With inflation continuing to rise, so is the need to assemble a battle plan for the bumpy road ahead. It’s easy to be distracted by hikes in commodity prices and surging energy costs, but businesses need to remain focused on the tasks at hand – whether that’s business survival, growth or embracing net zero. CEOs need to lead the charge in these uncertain times by supporting their talent, strengthening supplier relationships and backing that all up with a bulletproof cost management system. Here are the five key areas to look at.
Staff costs and meaningful people strategy
One obvious employer response to inflation is to increase pay. However, most businesses can’t afford this as margins are being eroded from all angles. The Bank of England has repeatedly urged employers to stop inflating pay as it just feeds the inflation spiral.
We’ve emerged from one period of uncertainty straight into another and staff need to be supported through this. Businesses with poor cultures and who don’t treat their employees in a way that demonstrates that they genuinely care about them will lose staff regardless of the pay and benefits they offer.
Broadcaster Andrew Neil, opening the recent MAKE UK conference, said that we all needed to go and sack our HR directors, but not for the reasons you might assume – because people and people strategy should be every CEO and leader’s top job for the foreseeable future.
Encourage alternative thinking and revisit business cases
With the pressures all businesses are facing, it’s easy to dismiss other priorities out of hand without reconsidering them from other angles. One great example of this is sustainability and net zero. I’ve heard many manufacturers say they’re conserving their cash, so have deprioritised investment in sustainability.
However, as the Institute for Manufacturers (IfM) has recently published, initial steps towards net zero are effectively lean manufacturing measures. By reducing waste, you will naturally reduce carbon impacts and of course improve efficiency, profitability and cash flow.
With soaring energy prices showing no signs of slowing down any time soon, business cases for making investments into bigger sustainability moves such as solar have been turned on their heads – if only from a cost-avoidance standpoint.
Back to basics
The pandemic caused many businesses to revisit everything to facilitate agility and responsiveness. However, it’s worth revisiting all previous assumptions and basics with an eye on more basic leak spotting. Great gains can be made by looking at all your costs and ensuring that services and products contracted are being received to your required spec and that there are no cash leaks or sloppy cost management.
Relationships are key
In times of challenge, our strength is when we collaborate and solve issues together. This period has seen some fascinating behaviours by customers, suppliers and other local businesses – relationship strength will be determined in this time and the strength of our upstream and downstream relationships will be key to navigating this latest period of uncertainty successfully.
The importance of true collaborative partnerships has never been greater, and the experience of being let down by suppliers and treated badly in pursuit of a short-term win lives long in the memory.
Accountants are crucial
Financial advice is more important than ever. Through the pandemic, before we even started talking about inflation, the ability to respond quickly and have the right people around you and the right advice around you was critical. Today, when it's inflation-related, every decision needs to be quantified.
I was on a call recently talking about current government consultations on areas including tax regimes; suddenly people are realising they’re going to have to raise their game. With margins being squeezed, businesses are running lean. Accountants have never been more important.
- Katie Davies is the managing director of manufacturing company Camden Boss. Davies explained the steps businesses can take to help them through the turbulent years ahead in a recent ICAEW webinar: Navigating the business in an inflationary world
- ICAEW advisory group member Nick Tiley has also shared his advice on how to Navigate the business in an inflationary world
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