John Linton
...a total misconception - Exetel is quite the reverse.
I had two phone calls and an email earlier this morning from business acquaintances congratulating me on Exetel's bravery in raising its prices "across the board" in "these difficult times" when they were being pressured by the managers of their sales operations to reduce their prices to allow them to meet their 'sales targets' and other associated 'numbers'. I was somewhat taken aback by the effusiveness of the language used and also very surprised that they had been made aware of the minor changes we had made in the latter part of last week - none of them are in the communications business and none of them, at least as far as I'm aware, use Exetel services in either their personal or business lives.
Each of them wanted more details on how and why we came to the decisions to increase rather than reduce pricing and how and why we went about it in the ways that we did. I suppose it was all very flattering up to a point but as I explained as plainly as I could it wasn't a decision we had any choice about. It seems to me that so many people "just don't get it". "It" being that Exetel is a very small company that operates on razor thin margins and is totally financed by the money of its shareholders who are also its directors and managers. So I told them that I didn't have a clue as to how the next weeks, let alone months, will 'play out' but that I had no reason to believe that anything positive was going to happen so I did what every financial management text book recommends in such circumstances - I raised our prices and froze our capex and hiring - stock standard 'uncertainty mitigation' with no hint of "bravery" and every 'hint' of uncertainty, fear and cowardice - fiscally speaking.
When asked what impacts I had seen so far on aspects of our business I had to admit that, apart from a rapidly escalating number of payment defaults and some small business bankruptcies, order intakes had been, and still are, running slightly ahead of the original forecasts. This puzzled all three 'enquirers' and I had no better explanation as to why we had taken the actions we had before we had experienced any 'downturn' clear signals other than my personal "fear" (a long way from bravery) that it would be too late to 'take evasive action' once a downturn did become obvious.
As I said to each one of them - I would love to be responsible for a company with fat product margins and big advertising and promotional budgets and be able to 'manage' the business without the burden of knowing any decision I made might destroy the brittle financial future that Annette and I have spent our lifetimes trying to establish as well as causing operational and possibly financial inconvenience to our customers, employees and suppliers. It would be good to be a 'hands off CEO' with advisers and divisional and line managers to take the burden of decision making and the subsequent consequences of not making the agreed targets. I don't, by choice, have that 'luxury'. I found it helpful 'listening' to three different decision makers talk about how they were going about dealing with what version of the current financial conditions in their industry they were confronting. While none of them was optimistic I suppose the consensus was that they didn't know to what degree, if at all, they should be pessimistic and where they should go, outside their own company and their established advisers, to get a better understanding.
I'm not sure they found anything I said was helpful but it reinforced for me that the burdens of having no 'support' in making the decisions a small company has to make is very much offset by not having a bunch of divisional and line managers all aggressively pushing their own 'career' self interests rather than taking other aspects of the company's operational needs (not to mention the share holder's and customers and employees of other parts of the company) in to account. There are some, obviously significant, advantages of having all decisions made by a small group of people who have an intimate knowledge of all the factors involved in the decision making - and, of course, no-one to blame if the decisions are incorrect. It's an extremely uncomfortable scenario in difficult times such as these because you get to keep saying the words "I don't know what is happening" and "I don't know what will happen" and have to cope with the fact that the people you are working with look at you expecting you to then go on from that point - which a sensible person can't do.
As the oldest of my acquaintances of this morning said when I mentioned this - "at least being told you don't know what is happening or what to do beats being told by someone they know exactly what to do and knowing they actually don't". We agreed that if the CEO of BMW could say he was in no position to provide even an estimate of BMW's 2009 revenue or profit less than 7 weeks before the start of that reporting period we were kidding ourselves if we thought we could do it for our respective companies (we were both mildly interested in the new 8 series due in 2010 which has just had its development canceled in the same press conference as the reference to the 2009 year we were both watching at the time)
It was nice catching up with people I haven't talked to for a while and it was some comfort (like the interviews in Saturday's AFR) to get a first hand glimpse in to how other people are dealing, or perhaps more correctly - not dealing, with the current uncertainties in their different areas of the Australian marketplaces. I know I couldn't add anything to their knowledge and, unlike Exetel, they are, and have to be, reliant on input from people they don't think are advising them correctly but are still required to make decisions based on the arguments and 'facts' with which they are confronted.
My guess is that their "marketing people" will prevail over their "financial people" and they will lower their prices and take the hit to their bottom line rather than take the harder, for them, decision of not allowing that to happen.
I'm glad, in a way, that we didn't have any 'fat' in our pricing to allow us to have a choice.