rogers-morris-admin, Author at Rogers Morris Pty Limited

Business owners – To what extent is there room for improvement?

Posted on February 17, 2025September 19, 2025 by rogers-morris-admin

After reading my school reports my dad usually just said, “My son, there is room for improvement, lots of room for improvement!”. He was quite right, there was. Now, if a suitably experienced independent party reviewed your business, would that party see room for improvement or lots of room for improvement?

You may think such a party may find some room for improvement but not “lots of room for improvement”. This raises the questions – Is that correct and on what basis did you reach that conclusion?

In the case of school reports, results can be compared against those of the class, the grade and the State. That luxury of comparison does not however apply to business owners. You can’t compare your business’ results against your business’ privately owned competitors or with those in other industries, and comparing against large, listed companies has questionable merit. They invariably have very different costs of capital, far greater access to capital, and probably a different business model. They could, for example, regard their products as commodities competing on price, whereas your business might offer far more customer care at a higher price. They might be targeting a broad market, whereas your business may be targeting only a subsection of that market.

Given this lack of comparative data, how do you really know how well your business is performing and so whether there is just room for improvement or lots of room for improvement? Some consider the performance of their business on how it is tracking on opportunities identified for improvement. But is that realistic?

You may well be in a situation where you have recognised some opportunities for improvement, which you are either working on or on which have scheduled to start. But have you identified all opportunities for improvement or at least all major opportunities for improvement?

Donald Rumsfeld once succinctly referred to “known unknowns and unknown unknowns”. While he was referring to Iraq’s alleged stash of ‘weapons of mass destruction’, the same expression applies to businesses. There are problems and opportunities that you know about and so can attend to. But there are also likely to problems and opportunities you do not yet know about. As these could have a material effect on the business, in a good or bad way, it is important to ensure that these are identified early and are brought to your attention.

Many, probably most, business owners ignore what they don’t know, making little (if any) effort to seek further opportunities for improvement. This is a lost opportunity, one that could be significant and even existential. If alerted early to a market opportunity, you can take early action to give your business an advantage over its competitors. On the other hand, if you were alerted early to a major threat to the business, you can take early action to minimize the potential adverse effect it could have on your business. Similarly, if alerted to a developing problem within your business, you can deal with it early before it manifests into a much bigger problem.

An example of new management reversing communication flow: Two years after the 1973 Arab oil embargo, Toyo Kogyo, the maker of Mazda vehicles, was perilously close to insolvency. Its new car sales in Japan dropped by over 20% while its sales to the USA, a much larger market for it, dropped by a massive 60%, at a time when industry wages increased by 30%. By 1980 debt had been considerably reduced, cash flows improved, sales revenues more than doubled, production per employee increased by 126%, and profits more than doubled the pre-oil embargo levels. While there were numerous factors that contributed to this improvement, it is generally considered that one of, if not the biggest, contributor to the turnaround was new management’s decision to effectively reverse the direction of the communication flow. Rather than the top-down communication that had been the case for decades, new management encouraged the employees to tell management how to improve the business. In 1979 employees submitted 600,000 suggestions, with about 60% adopted. In 1982, 1.8 million suggestions were submitted, some 65 per employee, with a similar proportion adopted. (For more information on this see: ‘The Mazda Turnaround’ by Richard Pascale and Thomas P. Rohlen – https://olemiss.edu/courses/inst203/pascalerohlen83.pdf)

Finding opportunities that you do not yet know about, is however easier said than done. It may require changes to the management style of your business, to your businesses’ culture, to leadership’s relationship with other employees, to meeting agendas, and more.

R&M can help business owners deal with and prioritize opportunities for improvement and can help business owners identify opportunities they do not yet know about. Both can be challenging. It is nevertheless important, some would say it is crucial, for business owners to implement strategies that give it the best chance for early identification of opportunities.

R&M’s Advisory webpage – https://www.rogersmorris.com.au/program provides information on what it offers, why and how it goes about its business. An email address is provided for those who would like to explore what R&M can do for them.

Business owners – What is the best use of your time?

Posted on February 17, 2025September 19, 2025 by rogers-morris-admin

Most business owners wear two hats. One as the visionary determining the long-term objectives for the business, the strategies to achieve it and the values it needs to adhere to. The other as the implementor responsible for implementing the strategies, ensuring the business and its people adhere to the stated values and ensuring that the business achieves the stated long-term goals.

Given these dual roles, business owners need to decide how much of their time should be allocated to each role. Many business owners spend considerably more of their time working in the business than they do working on it. This piece questions whether that is a sensible allocation of time.

Determining how best to allocate your time involves some math. You need to consider how much value you can generate for yourself and any other shareholders by working exclusively on your business. Once you have estimated that figure, you need to estimate what it would cost to engage others to do the work you would otherwise have done working in the business.

Start by estimating the extent to which you could increase dividends and the value of the ownership interests in your business. For example, if your business is generating $3 million in annual EBIT and commands a 4-times value multiple, it would be valued at $12 million. If by working on the business you believe that you can increase EBIT by 20% and the increase the value multiple by 1 point from 4 time to 5 times, the value of the business will increase by $6 million to $18 million ($3m x 1.2 x 5). (Note: Since the cost of increasing profits and value will be included in the EBIT figure, those costs will not need to be deducted from the expected benefit. If additional capex is needed to increase profits and/or the value multiple, this cost needs to be deducted from the amount of capital appreciation.)

In this example, assuming no additional dividend and no additional capex, the value the business owner would expect to add to the value of his ownership interest by working on the business is $6 million. For ease of comparison, it may be useful to state this value on an hourly basis. Assuming a 47-week working year (4 weeks annual leave and 1 week equivalent of sick leave) and five 8-hour days per week, the $6 million benefit equates to $3,131 per hour.

The next step is to consider the additional costs of delegating to others tasks you would otherwise have done. Where you are spending your time working on the business, it is likely that you will need to employ or engage someone else to do the work that you would otherwise have done or add to the responsibilities of one or more existing personnel. This comes at a cost, which needs to be estimated. Since it is likely that you would delegate tasks to various people on different salary packages, you will need to estimate the average cost of engaging those people. In doing so, it may be useful to consider their cost (of taking on tasks you would otherwise have done) on an hourly basis. Using the same assumptions as set out above, the hourly cost of a person on a $500,000 pa package is $266 per hour and that of a person on a $150,000 pa package is $80 per hour. It is worth recognising that the cost of engaging another person to complete tasks you would otherwise have done, can vary enormously depending on whether they would be employed full- or part-time, whether the tasks can be completed online and whether the job needs to be done during HQ office hours.

Once you have estimated the costs of delegating the tasks you would otherwise have done, you will need to include them in your EBIT projection.

Since the owners of most privately owned businesses have the potential to generate significantly more value by working on their businesses rather than in them, it is probably worthwhile for you to go through the exercise of determining where best to spend your time.

If, as would be expected, you conclude that you can add considerably more value by working on your business than in it, you will need to devise a strategy for making that transition.

This is more challenging. It is however worth mentioning that as regards many jobs, there are levels of delegation, which enables you to progressively transition from doing the job yourself to ultimately delegating full responsibility for it to someone else. In other words, one seldom goes from doing the job yourself, to delegating full responsibility in one step. Progressive delegation is invariably preferable. The rate of that transition could be a lot quicker on some tasks than on others. Since the level of risk is also likely to vary between tasks, the delegation of some tasks requires more caution than on others.

R&M can assist business owners with this exercise. It can help business owners determine the value they could potentially add to their businesses by working on it, rather than in it, and can assist them determine the associated costs and help them devise strategies to transition from working in their businesses to working on them, and to manage associated risks.

Here is a link to R&M’s Advisory webpage, which provides more information on what it offers, why and how it goes about its business – https://www.rogersmorris.com.au/program . An email address is provided for those who would like to explore what R&M can do for them.

Top-performers take a different approach

Posted on February 17, 2025September 19, 2025 by rogers-morris-admin

Whether in sport or business, the top performers generally take a different approach to their mediocre and tail-end competitors.

Top performers continually look for ways to improve and recognise that to get to the top and stay at the top, they need to use all the ‘brains’, internal and external, they can get access to. As a result, they are receptive to suggestions that could give them an edge over their competitors, no matter what quarter they come from.

Mediocre and tail-end performers on the other hand are generally dismissive of suggestions made by those who they regard as less accomplished than themselves. Unless the person holds a more senior position in the company or is a senior executive of the likes of a Goldman Sachs or McKinsey or is a much more accomplished former senior executive, mediocre and tail-end performers have scant interest in even hearing what they may say.

In the case of competitive one-design keel-boat sailing, the boats, sails and rigging are the same, the crew component is similar, and the crew and skippers have, almost without exception, decades of sailing experience. Despite these competitors being well experienced and competing on an equal (or nearly equal) basis, some boats consistently finish regattas at the pointy end, some in the middle and others at the tail-end. This raises the question: Why so?

It’s not superior genetics as is the case in most sports. It is due to management style and their approach to improving performance. Consider the situation of a youngster who is not a member of the class or even of a sailing club, is not a well-experienced sailor and has not even sailed on a yacht before, separately approaching skippers saying that he’s been analysing aerial footage of the last regatta and has identified an opportunity for that skipper to gain a boat length or two on each upward a leg of a race. The reactions of the various skippers would differ. Most would be dismissive of the approach and not willing to even hear what he had to say. They only listen to far more accomplished sailors and would probably even disregard what even they have to say. The typical response would be, that may work on a big keelboat (or on an off the beach boat) but it won’t work on my boat. Top-performing skippers on the other hand, recognise that even a yard of extra pace over a leg of a race can give their boat an inside overlap that translates into a 2 to 3 boat length lead after rounding the mark. They also recognise that other top-performing boats are also looking for every advantage they can get. So when one of the world’s most accomplished competitive sailors is beaten on a leg of a race, even in a club race, he will want to know how that happened –what the other boat did? Mediocre performers would either not notice or would put it down to luck and head off to the pub.

Top performing skippers continuously look for opportunities to improve and so not only welcome input from others but also encourage them to continue to look for and suggest improvement opportunities. They recognise that only by listening to what someone has to say can they determine whether it has merit or not. Given this attitude they would be keen to hear what that youngster had to say, and only having done so, would they have discovered that the youngster had for years been obsessed with virtual sailing competitions and the use of strategies to get ahead and had done plenty of research into that aspect of the sport. The top-performing skipper would then recognise that the youngster would be much more experienced in that regard than most weekend sailors and probably also more experienced than many professional sailors. Most roles on a boat do not require thought on boat strategy. Crew think about techniques and processes to get their jobs done more efficiently and effectively – such as sail trim, raising and dropping the kite, tacking and gybing – but pay little attention to boat strategies, probably because its outside the ambit of their jobs. Even the skipper, who is usually helming (steering), focusses on sailing at the right height to the wind, adjusting for changes in wind speed and direction, avoiding collisions, adhering to the racing rules of sailing and looking to get into and stay in clean airs. Given these other areas of attention, the skipper may also not be an expert on race strategy. So, notwithstanding the youngster never having sailed on a boat, he (or she) could know a lot more about sailing strategies than even professional sailors.

In this case, unless skippers are open to new information and other perspectives, they wouldn’t have heard of the analysis done and conclusions reached by the youngster, and as a result would suffer an opportunity cost – finishing races behind those who did. The business world is similar in this respect.

If one of your leadership team received an unsolicited approach from a youngster lacking the usual educational and employment credentials who mentioned that he had identified an opportunity for the business to substantially reduce its costs and enquired whether the company could consider entering into a mutually beneficial business relationship, how would you expect that leader to react and how would you want that leader to react?

Anecdotal evidence suggests that most business owners, managing directors, CEO’s and department heads will either ignore the approach or politely decline without taking the trouble consider the youngster’s proposal. Those few having an inquisitive mind could have established that the youngster was a genius and highly knowledgeable about AI or some other groundbreaking technology.

Mediocre performers are generally dismissive of suggestions made by subordinates and others they regard as less accomplished, while top performers are welcoming of suggestions from all quarters. Top-performers recognise that people from different backgrounds could offer a different perspective that may give them an edge over competitors reliant on ‘group think’ – employing and engaging the same type of people. Those reliant on group think are likely to end up with a similar outcome to the others also reliant on group think. To get a competitive advantage you may need a different perspective. These are more likely to come from people with different backgrounds and experience.

Getting a competitive advantage can be a lot more important for a business than it is for a competitive sailor. Competitive sailors can justifiably get a lot of satisfaction from finishing on the podium or in the top 10% and even from just finishing a gruelling race. Their main sources of income, sponsorships and advertising, are not generally severely impacted if they don’t win the race or regatta. When a business tenders for a contract, there is invariably only one winner. It’s a winner takes all situation. All others get no benefit and suffer real (and sometimes significant) bidding costs. Typically, only one party wins a tender but if too much is offered to win it, the winning business will suffer in the longer term.

In the normal course of business, if they price their products too high or quality reduces, the business can lose market share and suffer a loss in profitability. This wouldn’t sit well with their shareholders, who may push for new management. As a result, there is considerable pressure on businesses to win – in both the short and longer term.

Given the stakes involved, the competition is often fierce. So fierce that only a small competitive advantage may swing the outcome materially. Considering the high stakes and stiff competition, it is bewildering that many senior executives do not seek other perspectives and many ignore unsolicited approaches.

The entrepreneurial founders of their businesses would generally have had a strong desire to succeed and would have tapped the brains of many to get there. As the business passes to the 2^nd and 3^rd generations, management’s perceived level of self-importance increases giving them an air of superiority and fostering a top-down managerial style. And that is a recipe for disaster. A similar situation applies to listed companies. The larger the company, the more likely its management are filled with airs of superiority, draw from similar top-tier universities and engage similar consultants – and that has led to the downfall of many once mighty companies.

The top-performing executives instil a strong desire amongst all concerned to improve the performance of their businesses. They look far and wide for it and are receptive to suggestions and recommendations no matter where from whence they came. They also judge suggestions on their merit. Achieving this environment is however easier said than done.

R&M can help business owners design and implement systems that foster bottom-up communication and encourages all within the business to look for and suggest opportunities for improvement, and in that regard find out who is doing what in their area of the business.

Here is a link to the R&M webpage that describes what it offers, why and how it goes about its business –https://www.rogersmorris.com.au/program. An email address is provided for those who would like to explore what R&M can do for them.

Is your trust in employees reciprocated?

Posted on February 17, 2025September 19, 2025 by rogers-morris-admin

Business owners and senior executives would unanimously agree that trust is essential to a business’ success and longevity. Leadership needs to be able to trust their subordinates to do their jobs efficiently and effectively, to be honest, to act with integrity, and generally to do ‘the right thing’. They would also probably agree that if they don’t trust an employee, that employee should be moved on – fired or persuaded to resign. But there is a question senior management seldom, if ever, consider. It is whether their employees trust them to act honestly, with integrity and generally to do the right thing?

If executive management were to get all employees to complete an anonymous survey on whether they trust management to do the right thing and act with integrity, the answer they get may not be music to their ears. That is particularly the case with large businesses. Of the top 100 companies listed on the ASX, it is unlikely the employees of any of them would trust their senior executives.

If wanting to get to the truth, senior management should not just ask whether the employees trust management, they should put a few scenarios to them? Here are some that could be included:

If you were a bearer of bad news, is it more likely that you would you get praise and recognition from senior management or is it more likely that you would suffer some adverse consequences? In that regard, how likely is it that senior management would conclude that you are ‘not a team player’ or are a ‘troublemaker’ that needs to be moved on?
If you were to stumble across or otherwise become aware of some unacceptable conduct by your boss, how likely is it that you would (as a whistleblower) alert more senior management? In such a situation, how likely is it that you would get some recognition for doing so and how likely is it that you will suffer adverse consequences, possibly even ultimately losing your job?
If you were to tell senior management that you had made some or other costly mistake, how likely is it that you will lose your job?
If you identified an opportunity to make a significant improvement to the business and management gave you the responsibility for making the change, how would you expect management to react where it went to plan and where it did not. If it went to plan, would you expect senior management to award you a material financial benefit? If it did not, resulting in it costing a lot more, would your job be at risk?

It is important, very important, to the success and longevity of a business that senior management is made aware of problems early, and that opportunities to increase revenue, reduce costs and/or reduce risk are brought to their attention. And that is unlikely to happen where the risk for the employee concerned exceeds the benefit for that employee.

If employees conclude that there is more downside to them than there is upside, they are unlikely to act in the best interests of the company and more likely to protect their own interests. They are more likely to hide mistakes and other ‘bad press’ from senior management and are much less likely to alert senior executives to business opportunities – preferring to ‘keep their heads down’.

Many would think that if they alert senior management to the opportunity, they are likely to be given the responsibility to ‘make it happen’, which will add to their workload without their getting a commensurate increase in their salary package. They would also think that if the project worked out as planned, senior management would not bestow a material financial reward on them, thinking he was just doing his job, but if it doesn’t work out, he faces a real risk of being fired. So, the employee may see little, if any, upside potential but lots of downside risk. In such situations nobody in their right mind will take that risk while paying off mortgages, paying private school fees, saving for retirement and so on. That could result in a huge opportunity cost for the business.

Most employees have a lot at stake, so if an employee feels there is a fair (or even a remote) chance of losing their job, the employee would be much more inclined to hide the mistake or problem, try and shift the blame on to someone else, distance themselves from it, and delay bringing it to senior management’s attention. That would be far from ideal for the company or its shareholders.

While it is important that employees feel that they can trust senior executives, gaining that trust can be (and invariably is) a challenge. It would be naïve of the senior executives to think that if they tell employees they can be trusted, employees will believe them and act accordingly. Employees will also not trust senior executives merely by their including such foundational values in the company’s “values statement” and stating that they adhere to such values. Employees will be sceptical of anything senior executive says – verbally or in writing – in this regard.

R&M can help business owners make the changes needed to win the trust of their employees. For more information on what R&M offers, why and how, follow this link to R&M’s Advisory webpage –https://www.rogersmorris.com.au/program

Do your employees do just enough or do they do considerably more?

Posted on February 17, 2025August 12, 2025 by rogers-morris-admin

It is generally accepted that a business’ most valuable asset is its employees. So, it is somewhat bewildering that very few have implemented structures and made other necessary arrangements to capture the full value employees have to offer.

This could come down to the different perspectives business owners and their executive teams have as to employee contribution potential.

Some business owners would be satisfied if their employees did their jobs efficiently and effectively and did not cause trouble. Other business owners recognise that their employees have the potential to do much more. They recognise that employees with the right attitude could identify opportunities and implement strategies to increase revenues, reduce costs, lower risks, reduce wastage, take on additional work and so on.

Those in the former camp (who expect employees to do their jobs efficiently and effectively and not cause trouble) essentially regard their employees as machines needing maintenance, some repairs, and in respect of which they need to make periodic payments. By working a machine harder, it will need more maintenance and more repairs until it gets to a point when it breaks down or the cost of the repairs is not justifiable. Similarly, these business owners want to ensure their employees work to a sustainable level of capacity until a more productive person is found. To recruit and retain these people they need to be offered market related salaries, a potential bonus approximating a 13^th cheque and provided a comparatively better working environment. The corollary is that such employees will be inclined to do just what is necessary to not to lose their jobs. They tend to work their allotted times, take the tea and lunch breaks and take their full annual and sick leave.

Other business owners recognise that all their employees, from the lowest paid to the highest, have the potential to identify opportunities for the business to increase revenues, reduce costs, lower risks, remove bottlenecks, eliminate waste, improve processes, offer to take on more work where they have the capacity to do so, assist others needing assistance, and to otherwise identify opportunities to increase the value of the business. The challenge for the business owners in this camp, is convincing their employees to act accordingly, and that is not a simple exercise. This may necessitate changes to the business’ management style, culture, employee remuneration, and to operating procedures as regards issues and opportunities.

Many would be inclined to say those in the latter camp (where employees go above and beyond) are far more likely to be successful. That is however not necessarily the case. It really depends on whether, and if so to what extent, the value added exceeds the additional costs. Another relevant factor is how to reduce the risk of a business getting enough additional value to cover direct and opportunity costs. Business owners will want to avoid a situation where the expected benefits well exceeded the expected costs, but the actual costs well exceeded the benefits.

That said, many companies have enjoyed remarkable improvements in both profits and shareholder value after recognising the potential for their employees to contribute significantly more to the business than ‘just doing their jobs’. This change has also saved some from the ‘corporate guillotine’.

R&M can help business owners move employees from the former camp to the latter one, define the ‘added value’ (increases in NPAT, shareholder value or other), reduce risk, review (and if necessary, change) the management style, culture and operating procedures, and design suitable employee remuneration arrangements, employee recognition policies, and more.

For more information on what R&M can do, why and how follow this link to R&M ‘s Advisory webpage – https://www.rogersmorris.com/staging.au/rm-advisory/

Cookie Consent Required