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Monthly Archive for September, 2007

What makes a great leader?

Published by Business Link on 18 September, 2007 in Management & Leadership • 0 Comments

The leadership handbook lists many skills and approaches for good leadership, and defines what characteristics good leaders must exhibit. But even then, experts and the rest of us alike cannot definitively outline what makes a great leader.

This is in part because great leaders show different traits. One great leader is distant and commanding, when another is hands-on and nurturing. One is best in crises, when another is adept at avoiding them. And yet, both leaders are great. It could also be argued that what makes a leader great – more than a prescribed set of features for good leadership – is an ability to lead differently depending on the context, situation or environment.

John Sculley, president of PepsiCo during the 70s and early 80s, was responsible for turning a $16 million loss making Food Operations division into a $40 million profit making business within three years. Much of his success was attributed to recruiting new managers from rival food firms to improve product quality. Later, while at Apple Inc, the same approach backfired when a series of management reshuffles resulted in several high-level resignations and turbulent times for the firm.

It is difficult to define why Sculley’s approach failed the second time around. Did he hire and fire the wrong people? Was his approach incompatible with the company’s culture? Was a focus on shuffling heads diverting his attention away from leading the business? It seems attributing failure in leadership is just as difficult as prescribing success.

It is, of course, pertinent for any would-be leader to understand what makes a good leader good. There are many resources – including our own Top tips – that can help you build the foundations for effective leadership. But learning is only half the story. Great leaders are often great because they re-define the rules. And because there is no magic formula, you need to create your own.

More info – Top tips for Leadership

Pricing strategy

Published by Business Link on 18 September, 2007 in Sales & Marketing • 0 Comments

An effective pricing strategy ensures value for you and your customers, and is essential for profit and growth.

Cost-plus pricing is a useful measure, but may not take into account less tangible influences. It gives you an indication of pricing levels that will cover costs and desired profit. But in some markets, you may be forced to charge less. In others, you could price much higher to increase profit or control demand.

Value-based pricing focuses on the price your customers may be willing (or able) to pay to acquire your product or service. If you offer something unique or hard to find, your value-based prices can be higher. Of course the opposite is true – if you operate in a saturated market or your competitors have a superior offering, your pricing may need to reflect your lower perceived value.

Analysing competitor pricing helps you understand what the market will bear. Comparing your products and services to those of competitors – considering their relative experience and quality – may assist you in positioning your prices to compete more effectively.

Establishing room for manoeuvre is useful for any pricing strategy. Your ability to lower prices – to win key customers or gain market share – could in the long run help achieve growth and profitability. For example, you might offer a lower price initially to get customers, that steadily increases as your product or service matures.

Deciding how to price your product or service, and knowing if and when to be flexible, are key features of a pricing strategy that will assist profitability and growth.

Learn more about pricing, and how to build a pricing strategy

HR focus – The rise of equality and diversity, New National Minimum Wage Rates

Published by Business Link on 18 September, 2007 in HR & People Development • 0 Comments

The rise of equality and diversity

A recent survey published by the European Union suggests that, for many companies, legal compliance is the crucial driver for adopting equality and diversity policies and practices. But for some, a proactive desire to pursue equality and diversity is motivated by a desire to become ‘best in class’. These businesses see a strong business case for equality and diversity.

The UK has an ageing population, resulting from declines in the mortality rate and in the past fertility rates. As fewer young people enter the labour market, many businesses face the prospect of labour shortages within their traditional recruitment pools. At the same time, the greater participation of women, the elderly, ethnic minorities and people with disabilities in the workplace present growing sources of labour. Upon this backdrop, it is clear that to avoid labour shortages, businesses must embrace all recruitment pools – and at the same time create working environments that value inclusion and diversity.

Practical need aside, a business with a reputation for creating a culture of inclusion can more easily attract and retain talent, thus gaining a competitive advantage. In a 2004 Fortune magazine survey of MBA students, IBM was rated as a top five employer, in part due to its focus on creating an inclusive workplace. Top talent recognises the importance of an inclusive and diverse workforce. If businesses hope to attract talented people, they have to recognise this too.

Whichever way you look at it – from a legal, practical or competitive perspective – a business’s focus on equality and diversity in the workplace will, more than ever, determine its success.

More info – Prevent discrimination and value diversity

New National Minimum Wage Rates

Revised national minimum wage rates come into force on 1 October 2007.

For pay reference periods beginning on or after 1 October 2007, employers must pay eligible workers the following:

  • £5.52 an hour to adult workers aged 22 and above
  • £4.60 an hour to workers aged 18-21 – the development rate
  • £3.40 an hour to workers aged below 18 who are no longer of compulsory school age
  • £4.30 a day as the daily accommodation offset.

More info – Understanding National Minimum Wage Law

What is the Pay Reference Period?

The pay reference period is the basis of calculating whether the national minimum wage is being paid to an employee.

The pay reference period is usually the interval at which an employee is paid, i.e. daily, weekly or monthly. For the purpose of calculating the national minimum wage, a pay reference period can be no longer than one month.

Pay allocated to a pay reference period includes:

  • pay received during that period; and
  • pay earned in that period, which is not received until the next period. This may include overtime, bonus or commission payments earned but not paid until the next period. If payments are delayed by more than one pay reference period, they cannot be referred back to the period it was earned, so should be counted in the period it is paid.

Employers do not have to pay the minimum wage for each hour worked – employees must be paid the minimum wage on average for the time worked in the pay reference period.

More Info – The Pay Reference Period

Corporate Social Responsibility

Published by Business Link on 18 September, 2007 in Strategy & Operations • 0 Comments

After a decade of Corporate Social Responsibility (CSR) one thing is clear – the term is here to stay. Companies across the world – from both established and emerging markets – have embraced CSR ideals and let them direct policy in areas including workforce diversity, human rights and the environment.

Founded on the basic principle of responsibility, CSR considers how a business affects its employees, customers, suppliers, the wider community and the environment. By acting responsibly, businesses can minimise negative effects, but also increase their profits. In short everybody wins: the world becomes a better place, and businesses improve their efficiency and thus become more successful.

The business benefits of CSR are varied. On a basic level, CSR helps you comply with regulatory requirements. It can also help cut costs and improve performance, by for example, improving the efficiency of waste disposal or attracting a wider pool of talented workers through more inclusive recruitment policies. Beyond that, being responsible positions your company as one that cares. This can help recruit and retain employees, forge better relationships with the local community, and differentiate your company, its products or services.

Critics of CSR say that when deciding how to behave, businesses will more often than not be motivated by self-interest, and because of this, the only effective way to enforce corporate responsibility is through legislation. They ask: when given the choice, can companies be responsible?

Proponents and critics can debate all they like. The answer to the question, however, can only be answered by the companies themselves.

More info – Corporate Social Responsibility and how your business can benefit

Management development increases productivity

Published by Business Link on 18 September, 2007 in Management & Leadership • 0 Comments

A recently published research paper jointly funded by the London based Centre for Economic Excellence offers an intriguing insight into the relationship between management practice and business productivity.

The research, which aims to quantify company performance in relation to management practices, focusses on managers in manufacturing companies. Despite this industry bias, some of the findings have a broader relevance to many businesses, including non-multinational UK based firms.

The paper explains that “The spread of management performance between firms, even those of similar size operating in the same industry sectors in the same regions, is very broad, suggesting that management excellence is a matter of internal policy and not just the business environment”. The research also found strong links between improving management practices and large increases in productivity: “A single point improvement in management practice score is associated with the same increase in output as a 25 percent increase in the labour force or a 65 percent increase in invested capital”.

The assertion that management excellence is a product of internal policy gives weight to the widely established belief that proactive management training and development has a positive effect on productivity. Moreover, this productivity increase is so great it can eclipse other potentially more costly methods of increasing output.

In comparison to US, European and Asian counterparts, the UK performed badly in aspects of individual performance management, such as the establishment of effective, well structured targets. While UK firms work hard to recruit good people, they are far less effective at establishing processes that motivate workers to improve their individual performance and productivity.

A final point worthy of mention is a contrasting picture between multinational and non-multinational businesses. Multinational companies – in an effort to replicate the same performance standards across different regions, cultures and markets – have been forced into adopting a systematic approach to management. A positive offshoot of these efforts is improved management productivity, resulting in benefits such as better returns on capital and robust growth.

The research concludes that “the same benefits are easily accessible to other organisations, wherever they operate. Yet surprisingly few firms have made any attempt to gain an insight into the quality of their management behaviours. Those that do so give themselves the opportunity to access rapid, cost-effective and sustainable competitive advantage”.

More Info – Develop your management team