions were streets ahead in financial performance and long term sustainability.

I recommend that you get a mix of your employees, your board members, your advisors, an external faciliator and get out of town and away from your business for a minimum of a day and a half and hold a stratgeic planning session.