Minnows can use financial crisis for bright ideas

WHEN the times get tough, some smart business owners and managers give pay rises. That's the surprising finding from a survey of current Australian workplace practices.

WHEN the times get tough, some smart business owners and managers give pay rises. That's the surprising finding from a survey of current Australian workplace practices.

And some optimists are seeing opportunities in the economic threat of a slowing economy, high interest rates and a beaten stock market to actually increase advertising and are looking to other innovations to help their staff's hip pockets and to boost business.

However, it's not all "laugh in the face of adversary" stuff, with another survey saying 30 per cent of small and medium enterprises (SMEs) are pushing the panic button, cutting jobs and closing down parts of their businesses.

Australian businesses are shedding staff and slashing business costs to cope with weak consumer demand.

This conflicts with the opinion of federal Treasurer Wayne Swan, who tells us our economy is in good shape, especially compared with Western rivals. His view was supported by the International Monetary Fund, which confirmed last week that we would have 2.7 per cent economic growth for the current financial year. This looks on the high side given that the June quarter's growth came in at 0.3 per cent and with NSW tottering on the brink. In fact, Westpac economist Matt Hassan's crystal ball is pointing to exactly that outcome.

And the latest Sensis Business Index survey gives negative types no reason to change their ways. Christena Singh says weak demand is having a significant impact on business confidence, profitability and the willingness to invest in capital and staff.

"Demand for goods and services has weakened further since May, with the sales indicator now at the lowest level since August 2001," she says.

"Small businesses are expecting a further deterioration in demand in the short and medium terms.

"In fact, these are the weakest expectations for the year ahead we have seen in the 15 years we have been producing the report."

The survey found about 20 per cent of small businesses were on cost-cutting drives and more than 10 per cent were shedding jobs.

However, other SMEs are thinking outside the square and actually looking at the higher cost environment for their employees as a human resources matter and are digging deep to help out.

A survey entitled "Impact of inflation and fuel price increases" by services consultant Mercer says that surging fuel prices, which have lowered the purchasing power of employees' wages, are changing workplace policies, bringing about unexpected decisions by bosses.

In what appears staggering, close to 40 per cent of respondents to Mercer's snapshot survey say that they are planning to make compensatory salary adjustments. And 10 per cent are opting for a one-off payment to their employees.

It's not to say that these bosses have gone loopy and are raising costs in the face of a slower economy. More logical changes have also been planned.

Nearly one in two respondents expect increases in fuel prices to result in a 10 to 29 per cent increase in operating costs, which will bring about changes to their business processes.

In fact, a third of respondents think their costs will be pushed up more than 30 per cent.

"Rising fuel prices are forcing companies to look at their operating costs and the first, and most obvious, impact will be seen on travel-related expenses," says Rob Knox from Mercer.

"However, if the situation worsens and inflation remains, further pressure to cut costs on discretionary spending or employee benefits could well be on the horizon."

Knox says some workers are opting to help themselves and their cash flow by reducing voluntary super payments and cashing out benefits such as leased cars.

Some employers have increased travel reimbursements to staff. On the other hand, to cut costs, 62 per cent of respondents plan to increase the use of web meetings and teleconferencing to avoid unnecessary travel.

Other innovations include promoting car pooling -- 32 per cent are into this -- and 30 per cent say they will encourage more employees to work at home. The Sensis survey also says that some small businesses are trying to turn the economic threat into an opportunity by spending on ads and other activities to build sales.

"Many businesses are taking a more aggressive stance, including advertising more, diversifying the business, seeking new business opportunities and developing new products in an attempt to attract customers," Singh says.

Eleven per cent of small businesses are advertising more, 8 per cent are diversifying business, 7 per cent are looking for new business and customers, and 6 per cent are adding new products or services.

A defiant, complacent or lazy 12 per cent are taking no action in the face of more challenging economic times.

The survey also says 14 per cent of small businesses have reduced their workforce since May and this seems at odds with the August unemployment rate falling to a low 4.1 per cent. I guess it gets down to who you believe -- the statistician or the employers' survey?

Peter Switzer is a founding director of Switzer Business Coaching.

www.switzer.com.au