UK Starting Business

In order to implement successful measures for ensuring that the company’s medium and long term planning and expenditure take due account of possible future occurrences, it is suggested that the following points are noted:

Detailed studies of the company’s present costs and revenues should be undertaken in order to determine how the proposed expenditure and/or changes will affect these variables.

This should, of course, be paralleled with guestimates of the future cost and revenue levels and measured against the company’s objectives (profit vs. market share to attract institutional customers and so on).

The above process should be undertaken by both the firm’s and their parent company’s management and outside consultants if required.

This would allow the parent company to ensure that its subsidiary’s objectives were being attained and would enable the subsidiary to make sure that the proposals were practical in the environment in which they operated.

Thus, harmony would exist between the firm and parents provided that any differing points of view which existed could be consolidated as to achieve the objectives of both companies.

The company could set itself guidelines regarding the maximum levels of investment which it could undertake. This level would coincide with the firm’s breakeven point and would consider the many different possible conditions of the market.

Thus, a breakeven point whereby the company is able to maintain profitability in inactive conditions and taking in to account expenditure plans would result.

Another consideration however, would be the firm’s objectives. These may not be to maximise the levels of profit, but rather market share or to build up loyalty between corporate clients.

As a result, profitability would have to suffer due to the low or net commissions which are presently gained from them.

The firm could look at its competitors’ actions in order to determine its expenditure and planning, thus enabling them to be both competitive and prudent in the investments.

Behavioural Issues
The implementation of the measures designed to curb the firm’s behavioural problems should begin at the top of the organisation.

Once the heads of the organisation have reached a decision on the steps necessary to better the firm’s position, the information should be disseminated down through the structure of the organisation.

This would create an atmosphere of openness and would quell the talk of the grapevine if the employees were told directly by their superiors. Although good communications will lessen the severity of the problems with staff moral, they will not dispel it altogether.

Thus, the sooner the company carries out and finishes implementing the measures the sooner the remaining staff can begin to feel more secure in their jobs and thus concentrate on them and not on the management’s meetings.

The remainder of the implementation issues are covered during the analysis of the recommendations. The main emphasis for the company must be on the good communication of their proposed actions and use the employee’s superiors to provide the company with a personalised and caring face.

Involving the remaining employees in suggesting ways to improve the efficiency of their operations would provide the company with cost savings and give employees a sense of importance and one of belonging to a company who listens to them.

The implementation of the recommendations can be divided into two sections which are the immediate introduction of measures to curb the company’s present problems and secondly, to ensure that steps are taken to prevent avert foreseeable issues in the future.

The author will now continue by suggesting implementation structures which he believes will ensure the smooth induction of the necessary actions.

Reducing Costs and Expenses
The sooner the staffing levels, the auxiliary services, and the firm is able to utilise its assets more effectively (either through the short-term leasing of its spare office space or by other means), the sooner it would be able to move forward and face the competitive environment in which it has strategically chosen to operate.

As stated during the recommendations, communicating the reasons for the needs for change will ensure less resistance and greater understanding and co-operation between the employees, both those who are and are not directly affected by the measures.

Thus, it is suggested that after the management have decided which measures (and the degree of their application) are going to be adopted, they inform all personnel and explain the reasons for them. Those employees who are being released should then be told as it is probable that the staff will understand the reasons and thus will be more sympathetic towards the company.

It would be more considerate to the individuals if they were told personally and sincerely by their immediate superiors or by the Managing Director (or equivalent) as opposed to an internal memorandum.

This would also allow the superior to express their regrets and to wish the employee well in the future. If the company has decided to offer payments above the statutory minimum, this could also be conveyed at this time and thus bring some relief to the employee.

The anticipated problems arising from these measures centre around the fact that very few people will welcome being dismissed or seeing their colleagues released, even if the reasons are communicated using a personal medium.

These behavioural problems may be diminished by the firm’s openness and explanations but can also be reduced if the redundancies all take place together, thus reducing the time span of people leaving.

The people who remain with the firm will then not be constantly reminded of the company’s actions and once the redundancy period has passed, they will feel more secure in the employment and thus will concentrate on their work and not on the fears about their jobs.

The implementation of the office leasing might form a longer term objective to streamline the company’s main operations towards one area of the building and to ensure that the other operations are flexible enough to move to join up with them when a prolonged slump in the market is occurring.

Obviously, the greater the planning for the changes, the lesser will be the problems when they take place. There will no doubt be a period where problems occur while the staff adjusts themselves to their new environments.
However, because their duties and operations will remain essentially the same, they should be able to adapt quite quickly and as the changes take place during the up and downs of the market, the company should be able to make the adjustments faster and in the long term, smoother.

The implementation of the measures to cut auxiliary services should follow similar lines to the introduction of the redundancy program with full explanations for the cuts in standards and/or staffing levels.

The company may consider employing outside firms to continue some of their services, thus unloading the burden of profitability on to others. If the company decided to take this option, the standards in service would be maintained and the employees would have the choice whether or not to use these services.

It is recommended that the company undertake steps in order to enhance their business performance. The company should continue to take measures in order to reduce their current overheads and expenses to a level where they only contain the necessary tools to compete for institutional and private client business.

In the present stock market environment revenues are low due firstly to a substantial decrease in the number of investors in the market, and secondary to the lower rates of commission which are gained from transactions because of the intense competition.

When revenues are low, the company is unable to make a profit due to its high overheads. A reduction in costs would result in the future in an increased profit during buoyant periods and reduced loss or even a profit in periods such as the present when the market is relatively inactive.

Although the firm has a parent company who will support and finance it through its current troubles, it is unlikely that if the firm becomes established as a loss making organisation, the parent company would continue to support it.

Thus, changes in the cost structure are a necessity in order for its long-term and perhaps short-term survival. Ideally speaking the above recommendation could be best achieved if the company could begin its planning process again. That is, relocate in smaller, less expensive offices, reset salary scales and be more cautious in its expenditure.

However in the current circumstances these suggestions are impractical because of the disruption, expense and behavioural problems which would arise as a result.

The author believes that the practical solution would be to retain the present infra-structure of the company but to cut costs and expenses down to a minimum.

Some examples of expenses and costs which are at present (and probably in the short and medium term) not affordable or excess to the company requirements are:
a) Certain employees such as researchers and analysts should be kept to a minimum as they are currently being paid high salaries but they do not make a direct contribution to the firm’s income. Also at a time when the market is (and likely to remain for some time) inactive, there is no logic for keeping more dealers than is needed.

b) Office space - with the company’s present operations reduced, letting spare offices on a short term basis could provide the company with a valuable additional revenue source and therefore result in a greater utilisation of assets.

This may not be feasible at the moment but it would be worth considering altering the layout of the offices and planning in order to lease the space when the market is subdued and it is not required.

c) Auxiliary equipment and services including canteen facilities, company events such as parties, dinners and so on. Obviously these cannot be cut completely because of the behavioural problems which would ensue.
Reasonably but less expensive canteen facilities could be offered. The reasons for these changes should be explained to the people who use the facilities and this will form part of the overall communication of the firm actions which will be discussed later.

The firm should take more secure steps in planning in the future for occurrences which will cause it difficulties. If the firm is able to prepare itself for both prosperous and lean periods there would be less need for radical changes when conditions alter.

This recommendation can be seen to be important when the company’s present position is looked out. Short-term planning resulted in the short-term profitability of the company.

It is, therefore, necessary that major investments and changes are the results of long-term forecasting and planning of the future market behaviour and its likely or even possible effects.

The company should introduce measures to curb the present behavioural problems which are present or which may result from any of their current or future changes in the organisation.

At present there are feelings of insecurity among staff who envisage that the present and/or future re-organisations will be of detriment to them. Some employees will obviously have to be made redundant if they represent an excess to the company requirements or are not affordable.

It will be far better for these employees to be told as soon as possible as this will eliminate the uncertainty which the other employees are feeling.

Of course the reasons for the redundancies should be explained fully as to create understanding of the reasons. Perhaps generous redundancy payments would symbolise that the company cared and regretted that it was forced to make these decisions.

The other parts of the restructuring program would also have to be explained to the staff, again outlining the firm’s present troubles and the proposed solutions.

This would lead towards ensuring the employee’s support and cooperation and if opportunities were given for them to offer ideas as to how certain operation could be improved, this could aid the company further in its drive for profitability.