A wrap up of 2009

As 2009 draws to a close, SmartCompany’s publisher Amanda Gome and I look back on the past year, with a lowdown on the economy, politics, industrial relations, growth and the impending skills shortage.

ECONOMY

Amanda, thank you for joining me in your office. So let’s start with the economy. After a difficult year, give us your feeling of where we are in the recovery cycle. Are we still towards the start or are we a bit further along than we think?

I think we’re still towards the start and I think especially for many small businesses who didn’t feel the impact of the GFC going in, they’re going to feel quite a bit more pain at the end and at the start of the recovery. I think people are hoarding their cash over Christmas and that’s going to slow things down. That’s annoying when you’re not seeing your cashflow where it should be and it makes people a little bit nervous going into those tougher times of January and February when the cash is still short. And just whether we’re going to see the end of the stimulus package still flowing through early next year, all of those I think are issues – and of course rising interest rates.

I agree on the rates. I think that could be the big thing for next year. I think the big lesson I’ve learnt personally this year about the economy is the importance of psychology – as seen with the big boost we got when we realised we weren’t going into a technical recession. I didn’t think the boost would be as big as it was and it’s really spurred confidence. But the flipside of that might be when interest rates get to certain level that households could start to get worried about the family budget, I think that could have a bit of a dampening effect. I think lots of households can absorb higher rates but whether it puts the brakes on spending might be a bit of an issue.

And I think too if you look at the recovery overseas, that’s going to be very slow as well. We’ve still got I think 13 countries that are going to be in recession next year and we know how badly the US and Europe have been battered so I think our really smart companies that look at overseas countries for growth, they’re not going to find a lot of joy there next year either.

GROWTH

On the subject of growth, we’ve just been through a period where lots of entrepreneurs have acted with caution and prudence and it seems to have served them very well. As the economy recovers how hard is it going to be for people to switch into a growth mindset?

I think your natural entrepreneurs are always holding themselves back. If you see the opportunities, you will go for them. I think we’re still being hampered by lack of credit. It’s very hard still to get money from the banks and people are holding onto their cash and they’re still recovering from a bad year, so having the money to pursue the opportunities is going to be one barrier that holds people back. I think too for a lot of people there still is a feeling of ‘oh my god, we made it, but just’. It’s a time to be cautious next year and I think that’s a feeling that I know myself, how many plans have we got James? But we’re holding onto some of them until we see a little bit more clarity.

Yes, I think that’s right. I think that a lot of people shelved plans in 2009 but I think they’re pretty keen to get them out and dust them off if they see the opportunity. We’ve seen from our Smart50 and our Start Up Awards, lots of people have plans to get going again. So be aware that everybody’s going to be trying to get market share at around the same time. So it’s not going to be any less competitive than it was.

True, in fact I think that at the upper end, the larger end we’re going to see companies do more mergers once there’s a bit more capital. They won’t be able to meet the forecasts or the budgets that their boards have set just from organic growth and they’re going to buy that growth. So be ready for more consolidation at the top end of the market and more aggressive competition.

And probably a good idea that if you don’t feel you can do a takeover, make sure your business looks pretty for a sale.

That’s right, or some kind of merger, some way that you can actually build a bit of scale as well, because don’t forget at the smaller end you’re going to have the same problems. How do you grow at a time where the economy’s still got very slow growth, overseas markets are barely in recovery or still recovering? Where’s that growth going to come from next year?

POLITICS

It doesn’t seem that long ago that Kevin Rudd was elected Prime Minister but next year will be three years, which means we’re in line for an election. Can Tony Abbott win? Does he have any possible chance? I know you’re not a big fan of Tony.

No, I think what’s really good about Tony Abbott and the Coalition is that he’s brought back a bit of balance around IR issues, employment issues – small business will be more on the agenda than it was with Malcolm Turnbull. So I think there are some good things there. I just think that Tony Abbott is very outspoken on some personal beliefs and issues and I think he’ll end up shooting himself in the foot at some stage. I think you’ve got some big issues around climate change that really are dividing and polarising. So really it’s going to move from being a debate into, are you for or against? And that’s going to be a divisive element that’s going to change the nature of that debate and I think that’s unfortunate. I think there might be a bit of backlash from more conservative elements that might have voted for him who really believe in taking some action on climate change.

I think you’re right. The good thing about him in one way is you’re left in no doubt as to where he stands on lots of issues. He doesn’t play the middle ground, he’s very opinionated to the point of being divisive. I think you’re right on climate change and I think our readership would probably agree that while there are some doubts about the science – and we’re not exactly sure about how the next 50 years are going to play out in relation to climate change – there does seem to be a need to do something, even from a risk mitigation point of view. I think Malcolm Turnbull in the end probably read that right but I’m not sure Abbott has.

But he’s going to go on cost and at a time when cost will actually get quite a bit of traction in the community. I mean, there’s a growing number of people, as we know that we actually do have to pay to mitigate this. Even if it is just a risk and we’re not sure. We at least must pay to litigate the risk of climate of change. Interesting to see how he addresses that issue. But I think he will play that cost card as well. We’ve already seen that in the way he’s saying this is a Labor plot to divide the rich and the poor. Ridiculous.

INDUSTRIAL RELATIONS

One other big political issue we should look at is IR. Obviously we’ve had a lot of changes in 2009 and we’re going to see another raft of changes in 2010. I think this next round of changes is very big. Particularly because of those family friendly policies and the flexibility provisions that give people with school age children the right to request flexible working conditions. I guess a lot of businesses and successful employers have used flexible working conditions as a point of difference. Is this going to affect their ability to stand out in the crowd?

It might. I mean one of the great things about smart small businesses is how they can tailor things for their employees. So it has been a way of attracting employees, as has employee share schemes. So the fact that neither of those are now really a competitive advantage could mean that it’s going to be harder for smaller businesses to attract, because finding the funds to match some of the large company salaries is difficult. However, as we know James, nothing beats working in a small business. The access to decisions makers, the speed in which you can move, the wonderful atmosphere – we love working in a small business and we love writing about them.

Having said that, I think one of the questions is, has that pendulum swung too far? I think as a community most people broadly back the fact that we need maternity leave provisions for women in the workplace. But then when you go into other areas like more flexible working hours for employees, that’s fine too but the employer also needs more flexibility. At the same time we’re offering employees more flexibility, it’s getting more difficult for employers to have that flexibility so I think that’s going to be a big issue going forward next year, getting that balance right. I suppose it’s always an issue, isn’t it?

Yes it is and I think we’re sort of in a weird time at the moment where we don’t really know even how the changes made back in July 2009 are playing out. We just haven’t seen a lot of cases around unfair dismissal. We haven’t seen a lot of cases around good faith bargaining. We’re still feeling our way and I think next year there might be a few nasty surprises for employers as we realise how difficult it is to manage staff out, or perhaps how big a role unions will have in some businesses where they haven’t had a role before.

And I think too how they’re going to handle the flexible leave, that’ll be another issue too. So I agree with you that will be interesting coming into an election year as well, especially if we see a much tighter budget. So it will be very interesting to see how Kevin Rudd and Co. actually manage all of those competing interests next year.

SKILLS

Indeed. The issue that I think will be one of the biggest next year is skill shortages which seems crazy given that unemployment is tipped to rise a little bit more. But I think this is going to be a big issue very, very quickly for lots of small businesses.

Yes, and it’s just been lovely in the last year, year and a half to wake up every morning and feel that security of your employees, whether it was true or not . But we’re going back into that time and we’re already seeing quite aggressive poaching of staff by competitors. The thing is we now know it’s going to get worse. No matter what the baby boomers think about their mortality, they are going to start to leave the workplace and our immigration is still low, we’re not bringing in the skills we need and it’s just going to get worse from now on. So it’s going to be a very big issue next year and ongoing.

And the tip I’m hearing from recruiters is that salespeople are the first on the poaching list. So if you’ve got good salespeople like we do at SmartCompany, lock them up. Talk to them, nurture them.

We do, we do.

Shower them with praise as they’re going to be sought after as companies try to ramp up for next year.

And I think too middle managers. In any recession, that’s a level that gets pulled out and we saw a survey last week that was commenting on the big skills shortage in middle managers. Not only that, the middle managers that are there lack the skills. Many of them were promoted quite early from lowly ranks as a way of saving money through the recession. And of course we’re going back into a recovery, they haven’t got the skills necessary to take that company to the next level. So a lot of training next year I see on the cards as well.

And finally Amanda we should thank our wonderful and loyal readers for their support this year. It’s been a big year for SmartCompany, a new website and lots of new content, lots of new features but I think we’re looking forward to a very big 2010.

And I’d like to thank you James, you’ve been a fantastic editor. Lots of new initiatives and I think next year we’ll be pushing out more webinars in greater depth, more eBooks, more SmartCompany events and I’m looking forward to a fantastic year.

Thank you everybody, we’ll see you in 2010.

Happy Christmas.