At the end of last year the New Zealand Institute of Management undertook selective senior management business trends survey to get fix on what managers were thinking about as they reviewed last year and planned for this. The results, given the way this year is unfolding, are interesting and not little perplexing. But here are some of them – you draw your own conclusions.
Improved profitability was, perhaps not surprisingly, uppermost in the majority of managers’ minds at the start of this year. And how did they plan to achieve their objective? Well, 88 percent of them said they planned to improve their management of quality, while 74 percent thought an increase in product focus and targeted marketing would deliver the goods.
Now these might seem like clearly articulated strategic goals but, interestingly, only 63 percent of the managers who responded to our survey admitted to actually having published business strategy at all. higher number, 74 percent, said they had written mission statement but, based on current management orthodoxy, that does not seem like particularly high acceptance of the importance of having clearly understood and articulated mission statement and vision of the future.
If profitability was high on the priority list, surely well-crafted marketing strategies would be necessary. But, and this is surprising, only 70 percent of businesses agreed that they had clearly defined marketing objectives for 2004. little under 60 percent said they had regular review procedures for monitoring progress toward meeting marketing objectives; and 52 percent said they had well-established marketing planning process. And while only 60 percent indicated that they had clearly defined marketing strategy, another 13 percent were planning one.
Those figures suggest many organisations went into the year with significantly under-done marketing plans. On the other hand, most companies (53 percent) that had marketing strategy were looking to deliver on two- or three-year timeframe. Just 24 percent were focused on one year out and 13 percent were planning for less than year. The other approximately 10 percent were operating on timeframes of four years or more.
So how much, as percentage of annual turnover, did they plan to spend on marketing and selling? quarter planned to spend less than one percent. Another quarter had between two and 2.9 percent in mind, while 20 percent expected to spend between one and 1.9 percent of their turnover on pushing products and services.
Nearly all, 95 percent, of responding enterprises, thought they could gain competitive advantage this year by concentrating on the quality of their products and services. It is interesting to note the importance businesses also attach to the reliability of their offerings. Some 93 percent of them thought product reliability was important from competitive standpoint. And 90 percent of them rated their reputation as defining competitive factor.
Few companies, it seems, had plans for growing their revenues by exporting, which is disappointing given the importance the country places on it as revenue stream. Only 15 percent of them say employee language proficiency is important when it comes to delivering any competitive advantage.
Operations and quality
Most managers (81 percent) are still fixated on cost reduction to deliver enhanced performance. Two thirds (68 percent actually) of respondents didn’t think the price of their goods and services was turn off for their biggest customers/clients, or that they would involve them more in design issues, or that their customers were actively adopting more online electronic communications. Only 32 percent thought their major suppliers were increasing their influence over how the organisation works and that the issue was, to their minds at least, important.
And if today’s marketplace is more customer driven, the response to this survey didn’t exactly reflect it. Just 19 percent of businesses said they had requested their major suppliers to review their quality procedures over the previous year. Another 43 percent said they had voiced their intentions to some suppliers while 38 percent had not asked for any reviews from any suppliers.
Respondents didn’t intend spending much of their capital expenditure on research and development this year either. third were not planning to spend anything. The majority, 56 percent, expected to spend between 0-3 percent of their capex on R&D. On the other hand, 84 percent of all organisations said their capital expenditure programme had increased.
Only one in five businesses had an ISO 9000 certification, another seven percent were planning to obtain one and 73 percent had no ISO status and weren’t looking for it.
Business environment
When it came to looking at the business environment there was no enthusiasm for New Zealand’s level of corporate tax. Only 25 percent of respondents rated the Government’s handling of the economy as beneficial to their business operations, and only 20 percent rated the Government’s participation in industry development helpful.
Having said this, solid 41 percent believe that the prime responsibility for creating better (business) environment rests with the Government against 39 percent who think it rests with individuals and 15 percent who believe the responsibility lies with industry. We do, it seems, still look pretty much to Government to set the scene for enhanced business success.
Managers are not yet keenly attuned to environmental practices. little over one third (35 percent) have someone on the staff with overall responsibility for environmental matters and only 28 percent carry out regular environmental audits. At the same time, 41 percent said environmental concerns will be considered important when they develop new company strategies.
There does, however, seem to be pick up in formalising ethical management practices. Two out of three organisations (65 percent) say they have ethics codes for their directors and slightly more (67 percent) for their managers. But quarter of respondents admit that even though their organisation has ethics codes, it does not have clear mechanism for reporting violations.
Education and training
In my view, the most obvious contradiction in thinking came from the education and training plans. While 87 percent of businesses said training helped retain employees, more than half of them (57 percent) expected to spend less than one percent of their turnover on it. And of those, 34 percent will spend less than 0.25 percent. Perhaps another belief revealed by the survey influences this thinking. While 87 percent of respondents think training helps employees’ mobility through the organisation, 78 percent also think training helps the mobility of employees to other employers.
Most organisations (87 percent) focus their training on adjusting to new technologies, 87 percent use it to change employee attitudes, 61 percent use it to achieve measurable results while only nine percent agree that training is drawn up to utilise government grants.
And finally, 78 percent of respondents believe their training programmes increase productivity; service quality (74 percent); adjustment to new technology (73 percent); customer satisfaction (71 percent); efficiency (70 percent) and product quality (60 percent). By contrast, only 30 percent of companies rate the impact of training on attracting new employees as having great benefit.
So what do you make of that? My take on it is that we have some way to go when it comes to getting management to lift its sights on some key practices and attitudes.
David Chapman FNZIM is ceo of NZIM’s National Office.
