2012 Business Strategy

SPECIAL REPORT BROKERNEWS.COM.AU

Your complete guide to business success

SETTING AND IMPLEMENTING STRATEGY

MARKETING, BRAND AND CUSTOMER EXPERIENCE

LEADERSHIP AND PERFORMANCE MANAGEMENT

IT STRATEGY IN A CHANGING WORLD

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STRATEGIC THINKING COPY & FEATURES EDITOR Kevin Eddy CONTRIBUTORS Jill Fraser, Charles Beelaerts PRODUCTION EDITORS Sushil Suresh, Moira Daniels

ART & PRODUCTION DESIGN PRODUCTION MANAGER Angie Gillies DESIGNER Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake SENIOR MARKETING EXECUTIVE Kerry Corben MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Kevin Eddy tel: +61 2 8437 4793 kevin.eddy@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au

Welcome to MPA’s Business Strategy Special Report. Building on the success of our regular in-magazine special reports and last year’s 10-year anniversary supplement, this will be the first in a series of standalone Special Reports casting a light on various aspects of the mortgage industry.

For this first publication, we’ve taken a step back from the nitty-gritty of the mortgage industry and are instead approaching the subject of running a business from the business owner’s perspective. Have you ever been accused of spending too much time in your business rather than on your business? Keen to grow your brokerage, uncertain where you’re heading, and no idea how to start planning? Well, this is the antidote.

We’ve gathered some of the top minds from around the world – academics from business schools such as Harvard, Melbourne and UTS, from leaders of the banking industry and consultants with more practical experience than you can shake a stick at – pumped them for the best and latest in business thinking, and distilled down the important stuff that you can really use, along with real-life stories from real-life business owners. This is your complete guide to planning your business growth over the next few years, and as close to an MBA as you’re likely to get without studying for one yourself.

Kevin Eddy, Editor, MPA

Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor.

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Contact the editor: Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

kevin.eddy@keymedia.com.au APRIL 2012 BUSINESS STRATEGY | 1

CONTENTS

14

08

ROUNDUP 8 | News Key economic and management news that you need to know 12 | From the experts Essential business advice from our multimedia broadcasts

CHAPTER 1: STRATEGY & PLANNING 14 | The game plan Do you have a strategy for business growth? If not, you could be on a road to nowhere.

CHAPTER 2: MARKETING AND SALES 22 | Marketing forces Marketing your business effectively is probably the second most important strategic activity you can undertake after planning your overall strategy. What are the challenges?

28 | Brand value Is a strong brand really important for a small company? It could be even more essential than for larger firms.

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32 | The customer is always right It’s one of the oldest adages in business, but getting customer service right could be more important than you know.

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CONTENTS

48 CHAPTER 3: PEOPLE AND MANAGEMENT 36 | What makes us tick How can you be a leader, not just a manager – and take your team to the next level?

44 | The people factor Growing your business invariably involves one thing: staff. How can you attract the best employees – and keep them interested?

CHAPTER 4: SYSTEMS AND IT 48 | Wired world You may be able to survive as a ‘man with a laptop’ for a while, but eventually you’ll need to consider an IT infrastructure. What are the pros and cons?

SMART BUSINESS

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54 | Cash flow crisis Keeping the money flowing is essential if you want to achieve your business goals.

56 | Business resources Where to go for grants, advice and guidance

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FEATURED CONTRIBUTORS

A rundown of some of the top business minds who have assisted in putting together the MPA Special Report: Business Strategy JIM SHARPE SENIOR LECTURER OF BUSINESS ADMINISTRATION, HARVARD BUSINESS SCHOOL Jim Sharpe is a Senior Lecturer in the Entrepreneurial Management unit. He teaches a second year elective on turnarounds, and the entrepreneurial manager, a first year required course. His interests are in the areas of business acquisitions, manufacturing, B2B niche marketing, turnarounds, pricing, leadership, family balance, large/small company differences, ethics, exit strategies and employee empowerment.

ANTOINE HERMENS HEAD OF MANAGEMENT DISCIPLINE GROUP, MANAGEMENT CORE MEMBER, CENTRE FOR CORPORATE GOVERNANCE, UNIVERSITY OF TECHNOLOGY SYDNEY Antoine M J G Hermens MBA (Macq) fellow of the Australian Institute of Management and fellow of the Australian Marketing Institute, is the executive MBA director at the University of Technology Sydney. Antoine spent the first 16 years of his career as a manager and executive in a range of companies in the retail, car, and tyre industries. In this period he reached CEO of a joint venture company. Antoine is multi-lingual and draws on extensive commercial experience in his role as an academic and advises a number of national and international clients on strategy and alliance management.

DON O’SULLIVAN ASSOCIATE PROFESSOR – MARKETING, MELBOURNE BUSINESS SCHOOL Don O’Sullivan joined the faculty at Melbourne Business School in 2008 from University College Cork, Ireland. Don’s principal academic interest is in the impact of marketing activities on company performance. His research has been published in the European Journal of Marketing, and the Journal of Marketing among others, and his case studies on technology marketing are taught in business schools across Europe.

Don is an active member of the Chief Marketing Officers (CMO) Council of the USA. Since 2003 he has led the Council’s Marketing Performance Measurement research program, and is a co-author of the Council’s Report on this topic.

TOM RICHARDSON MANAGING PARTNER, DELOITTE LEADERSHIP ACADEMY Tom qualified as an accountant, an investment banker, a Master of Business Administration and a strategy consultant before realising business succeeds because of people not Powerpoint. After 15 years as a consultant with Arthur Andersen, Bain International and most recently Deloitte, Tom advised Australia’s leading organisations on operational excellence and growth. Tom identified as a consultant the need for leadership capability to realise performance improvement in business and hence founded the Deloitte Leadership Academy. With over 3,000 Australian business leaders using the DLA, Tom has unparalleled insight into the use of cutting edge techniques to cost effectively and pragmatically develop our future business leaders.

MAARTEN BOS POST-DOCTORAL FELLOW OF BUSINESS ADMINISTRATION, HARVARD BUSINESS SCHOOL Maarten Bos is a post-doctoral research fellow of business administration in the Negotiation, Organisations & Markets Unit at the Harvard Business School. He holds a PhD in Psychology from Radboud University Nijmegen and a BA in Psychology from the University of Amsterdam.

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NEWS / BUSINESS

HOUSEHOLD FINANCES

LEADERSHIP

LEADERSHIP WOES NOT JUST IN CANBERRA Leadership difficulties are the norm for many people in everyday organisations, not just politicians like Julia Gillard or Kevin Rudd.

Three-quarters of Australians surveyed by OfficeTeam reported that having a manager they respect and can learn from is one of the most important factors in their work environment.

The survey also revealed that despite the importance of good management, many managers display poor behaviour, regardless of its negative effect on employees.

Indeed, one in 10 Australians cited that the main drawcard for accepting a new job offer would be the chance to work for an inspirational manager.

OfficeTeam also highlighted several types of ‘bad manager’: are you guilty of any of these bad habits?

THE BAD BOSS THE MICROMANAGER has trouble delegating tasks.

When assigning a project, this boss tells you exactly how, when and where to do it.

THE POOR COMMUNICATOR provides little or no direction. Your assignments often have to be completed at the last minute or redone because goals and deadlines weren’t clearly explained.

THE BULLY wants to do things his or her way, or no way at all. Bosses like this also tend to be gruff with others and easily frustrated.

THE SABOTEUR undermines the efforts of others and rarely recognises individuals for a job well done. This supervisor takes credit for employee ideas but places blame on others when projects go awry.

THE MIXED BAG is always a surprise. This manager’s moods are typically unpredictable: He or she may confide in you one day and turn a cold shoulder the next.

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Aussie finances in good shape The personal finances of Australians are in their best shape since the GFC, according to new research.

The Bankwest Financial Fitness Index found that 25% of Australians can now be labelled as “financially fit” – an 8% increase on last year’s figure of 17%, and the highest recorded figure in the Index’s four-year history.

According to the bank’s research, a “financially fit” individual has regular savings, a range of insurance, low housing costs relative to income and, high asset levels relative to debt and income.

“Borderline fitness” was defined as having moderate savings, some insurance, average housing costs and moderate debt levels. A “financially unfit” Aussie was described as having an over reliance on debt, little or no regular savings, no insurance coverage and high housing costs.

The annual survey of 1,000 individuals found that 44% of respondents had become more conservative in their spending habits, with Bankwest retail chief executive Vittoria Shortt putting this change in attitude down to global economic uncertainty.

“Consumers are responding to economic uncertainty by being more careful with their finances, such as using cash or debit cards to make purchases,” she said.

According to the Index, 24% of Australians were found to be “financially unfit” – an improvement on last year’s figure of 31% – while 51% were labelled as “borderline” cases.

WHAT ARE THE MAJOR FACTORS INFLUENCING AUSTRALIANS’ FINANCIAL DECISIONS?

1

2

INTEREST THE EUROPEAN RATES DEBT CRISIS

3

RISING UNEMPLOYMENT

4

THE RESOURCES BOOM

Source: LoanMarket

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NEWS / BUSINESS

BUSINESS OUTLOOK

Business outlook getting brighter Australian firms recorded a dramatic lift in expectations for the June quarter, with the outlook for sales hitting its highest level in almost a decade.

The latest Dun & Bradstreet National Business Expectations Survey of manufacturing, retail and wholesale firms revealed that preliminary expectations for June quarter sales and profits were more than twice March quarter forecasts. Sales expectations are now at their strongest level since the 2003 December quarter, well before the onset of the global financial crisis.

Dun & Bradstreet CEO, Christine Christian, said the strong sentiment was encouraging.

“Historically, leading indicators of financial stability, EMPLOYMENT

Employment engagement #1 issue HR professionals have cited employee engagement as their single biggest challenge this year.

IN a recent survey, 70% of respondents to a recent survey by King’s College London named engagement as their top concern for 2012. The figure has increased from 65% in 2011 and reflects the challenge of motivating employees in an age of uncertainty.

Despite recognising the importance of engagement, many organisations are cutting back on their investment in engagement initiatives. Just 50% reported an investment in initiatives to enhance employee input in the decision-making process – a marked decrease from 70% recorded in the previous year.

Economic concerns were also found to be weighing heavily on staff and leading to additional stress. When asked what changes had occurred in the past four years, the top three cited were: 1. Number of additional hours worked by staff 2. Stress-related grievances among staff 3. Employment relations problems “Higher workloads erode employee wellbeing. This is both counter-productive, and also a serious driver of employee disengagement and withdrawal,” said Stuart Woollard, co-author of the report.

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such as cash flow, have improved during the June quarter as firms gain momentum. We are also no doubt seeing businesses increasingly factoring in the impact of further interest rate reductions on their operations,” Ms Christian said.

This improvement has not, however, translated into plans for long-term employment growth, with businesses recording a three point drop in employment expectations for the June quarter.

“This would appear to indicate that businesses are still taking a cautious, wait-and-see approach on trading conditions before looking to expand their operations or their workforce.”

BUSINESS

SMEs PRESSING ON DESPITE DIFFICULTIES SME confidence has taken a dive as businesses have difficulty securing finance, but few are considering closing shop.

The Sensis Business Index has found confidence among small and medium businesses has taken a hit. The index found 30% of businesses are worried about the year ahead, including 10% who said they were extremely worried.

"While we are not seeing anything like the low levels of six months ago, business confidence is considerably down on this time last year," report author Christena Singh said.

In spite of the difficulties facing SMEs, Singh indicated that few

were willing to call it quits.

Only 11% of small businesses said they were planning to close or sell their business, down 6% from six months ago.

"Almost half of businesses are aiming for growth, and many are planning business strategies to grow their business despite what they perceive are comparatively adverse conditions," Singh said.

Singh said small businesses felt it was hard to access the finance for investment, and that this sentiment had led to weak capital expenditure trends.

She said businesses are also expecting weak trading conditions for the next quarter and the year ahead.

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MULTIMEDIA / HOW TO

FROM THE

EXPERTS

Australian Brokernews hosts not only regular news reports, but also business advice from industry experts. Here’s your quick how-to guide

HOW TO… Set KPIs and use scorecards These are generally a measure of your business’ success and they keep you on track for the goals you’ve set.

Get an Excel spreadsheet and record on a month to month basis how many leads are generated, how many appointments attended, how many applications are submitted, how many settlements are achieved and client satisfaction ratings. Then set annual or quarterly goals that you want to achieve, working back from your business goals.

Doug Mathlin, Frontrunner Consulting Group

HOW TO… Systemise your workload A book you must read is Michael Gerber’s ‘The e-myth revisited’. You get systems to run your business and people to run the systems. Look at what systems you need. Maybe there are systems that you need for your office – even as simple as a short checklist. It also makes training of new teams much easier. A system will also protect you and help you for audit purposes.

Warwick Merry, the GET MORE guy

HOW TO…

HOW TO… Identify and attract your ideal clients Who is already a typical purchaser of your services? Look at what’s common about them – where they live, what they buy, economic status, stage of life. You’ll probably find you have a couple of groups of client types. To attract your ‘ideal clients’ pick five key attributes for each group. Go to events that your client groups attend such as charity functions, community events – but make sure it’s something you enjoy, and don’t sell.

People do business with people they like, they know and they trust. Business flows automatically from that.

Jen Harwood, Business Champion

Cross-sell Earning the customer’s trust before cross-selling a product or service is key. Trust is something which is personal and not institutional: it’s not transferable..

Julio Labraga, Capital Fusion

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For further advice on each of these areas and more besides, visit brokernews.com/tv

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CHAPTER ONE / STRATEGY AND PLANNING

GAME

PLAN

Do you have a strategy for business growth? If not, you could be on a road to nowhere. Kevin Eddy reports Having a clear, well-articulated strategy for your business is widely acknowledged to be one of the most important things you can do in making sure your company is successful. It can be a tricky thing to get right, especially when a firm is in a relatively small state in a fast-moving industry. What timeframe should you be looking at? How do you set goals, and break them down into achievable targets? How do you stay on course – or adjust as necessary?

The first thing you need to do is make time to develop one. The classic approach is to take a day or two out of the office with your business partners, key employees or outside parties such as business coaches or consultants. Others find that a couple of hours is sufficient, while some still use holidays and quiet periods in the market to do some of this planning.

1

KNOW YOUR VALUE PROPOSITION

Next, you need to have a clear idea of what makes your business different – what your overall value proposition is. Antoine Hermens, head

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of the Management Discipline Group and executive MBA director of University of Technology Sydney, says that too many small businesses don’t have a clear idea of what their offering is.

“The biggest challenge for small and mediumsized companies is really understanding what value you add to your customers,” says Hermens. “My research indicates that successful SMEs have really thought long and hard about their unique value proposition and the economic value they’re adding for their stakeholders: customers, employees and suppliers.”

Hermens highlights using the ‘balanced scorecard’ approach as a good way of assessing value. This is also the point to look at elements like your market positioning, analyse your competitors and your customer base. A wide range of tools have been developed to assist with this.

He also recommends that you look at your business and ask what’s unique about it.

“If you stopped doing business tomorrow, would anyone really miss you?” he asks. “If the answer’s no, then you’ve really got to go back to square one.

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TOOLS FOR THE JOB There are a staggering array of strategy models, frameworks, diagnostic tools and systems out there – several of which are too clever for their own good. Here’s MPA’s picks of the most useful. harmful

strengths

weaknesses

opportunities

threats

external origins

internal origins

helpful

new products

market penetration

product development

market development

diversification

new markets

existing markets

existing products

SWOT – DIAGRAM A well-established system first developed in the 1960s and 1970s for assessing the market position of a business and/or project. It involves analysis of Strengths, Weaknesses, Opportunities and Threats using the grid framework on the left USEFUL FOR: Determining market position; identifying weaker areas to strengthen; identifying strong areas to exploit further; competitor analysis

ANSOFF PRODUCT/MARKET MATRIX Another long-established tool, the Ansoff matrix is intended to help develop growth strategies by providing a framework for developing existing and new products and markets USEFUL FOR: analysing current market position; diversification strategies; identifying new markets; potential expansion opportunities

financial

BALANCED SCORECARD (BSC) A tool developed in the 1990s by Robert Kaplan and David Norton, the balanced Scorecard measures four key performance metrics – financial, customer, internal process and growth. As the name suggests, it’s intended to give a more ‘balanced’ view of performance and strategy than pure financial metrics

vision and strategy

customer

USEFUL FOR: value proposition, strategy development and prioritisation, ongoing monitoring

high quality company A

relative market share high low

market growth rate low

USEFUL FOR: Assessing current product/service mix; identifying growth markets; cash flow assessment

learning and growth

stars

question marks

cash cows

dogs

high

BCG MATRIX Developed in the 1970s by Boston Consulting Group, the BCG Matrix classifies products (and services) into one of four categories based on combinations of market growth and market share.

internal business processes

company B company C low price

high price

company D company E company F

low quality

PERCEPTUAL MAPPING: A tool that maps rival brands onto an x/y axis graph based on various attributes, usually based on customer research. Attributes are not typically seen as positive or negative, but instead reflect the needs of different market segments.

USEFUL FOR: market positioning; competitor analysis; customer targeting; launching new services

value proposition The unique factors which explain why a customer should use your service or product.

This is best summarised in a short statement (or several short statements).

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CHAPTER ONE / STRATEGY AND PLANNING

STRATEGY: Q&A Jim Sharpe, Harvard Business School Jim Sharpe, Senior Lecturer at Harvard Business School’s Entrepreneurial Management Unit, is a successful entrepreneur in his own right. He shared his thoughts on strategy with MPA.

Jim Sharpe

HOW DOES SETTING STRATEGY FOR A SMALLER, ENTREPRENEURIAL BUSINESS DIFFER FROM LARGER FIRMS? Large firms have a much longer time horizon and a global outlook. Determining their funding needs, operational investments and resource allocation is supported by their strategic planning. Small and medium-sized businesses are more operationally focused with less complex needs. Planning for growth with existing customers, developing product extensions, adding incremental capacity and finding more profitable opportunities keeps them busy.

TIMESCALES – HOW FAR AHEAD IS REASONABLE? HOW IMPORTANT IS IT TO HAVE AN EXIT STRATEGY IN MIND? An entrepreneur should probably be thinking no more than three years out. Having a good idea of the plan for the upcoming year along with what might be needed the year after and some thought about the year after that. More importantly, managers need to be ‘stress testing’ this relatively short-term outlook.

Will there be a recession? What if a major customer or vendor goes out of business or a couple of key employees leave? Planning for an exit can start when the owner is emotionally ready to leave the business;

it generally takes a few years, so well within the planning horizon.

ARE THERE ANY TOOLS THAT YOU HAVE FOUND PARTICULARLY USEFUL IN STRATEGY SETTING? Look first at the business model: customers served, delivering/making the product or service, getting and serving customers and ensuring that the economics for future growth comes first. Then an assessment of the changing environment within which the business works helps set the stage for a SWOT analysis. Doing this every couple of years is a good exercise.

HOW SHOULD YOU MAKE SURE YOU STAY ON TRACK WITH A STRATEGY – AND WHEN DO YOU KNOW WHEN TO CHANGE IT? Sooner rather than later; it is always easier to wait for a little more information or another attempt at ‘fixing’. Moving to change direction decisively, based on even limited information, is one of the characteristics that make entrepreneurs successful.

Generally, when a significant ‘event’ happens to the business or some major external changes occur are good times to reflect on ‘where we are headed’.

WHAT’S YOUR SOLID GOLD BUSINESS ADVICE FOR AN AMBITIOUS ENTREPRENEUR? Pay attention to your customer and make it easy to do business with you. Charge enough for your product/ service, then some – unprofitable businesses don’t survive!

IN PRACTICE: PROCESS EFFICIENCY The importance of effective and efficient process is often underestimated. Many firms – large and small – are unintentionally wedded to ‘the way things are done’ and carry out tasks without assessing whether it’s the best way to carry them out.

However, taking a fresh look at your business processes can be hugely beneficial. Commonwealth Bank’s Kaizen program focuses on helping brokers improve their business processes, creating efficiencies and improving staff morale.

Two brokerages that have seen benefits by using the scheme to refine their processes are the Australian Lending and Investment Centre and Smartmove.

“We mapped out our loan application process, from the point where we first receive the lead right through to post-settlement on a process map,” explains Smartmove principal Simon Orbell. “We identified inconsistencies in how each of our five brokers operated, and we worked towards systemising and closing up those inconsistencies.”

Smartmove also rationalised the role of the support team, so that it would only take care of file from unconditional approval onwards rather than supporting the broker throughout. The firm has seen business efficiency improve markedly; it’s recently taken on a sixth broker, and lost two of its support team – and is

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still able to write the same volumes as before with no difficulty – and has seen an increase in customer satisfaction levels and client referrals.

“We’ve removed inefficiencies that previously we would have solved by just hiring somebody,” adds Orbell. “The single biggest benefit is that it’s improved the morale of the team. They feel part of a bigger picture without us having to drive it: everyone’s engaged and wanting to move towards a common goal.”

A process innovation that Australian Lending and Investment Centre has introduced is a ‘visual management board’ – a simple whiteboard showing the progress of active files, colour coded as to status of application. A green file is proceeding well, whereas a red file is a problem file, and blue is approved or settled.

“I can walk out the back and see where every file is from a status point of view. We combine that with a huddle every morning, where we discuss how to move on the ‘red dot’ files,” adds Agent. “It’s had a positive impact: our guys are working smarter than they used to; we can track files better.

“It’s also reduced ‘Fat Controller Syndrome’: previously, the directors felt like they had to control and check everything, whereas now employees are empowered to take the initiative and do their job.”

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CHAPTER ONE / STRATEGY AND PLANNING

STRATEGY: Q&A

Ian Jordan

Murray Lees

Ian Jordan, Selector Group

Murray Lees, Connective

Sydney-based Selector Group is a diversified financial services company providing mortgage finance personal insurance, financial advice and investment options. The company employs 12 full-time staff. Ian Jordan is a director and placed #34 on MPA’s Top 100 Brokers list in 2011.

Aggregator Connective started as a brokerage back in 1998, and made the move to an aggregation model in 2003. Since then it’s been one of the fastest growing companies in the mortgage industry and has featured in the BRW Fast 100 for the last three years. Murray Lees is a founder and director.

WHAT ARE YOUR FIRM’S OVERALL STRATEGIC GOALS? We’re two years into a five-year plan: We’re aiming for a $5m turnover and $2m EBIT (earnings before interest and taxes). The reason we’re using EBIT rather than a multiple of trail is because of the range of services.

WHAT ARE YOUR FIRM’S OVERALL STRATEGIC GOALS? We have a five year vision, but we keep it simple. If you can’t express your plan on one page, it’s not well enough formed. You do need detail when executing, though, so that vision is broken down into plans for each year.

HOW DO YOU GO ABOUT STRATEGIC PLANNING? We get out of office and remove ourselves from company. We also try to involve a mentor of some kind: other professionals, business coaches or experts on specific areas.

We don’t use many formal strategy tools: we tend to uncover risks innately. In a small business you’re so focused on revenue, that when you move away from the office and sit under the yum-yum tree for a day, that stuff becomes clear.

HOW DO YOU CARRY OUT STRATEGIC PLANNING? It’s a three-headed monster. The directors – myself, Mark and Glenn Lees – formally come together on monthly basis, with our non-executive chairman, Graham Maloney. We also do quarterly reviews.

HOW DO YOU MONITOR AND ADAPT YOUR STRATEGY? We have the one five-year plan, and we change that.

There are always changes. That’s the basis of what we want to achieve. We break that down to 12-month, quarterly and monthly plans. Those are divided into four areas – finance; sales and marketing; ops; and HR – and set quarterly goals that link to each of those.

You can talk about vision, mission and objectives – but if you don’t know what kind of business you want to be, what your competitive advantage is, it’s meaningless.”

The general consensus is that value propositions are best kept short – distilling your core competitive advantages into a few lines or paragraphs.

2

SET YOUR OVERALL VISION

The next stage is to set your ultimate goal or vision for the business – where you want your business to be, and when.

What this means varies from person to person as does the timeframe in which you’re planning to achieve it. Some people operate on a calendar year basis; others work to five- or 10-year plans.

Fiona Mackenzie, head of Macquarie Practice Consulting, recommends a three-year horizon as a good compromise.

“We encourage our clients to step back and look at a three-year goal,” she says. “One year can be too

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‘operational’: if you want to make any changes to the business it feels too tight. Five years, meanwhile, is a little far out for some people to feel that it’s practical.”

The overall goal or vision should be based on where your business is at present.

“We take a look at the business today. Key facts down on the table: key clients, revenues, profit, size and shape,” adds Mackenzie. “Then, we look at what you want it to look like in three years – once we know that, we can look at the ‘gap’ and what you need to do to achieve that.”

That overall goal shouldn’t just focus on business metrics, however: Mackenzie says you should also factor in your personal goals. While the overall vision should be relatively realistic, it can be somewhat aspirational, too – crunching it down to numbers and targets can come later. Whether you call this a vision, a big hairy audacious goal or a stretch target doesn’t matter – the key is to concentrate on where you want to be at the end of your timeframe.

Doug Mathlin of consultancy Frontrunner Group adds that it can be useful to think of this in terms of financial metrics.

“In a commission-driven business, you need something you can focus on: for example, saying you want to write $100m worth of business in a year.”

3

BREAKING IT DOWN

Once you’ve got your overall goal and your timeframe, you need to figure how to get there – and this is the nitty gritty of strategic planning.

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STRATEGY: Q&A Tanya White, Australian First Mortgage Mortgage manager Australian First Mortgage was established in 2003 in Sydney, and quickly grew to a national brand. It now offers residential, commercial and leasing finance and employs more than 60 staff.

Tanya White is one of the company’s three directors.

directors meet formally once a week; informally, we talk every one or two days. We’re always reviewing what we’re doing with department heads. We also ensure we have monthly sessions with salespeople. We also have a national conference every 18 months.

DID YOU HAVE A CLEAR STRATEGY IN MIND WHEN YOU STARTED AFM? We actually planned on being a brokerage, not a non-bank or mortgage manager. However, we quickly realised our relationships and the market opportunities gave the chance to being a non-bank – we had the knowledge, the contacts, the reputation to take the business to something more.

We had a clear strategy with clear financial projections: we grew faster than expected, as we originally only targeted NSW and Victoria, but opportunities presented themselves.

HOW DO YOU MEASURE PROGRESS? We use a number of metrics, but monthly volumes say it all. We also measure specific metrics in each department, such as churn rate, how often borrowers call. We use a lot of cross business reporting to see where we need to add in or rationalise resources.

HOW DO YOU GO ABOUT STRATEGIC PLANNING? We do it all the time – it doesn’t ever stop. The three

You need to work backwards from your large, aspirational goal into measurable, timed targets, ideally monthly or even weekly. The tried-andtested SMART rules for target-setting are invaluable here. Any targets you set should include the following criteria: • Specific • Measurable • Attainable • Relevant • Timely From these targets, you can track how you’re going and extrapolate other aspects of strategy such as: • Marketing: how many campaigns do you need to mount to fulfil your targets?

• Product/service offerings (should you diversify?)

• Operational issues, such as staffing: do you need administrators or more loan writers, or expand into more offices • Process (can you put in place better systems to improve efficiency and therefore write more business for the same resource requirements?).

4

FINANCIALS

Understanding the financial implications of your strategy is a fundamental part of success. Budgeting should be based on realistic sales estimates, based on your current position and long-term goals; you should also take into account every cost. It is useful to break down costs into discrete areas, such as people, supplies, facilities, equipment, marketing and other. While these

Tanya White

WHAT ARE YOUR TOP TIPS FOR A GROWING BUSINESS? You can have strategy – but outside factors like the market or economy also determine your path. You have to take risks into account and mitigate them. You should also plan for business growth and the resources you’ll need before growth happens.

The key is to concentrate on where you want to be at the end of your timeframe.

WHAT’S YOUR VALUE PROPOSITION? SIMON ORBELL, SMARTMOVE PROFESSIONAL MORTGAGE ADVISORS A personable and knowledgeable approach to property finance solutions, building a long-term relationship based on communication and trust.

JAMES GREEN, OXYGEN HOME LOANS We have three points: • We find the best deals from over 20 lenders • We take the hassle out of applying for a mortgage • It’s a free service JUSTIN DOOBOV, INTELLIGENT FINANCE To offer our clients the best customer service that they have ever experienced.

GERARD TIFFEN, TIFFEN & CO That our clients will appreciate the level of service we provide them. From the initial consultation with their broker, through to settlement and beyond, our entire team truly are there for the life of our clients’ loans.

APRIL 2012 BUSINESS STRATEGY | 19

CHAPTER ONE / STRATEGY AND PLANNING

EXECUTIVE SUMMARY

“It’s good to have quick wins, especially for small businesses”

time to plan your strategy, and commit to  Make carrying it out

Fiona Mackenzie

out analysis of your market position,  Carry competitors and areas of potential growth

numbers don’t need to be accurate, they should be a realistic estimate.

You should work several scenarios if at all possible, with conservative and optimistic income figures so that your strategy is stress tested. It may also be worth plotting a cash flow projection showing the timing of payments and expenditure, too.

Plotting in some high-paying (or money-saving) ‘quick wins’ is also important, especially if you’re looking at investing in the business for the longer term.

“It’s good to have quick wins, especially for small businesses that need to get benefit back quickly,” says Mackenzie. “Revenue is key and if they’re going to be spending time investing in the business in some way for longer-term goals – which can drain resources – you have to look at activities which are going to give them benefit in terms of cash to help invest.

Quick wins can range from sorting out bugbears in processes to make business run smoother, catching up with a referral partner or outsourcing loan processing to free up sales staff time.

5

your value proposition, and be able  Understand to express it in a short statement

a vision in mind of what you want to  Have achieve – and a timeframe down the vision into goals and targets;  Break these should be SMART (Specific, Measurable, Attainable, Relevant, Timely) your strategy up into operational areas,  Divide with goals for each. Make sure these tie back to your core strategy

 Plot in some ‘quick wins’ to get cash coming in your financials inside outside – forecast  Know on both conservative and positive sides. Carry out cash flow projections too at your business process – can you  Look streamline it at all? can be a cost-effective solution  Outsourcing and/or give you access to specialists

MONITOR, REVIEW AND ADAPT

20 | BUSINESS STRATEGY APRIL 2012

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It’s all very well building a grand plan, but if it ends up in the filing cabinet until next year, then it’s no use. Therefore, it’s important to keep monitoring your progress on a regular basis.

“If nothing else, my strongest suggestion would be to set a recurring appointment with yourself called ‘Business Review’ that runs 12 times a year at the very least,” says Mathlin. “The best time to do it is straight after commissions are paid: that’s a trigger to review exactly the results achieved and adjust the plan for the next 30 days as necessary. Even if it’s just a reminder that pops up on the Friday afternoon for you to take an hour away to review and plan, it’ll be time extremely well spent.”

You shouldn’t be hobbled by your strategy either.

“The vision should be where you want to get to: the route you get there might change. Some things you implement will not work; some will work better than you expect. There are some things you haven’t thought about that you will be able to do, so you shouldn’t necessarily wait until the end of the month to decide to do something differently.”

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BROKERNEWS.COM.AU

APRIL 2012 BUSINESS STRATEGY | 21

CHAPTER TWO / SALES AND MARKETING

Marketing your business effectively is probably the second most important strategic activity you can undertake after planning your overall strategy.

Charles Beelaerts breaks down the challenges for financial services businesses.

22 | BUSINESS STRATEGY APRIL 2012

BROKERNEWS.COM.AU

MARKETING STRATEGY Step by step

1

IDENTIFY YOUR TARGET CUSTOMER GROUPS/ MARKET SEGMENTS

2 3 4 5

IDENTIFY YOUR VALUE PROPOSITION(S)

TAILOR YOUR CUSTOMER EXPERIENCE

TAILOR YOUR COMMUNICATION CHANNELS AND MIX TO MARKET SEGMENTS

MONITOR, REVIEW AND UPDATE REGULARLY

Marketing financial services – particularly mortgages – is not as straightforward as marketing many physical products. There are a number of extra hurdles that must be crossed before a purchase is made.

These can be boiled down to two key issues.

First, mortgages entail a uniquely large commitment on the part of consumers compared with anything else they will buy, with little opportunity to appraise the product before purchasing. The experience of Don O’Sullivan, an associate professor of marketing at Melbourne Business School, is that the sheer size of the purchase slows down the consumption process, compared with smaller transactions.

Secondly, there can be difficulties demonstrating that you are unique in the market – whether that’s in comparison with other brokers or lenders themselves. Sullivan adds that when marketing and selling mortgage-related services, “you need to be more believable than the competition – and competition may default to price.”

Dealing with the first issue – the perceived risk of the purchase – can be dealt with in a number of ways, not least through the reassurance of a strong

MARKETING SERVICES Key issues INTANGIBILITY: Services are intangible. You don’t have a physical product to sell and you don’t sell from inventory. If a physical product is defective, you can take it back and get a replacement. You can’t always do that with a service.

VARIABILITY: You can’t standardise the product offering. Even if the terms of two mortgages are identical, the process by which they are sold varies.

INSEPARABILITY: It is difficult when marketing a service, such as a mortgage, to separate the consumer and the producer.

PROCESS: The whole service experience with a mortgage impacts on the consumer in a way it doesn’t with a physical product.

RESEARCH: Services are more difficult for consumers to research than where there is a physical product. Word of mouth is more important.

COMPLEXITY: This is related to intangibility – quite often, a service such as mortgage broking is a complex product and it is not generally an easy thing for people to understand.

brand, communicating in the right way at various points in the decision-making cycle and peer recommendation. Differentiation to other service providers, meanwhile, can be carried out through a clear marketing strategy. How can you put one in place?

STEP ONE: SELECTING MARKETS The first step in developing a marketing strategy is to identify the consumer group to whom you are making a unique offer – usually as part of your overall strategy setting.

The initial task is to evaluate the needs and characteristics of consumers and divide the market up into segments according to such things as geography, income, credit risk and so on. These segments should be evaluated in terms of profit and growth potential. You may choose to focus on one segment, or service several. O’Sullivan points out that all mortgage organisations have a choice of market and positioning and this should be an integral part of their strategy.

STEP TWO: KNOW YOUR STRENGTHS Once you know the type of customer you are target-

customer experience The sum of all experiences – good and bad – a customer has with a supplier of goods or services, over the duration of their relationship with that supplier. It is viewed by a number of experts as the single most important aspect in business success (see page 32 for more on customer experience)

APRIL 2012 BUSINESS STRATEGY | 23

CHAPTER TWO / SALES AND MARKETING

THE SEVEN Ps OF MARKETING The seven Ps of marketing is a well-established formula to evaluate both your business strategy and marketing mix by analysing seven key customer touch points. How does it apply to mortgage broking?

4. PROMOTION AND ADVERTISING Online marketing has reduced the pressure on advertising. Getting messages out has become more straightforward. The importance of social media has increased enormously.

1. PRODUCT A mortgage is different every time it is received. The service and the add-ons one gets can be different for otherwise identical products and the information a consumer gets is greatly influenced by the way in which a mortgage broker deals with a customer.

WHAT YOU NEED TO ASK: What channels are most appropriate for my target customer groups? How should these be used most effectively?

WHAT YOU NEED TO ASK: What are the key differences in the mortgage products? How do these relate to the target market?

2. PRICE There are many, often similar, offerings and competition can default to price where a mortgage broker cannot differentiate themselves on other bases. Prices are freely available online so mortgage brokers need to focus on non-price differences.

6. PROCESS Marketers need to be aware of every process step a consumer goes through and how to deal with it – right from when a consumer starts looking for a mortgage until they fill out the forms.

WHAT YOU NEED TO ASK: What steps are consumers taking on their journey with me? How can I ensure the process is optimised for them and espouses our value proposition?

3. PHYSICAL DISTRIBUTION Communicating the service is critical and you need to ensure that the distribution of information, including physical contact, is in line with consumer needs.

7. PHYSICAL EVIDENCE Financial services are intangible, but it is essential that you examine whether there is a consistency of look and feel of documentation, particularly of your own brand, at all stages of the process.

WHAT YOU NEED TO ASK: How can I ensure my communications are consistent and hit the right touch points at all stages of communicating with the client?

WHAT YOU NEED TO ASK: Are all my public-facing touch points – documentation, websites, office branding, uniforms etc – consistent and in line with our value proposition? Do I have a strong brand?

Kirrily Dear

A brand advocate is a person who talks favourably about a brand, product or service and passes on positive word-of-mouth messages about the brand to other people.

Advocates can be other businesses you have referral relationships with, public figures and/ or satisfied customers.

WHAT YOU NEED TO ASK: Are my people upholding the values we are portraying to the market?

WHAT YOU NEED TO ASK: What other services do I offer other than price? Eg speed, knowledge, choice of lender, personal service?

“The days of formalised communications, i.e. putting on a ‘persona’, has gone by the wayside” brand advocate

5. PEOPLE As consumers can obtain the same loan from many different brokers or businesses, every touch point becomes important with a service that is intangible.

ing, you can start to shape your market positioning and communications. However, you also need to know what you’re highlighting as your key messages to various market segments.

There are a range of marketing tools available to do this, with the long-established ‘Seven Ps’ of services marketing (see boxout) commonly used to analyse your marketing strategy. Another, simpler but arguably just as effective tool that’s become popular in recent years is the concept of the ‘value proposition’: in effect, this is a short statement espousing the unique factors that explain why a customer should use your service or product. Again,

24 | BUSINESS STRATEGY APRIL 2012

these may differ for market segments, but tend to be similar.

Marketers argue that this value proposition is something that businesses should pay extra attention to; Kirrily Dear, founder of marketing and management consultancy, Eyes Wide Open, sees mortgage broking businesses struggling most with the area of value proposition.

STEP THREE: KNOW THE CUSTOMER’S JOURNEY Anouche Newman, associate lecturer in marketing at the University of Technology Sydney’s Business School, agrees that customer experience is crucial – and you need to be on top of it from the word go. “[The customer experience takes place] from the moment that they meet a mortgage broker, through to experiencing the service and actually consuming the mortgage service itself. That should all be taken into account from a strategic perspective.”

Newman suggests that a worthwhile exercise

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IN PRACTICE: NAB’S GAME PLAN The most successful financial services marketing campaign of 2011 was undoubtedly NAB’s ‘Break Up’ campaign. However, the campaign didn’t spring out of nowhere: it had its roots in a strategic shift implemented at the time of the GFC – its muchtrumpeted ‘Fair Value’ strategy.

“This was a sentiment and a groundswell that we tapped into as we embarked on a business strategy underpinned by a philosophy of fair value,” says Lisa Gray, NAB’s group executive for personal banking. “We knew that there would be cynicism so we needed to build engagement with a ‘rolling thunder’ of decisions and announcements. So we aimed to create a ‘movement’ with our people that was self-compelling and self-propelling – reinforcing the right culture and behaviours.”

The Break Up campaign, launched on Valentine’s Day 2011, saw the bank highlighting a number of these, including abolishing a number of fees, and maintaining the lowest standard variable home loan rate (SVR) among the major banks for 32 months. The campaign used a range of media, especially online, to position the bank as different from the rest of the Big Four banks. The campaign resulted in 650,000 new customers switching to NAB and revenues have returned to pre-Fair Value levels.

NAB is currently carrying out a follow-on campaign to encourage more customers switch to NAB. This campaign has three parts: • Launch of 13 SWITCH: a dedicated bank switch helpline • Offer of $100 for customers switching everyday banking to NAB

Lisa Gray

• Launch of an advertising campaign highlighting the reasons it’s time to switch to NAB The intention behind this campaign enables the bank to highlight the decisions that have been taken to benefit NAB customers. It enables the bank to demonstrate how different it is to its competitors. It also enables NAB to challenge the behaviour of the other major banks to match NAB’s actions.

“NAB’s differentiation and reputation agenda has us better positioned for the future than our competitors,” says Gray. “We recognised that for our industry to have a positive, sustainable relationship with our customers, people, community and shareholders we needed to change from within – from a position of incumbency.

“We have growing evidence that authentic difference, putting people and customers first, can create sustainable shareholder value.”

APRIL 2012 BUSINESS STRATEGY | 25

CHAPTER TWO / SALES AND MARKETING

AT A GLANCE: THE MARKETING MIX DIRECT MAIL

SOCIAL NETWORKING

TELEPHONE MARKETING

BUILDING REFERRAL RELATIONSHIPS

ADVERTISING – PRINT AND ONLINE

SPONSORSHIP

E-MAIL NEWSLETTERS

PUBLIC RELATIONS

when planning your marketing strategy is to ask exactly what the customer experiences from start to finish and then determine how you, as a marketer, can communicate your value proposition at all stages of the process.

O’Sullivan adds that you should also demonstrate that you are unique in the market: that comes back to researching the market and having the right elements like promises of delivery – in effect, being able to get the customer the mortgage they want.

STEP FOUR: COMMUNICATE YOUR MESSAGE

social validation The act of checking decisions by consulting those around us, whether face-to-face or online. It’s seen as a powerful marketing tool.

Once you know a) your value proposition, b) your target consumer group(s) and c) the customer journey, you can then work out the best ways to communicate with them at each stage.

The integration of communications into the mortgage marketing mix has taken on new dimensions with the ever-increasing number of ways you can contact consumers (see boxout). Matt Mitchener, marketing manager at Vow Financial, recommends three key methods of client contact.

“First, simple eDMs (electronic direct mail) to your database – no matter who they are. It is important to get your name, brand and contact details in the inbox of your database at pertinent times during the year,” he says. “Second, text messaging, for quick, cheap and easy communication en masse to your current clients. Why not send out a personalised SMS for an RBA rate reminder or birthday SMS? Finally, telephone – finding a reason to talk to a client or prospect is easy. All you have to do from there is keep the contact regular so that you remain top of mind.”

26 | BUSINESS STRATEGY APRIL 2012

Make sure you can monitor which methods are most effective – whether that’s putting a special offer code on a print advertisement, using analytics software or a simple ‘where did you hear about us’ question into your initial client interview, being able to assess which methods of communication are most effective is essential in refining future communications, Dear warns that you can face an uphill struggle in a world that’s increasingly bombarded with marketing and media messages.

“There is an absolutely huge amount of market cynicism to overcome,” she says. “Physical evidence, case studies and results, and all the measurable aspects of what you do are critical in overcoming that.”

Providing something that’s more than just a sales pitch can make the difference between gaining a client or being instantly dismissed.

“The days of formalised communications, i.e., putting on a ‘persona’ has gone by the wayside,” says Dear. “Buyers are looking for a very authentic voice within the marketplace so they feel like they are connecting and understanding the real person behind the service. That again helps with the feeling that they’re buying a known product.”

On a practical level, it is important to make sure that communication is consistent across every single interaction that a consumer might have with your firm, either online or face-to-face “For example, you might have a wonderful website with lots of information and a beautiful design,” says Newman. “However, it sends the wrong message if the office is really shabby and the colours and branding that were used on the website are nowhere to be seen.”

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WORD OF MOUTH POWER

and segment the market by customer  Divide type and need

 Position yourself by offering a unique service  Know your value proposition the courage to set yourself apart from the  Have competition  Never over-promise  Research your competitors and your consumers  Emphasise quality of service  Be consistent with your communications a knowledge and awareness of social  Develop media  Don’t sell to consumers, help them to buy  Be adaptive to the rapidly changing environment beyond the ‘Seven Ps’ of marketing to  Look customer experience, and focus on giving consumers the best outcome. trust in your dealings: reputation is a key  Build element.

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Probably the most important marketing channel for financial services companies doesn’t involve formal communication at all: it’s all about referrals.

The power of word of mouth, referrals and testimonials is something that many brokers have cottoned onto. The reason for this comes back to the ‘perceived risk’ issue about buying services, and particularly financial services. As the service can’t be evaluated before purchase – as, say a television can be – buyers have to look for other methods to reassure themselves that they are making the right choice. A strong brand, as discussed elsewhere, is a key way of doing this: ‘social validation’, seeking the views of trusted others, is another. Research also bears this out: according to a McKinsey Quarterly report, word of mouth is the primary factor for between 20% and 50% of all purchasing decisions.

One way of doing this is building relationships with other professionals – financial planners, real estate agents, accountants, solicitors and so on – who will refer business, usually for a small fee or commission cut. Credit legislation requires brokers to keep a register of all referrers.

The second, more prized referral method is recommendations from previous customers, who effectively act as ‘advocates’ for a business in a social situation.

However, the best way to recruit a ‘brand advocate’ is to simply provide a superlative customer experience: if you do that, they’ll want to tell their friends about you.

While face-to-face recommendations are still the most common form of referrals – the classic ‘chat over the barbecue’ – social media is also opening this up to a much wider audience. Think consumers using customer reviews (eg on Amazon or iTunes) prior to purchase, or by asking for peer views via social networks.

Admittedly, managing the new world of two-way online conversation can be a bugbear to many marketers previously used to ‘one-way’ communication. O’Sullivan says that there is a degree of maturity coming into this aspect of marketing communications: it is increasingly being looked at as a cost of doing business.

It’s a growing channel, too. According to Dear, the amount of social validation being carried out online is significant: “Selling any type of service online, and mortgage broking in particular, isn’t necessarily happening on the corporate website anymore,” she argues. “It’s happening within social networks. Any firm serious about their marketing needs to work that out.”

All this online and offline social validation adds up to one thing: your reputation is crucial.

How do you manage that reputation? Know your value proposition; know your target market; ensure your marketing messages and brand are targeted and consistent, and recruit ‘brand advocates’ through providing value and, above all, superlative customer service.

EXECUTIVE SUMMARY

ustomer Set up c

APRIL 2012 BUSINESS STRATEGY | 27

CHAPTER TWO / BRANDING

VALUE Is a strong brand really important for a small company? It turns out it could be even more essential for larger firms. MPA reports

Brand has been the darling buzzword in marketing circles for years – and it doesn’t seem to be losing any traction. However, while the world of brand gurus, personal brands and evoked sets might appear faintly ridiculous, there is method to the madness – and some real benefits for services companies.

SAFETY FIRST A strong brand can act as a safety net for customers, and in an environment where the perceived risk of purchase is high, as in financial services, brands can act as a mitigator to this.

According to textook Services Marketing by K Douglas Hoffman, John EG Bateson, Greg Elliott and Dawn Birch, a strong brand makes potential customers more likely to try a particular service provider.

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5 STEPS TO A KILLER BRAND Neil Shewan explains how to build your brand from the ground up Creating and maintaining a strong brand is hard in itself. It is as much about “doing” as it is about “saying”. That is why so many do it poorly. Poor brands have a shallow promise. Strong brands come from a core idea people believe in.

1. WHAT ARE YOUR CLIENTS THINKING? You must get closer to your clients. Talk to them. Get someone else to talk to them. Interview them. Survey them. Understand them. Truly uncovering why your clients decided to use your services can easily get lost in the day-to-day grind. Make it your job to find out what they are thinking. It will often lead you to a core idea for your business that may have been there all along, hidden from view.

2. HAVE A CLEAR PLAN Get your business plan in order and have a clear point of difference in the market that you can defend and consistently deliver. Branding is about sending the right signals about your business to your audiences. If you don’t have a core idea that differentiates you in the market, you are on a rudderless boat. Without a core idea it is hard to know what your brand stands for.

You can tell this is the case when a brand resorts to gimmicks or purely competes on cost.

3. GET TO THE MESSAGE Once you have a core idea to centre your thinking, it becomes easier to start shaping your key messages.

• What does your brand stand for?

• What benefit do you provide?

• Is there a process that makes you unique?

“If we start with the premise that consumers do not like taking risks, then it would seem obvious that they will try, whenever possible, to reduce risk during the purchase process… Service brands perform a valuable function … they can simplify the customer’s search, evaluation and decision processes. Thus, service customers may already hold positive opinions about HSBC without ever having been a customer, largely based on its familiar name and logo.”

It also means that customers are more likely to come back (and become ‘brand loyal’).

“Having been satisfied in a high-risk purchase, a consumer is less likely to experiment with a different purchase,” argue the authors. “Maintaining a long-term relationship with the same service provider, in and of itself, helps reduce the perceived risk associated with the purchase.”

These are good starting points. Once you know the messages you want to communicate, you then need to be consistent and single minded in staying on brand.

4. THINK ABOUT THE ENTIRE EXPERIENCE Gone are the days when a brand was considered just a logo, or a clever catchline. You need to start thinking about every way you are signalling your brand to your clients. For a service business, brand signals can be broadly broken into visual, behavioural, physical and communication perspectives.

• The visual perspective covers your visual identity – including your brandmark, visual style, typeface and colour palette.

Neil Shewan

• The behavioural perspective covers the way you interact with clients – your attitude, your turnaround times and how you handle problems.

• The physical perspective covers anything tangible your client may interact with – including your office space, wayfinding signage and furniture.

• The communications perspective covers the content and channels you use to interact – be they in press, online, print or in person.

Think about all the ways your clients interact with you – the application forms they use, to the chairs they sit in. Everything communicates your brand.

5. THE HARD PART Once you have a core idea and your team are behind it, then consistency becomes critical. You need to consistently reinforce your messages internally so your team can live the brand with your clients.

Brokers are likely to already be aware of the power of strong brands: for example, the flight of borrowers to the Big Four banks during the GFC is an example of this. Indeed, brokers can and do already ‘trade off’ the strength of financial institutions’ brands.

However, by building your own strong brand, you can shift the customer’s loyalty from the ‘bank brand’ to your own business or personal brand – creating longterm repeat customers.

PREMIUM PRODUCT Brand also helps you build a competitive advantage in the marketplace. Sarah Petty and Erin Verbeck, MBAs and authors of Worth Every Penny: Build a Business That Thrills Your Customers and Still Charge What You’re Worth, argue that having a strong brand is critical to your survival. If you

APRIL 2012 BUSINESS STRATEGY | 29

® CHAPTER TWO / BRANDING

IN PRACTICE: THINK TANK COMMERCIAL PROPERTY FINANCE

©

“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.”

Jeff Bezos are ‘generic’, in many cases you’re fighting an uphill battle to get consumers to pay attention to you at all.

“Monster companies like Apple and Coca-Cola have very deep brands. Being smaller, your brand has to be more dialled in than the brands of the bigbox stores, because one mistake can leave you unrecognisable,” says Verbeck. “We have a smaller budget, limited reach and lower frequency, so when we make a branding mistake, it can cause a lot of harm. The stakes are higher for us because we are smaller. Every misstep is a big splash in your small pond.”

Petty highlights the key advantage that smaller outfits have.

“Even with your limited resources, you can beat

30 | BUSINESS STRATEGY APRIL 2012

About 18 months ago we started working with commercial property lender Think Tank to re-focus their brand. The goal was to create clarity around the brand in a very crowded and disrupted market post-GFC. We followed the steps above and uncovered a core idea that had been hidden from view. The company was driven by a simple desire to make commercial finance accessible and easy. Over the past four years they had been living by this philosophy and delivering. However, it was hidden from prospective clients and introducers of business.

Working closely with the Think Tank team we started uncovering stories from financial brokers and clients around delivering on a simpler commercial lending process – less time, less cost and less hassle. We then turned the focus of the brand to verifiable, real-world stories of how the company truly delivers – rather than just making an unsupported claim.

This simple, no nonsense attitude has cut through and increased their loan portfolio by nearly 100% over the past one-and-a-half years. Think Tank is now the largest specialist commercial property lender in Australia.

Neil Shewan, MD, TANK Branding

big companies at the branding game because these power-players will never be able to offer something to their clients that you can offer – you,” she comments.

“You are an integral part of your brand – the one that’s built on your passion.

“As a smaller, boutique business, you have the opportunity to get that loyalty immediately – through one meaningful conversation, one unforgettable experience, or one product that a customer couldn’t possibly find anywhere else.”

Getting it right can produce a snowball effect that could see your business grow rapidly.

“You want your customers to be so impressed with your brand that they tell all their friends about you. You want your brand to give people a reason to do business, or even wish to do business with you in the future,” says Verbeck. “You want your brand to be so strong that people are willing to spend more money with you. You want them to do business exclusively with you, and complain that every other company isn’t as fabulous as yours. It’s about people being so excited that they talk about you and invest with you – that’s the ultimate goal.”

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APRIL 2012 BUSINESS STRATEGY | 31

CHAPTER TWO / CUSTOMER SERVICE

THE CUSTOMER IS ALWAYS RIGHT It’s one of the oldest adages in business, but getting customer service right could be more important than you know. Kevin Eddy reports

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CUSTOMER DECISION MAKING PROCESS Stages and types of communication CONSIDERATIONS

EFFECTIVE TYPES OF COMMUNICATION

Pre-purchase

Perceived risk of purchase Importance of personal sources of information (word-of-mouth recommendations) Considering alternatives

Stress word-of-mouth recommendations; provide plenty of information via brochures and websites; Emphasise benefits of purchase; Strong brands can help mitigate perceived risk

Purchase/ consumption

The service experience itself Cultural and social influences Knowledge and security regarding the process Self-esteem, particularly being treated with respect and fairly by the service provider

Provide excellent service throughout; Ensure customer is happy with service at all stages; keep customer informed of process of purchase; treat customer fairly and with respect;

Post-purchase

Doubt that the correct purchase has been made (buyer’s remorse) Did the service live up to expectations?

Maintain contact and reassure customer about purchase; Enquire about service levels; Ensure outcome is in line or exceeds expectations

STAGE

Customer experience is king. That’s the realisation that’s been revolutionising the financial services industry for the last few years, and with good reason: happy customers spend more. Research by consulting firm Strativity in 2009 revealed that 70% of customers would exceed their spend with a firm by more than 10% if that company exceeded their customer service expectations.

That’s not all: satisfied customers also tell their friends. Another 2009 Strativity study revealed that businesses that invested a higher percentage of their revenue into customer experience management had a significantly higher incidence of customer referrals: 27.3% of firms that spent 10% or more of their review on customer experience saw referral rates of 10% or more, compared to 10.1% that spent between 5–10% of revenue.

In a business like mortgage broking, in which customer referrals and repeat business can be make or break for a firm, you can’t afford to take a chance and get it wrong. How can you make sure you go above and beyond?

CONSUMER DECISION MAKING Understanding how consumers make decisions is an essential piece of the puzzle, says Harvard Business School’s Dr Maarten Bos, an expert in consumer decision-making. However, this is easier said

than done – as Bos points out, there is around 30 years’ worth of research in this field, and it could easily fill several books (and does).

“The decision-making process varies by product and by buyer,” he comments. “Generally, we assume a potential buyer evaluates some options, weighs the attributes by making a pros-and-cons list, and then makes a decision.”

Bos highlights just one theory, espoused by Barry Schwartz and Andrew Ward, which splits buyers into two categories: maximisers and satisficers.

“Maximisers try to look at all potential options, whereas satisficers search until they find an option that meets a certain threshold,” he says. “This rational way of decision making is actually surprisingly uncommon, because human beings have a limited amount of conscious capacity.”

Other theories model the consumer decision making process as a journey with multiple stages, in which using different types of communication can make or break a sale (see boxout). There are generally acknowledged to be three key stages of decision making: • pre-purchase • purchase • post-purchase Consumers typically have different considerations at each stage: by differently emphasising cer-

consumer decision making The process that a purchaser goes through when buying a product or service, which encompasses several distinct stages. By understanding these, you can improve the customer experience and maximise sales

APRIL 2012 BUSINESS STRATEGY | 33

CHAPTER TWO / CUSTOMER SERVICE

CUSTOMER SATISFATION Shades of grey?

Possible reasons for high customer satisfaction ratings: RESPONSE BIAS: only satisfied customers – or extremely dissatisfied – customers are likely to respond to surveys, potentially skewing results DATA COLLECTION METHOD: research suggests that higher levels of satisfaction are obtained via personal and phone interviews than via email questionnaires or self-administered interviews, as people are less likely to be critical to an actual person QUESTION FORM: Research suggests framing questions in a positive – ‘How satisfied are you?’ or negative ways – ‘How dissatisfied are you’ – affects the answer. Asking a question in a positive way appears to lead to greater levels of satisfaction CONTEXT OF QUESTION: The order in which questions are asked can influence answers to later questions

Understanding the stages of decision making can also help in introducing diversified products

customer satisfaction The level of satisfaction with a service encounter, when compared to existing customer expectations.

Seen as a key metric for successful business.

tain types of communication at each stage in order to allay these considerations, you can vastly improve the customer’s experience. Understanding the stages of decision making can also help in introducing diversified products: introducing the concept at pre-purchase stage and reintroducing at purchase stage, or raising it at post-purchase stage if they’ve not been mentioned before.

For example, chief amongst considerations in the pre-purchase stage is a heightened sense of perceived risk prior to sale, as customers are unable to examine a service prior to purchase. Price also magnifies this – so a mortgage is often seen as a big financial risk.

Ensuring your brand is strong and emphasising word-of-mouth recommendations can be very influential in mitigating perceived risk pre-purchase.

Meanwhile, buyers can often experience ‘buyer’s remorse’ post-purchase – again, something that can be magnified when purchasing a service as it’s essentially intangible. This can be mitigated by a simple follow-up call to reassure the buyer that they’ve made the right purchase. This can also be an opportunity to garner customer satisfaction in-

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TIMING OF QUESTION: When you ask a question relative to date of purchase, it has an impact. Satisfaction is highest immediately after purchase (a ‘honeymoon period’), then decreases over time.

SOCIAL DESIRABILITY BIAS: Some researchers believe that respondents can tend to provide answers that are socially appropriate, holding back criticism in certain situations.

MOOD: The simple mood of the customer when completing the survey can have an impact – respondents in good moods make more positive judgements.

GENUINE SATISFACTION: Of course, high customer satisfaction could well be the result of genuinely satisfied customers.

Source: Services Marketing, Cengage Learning 2010

formation (see below).

At its simplest, communication at all stages of the decision making process is about managing expectations, says Bos. “Promising ‘golden mountains’ may be a way to make a sale, but it will be the last sale you’ll make to that person. Be honest about what you’re selling: enthusiastically emphasise positive sides, while honestly displaying any negative sides,” he says. “[After purchase], make sure the buyer is not disappointed. Honesty is key.”

CUSTOMER SERVICE BENCHMARKING Of course, you can’t judge whether your customer experience is excellent, middling or poor without measuring it. Measuring customer satisfaction is a long-established way of doing this: linked to this is the concept of measuring service quality (examined in separate boxout).

MEASURING CUSTOMER SATISFACTION

Customer satisfaction is typically measured via indirect or direct measures. Indirect measures include business metrics such as sales records, profits and customer complaints.

Customer satisfaction surveys make up the bulk of direct measures, and there are a wide range of these, which are carried out through a number of methods – usually phone or e-mail. Customer satisfaction ratings are typically high – usually in the 80-90% range. Be warned, though: there are a

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SERVICE QUALITY Service quality focuses on cumulative attitudes to organisations over a number of experiences, and often also takes into account management and employee perceptions of service levels. Collating and monitoring customer and other stakeholder feedback over time – satisfaction surveys, complaints, mystery shopping, employee surveys and specific service quality exercises such as SERVQUAL – to build up a long-term picture of service and areas in which it can be improved.

The SERVQUAL (also known as RATER) framework is a tool devised specifically to measure service quality. It consists of two questionnaires, one which measures consumer perceptions of excellent companies in a service field, the second which records perceptions of the company being assessed.

The system assesses five service quality dimensions:

RELIABILITY:

ASSURANCE:

TANGIBLES:

EMPATHY:

RESPONSIVENESS:

CONSISTENCY AND DEPENDABILITY OF PERFORMANCE

COMPETENCE OF ORGANISATION, COURTESY TO CUSTOMERS, SECURITY OF OPERATIONS

APPEARANCE OF EQUIPMENT, OFFICES, CORRESPONDENCE AND EMPLOYEES

ABILITY TO GIVE INDIVIDUAL ATTENTION, OPEN AT CONVENIENT HOURS, ACTING WITH CUSTOMER’S BEST INTEREST AT HEART

COMMITMENT TO PROVIDE SERVICES IN A TIMELY MANNER

number of factors that can influence them. It’s worth thinking carefully about how your direct measures are shaped in order to reduce the impact of these factors and get a truer picture of customer satisfaction.

Aggregator Connective uses both indirect and direct methods of customer satisfaction measurement – although in its case, its customers are brokers themselves.

“For example, we benchmark performance in our IT helpdesk by using software that measures how long it takes us to respond to a ticket; we also have an online commission query system, which also allows us to benchmark that service,” he says.

More direct benchmarking takes the form of an outsourced annual survey, as well as feedback at the end of each PD run; the firm is also looking at more ‘ad hoc’ feedback options.

Smartmove Home Loans uses its aggregator AFG’s online solution to canvass clients around two weeks after settlement. Clients receive free movie tickets for filling in the survey, which asks them to rate various aspects of their experience out of 10.

Oxygen Home Loans, meanwhile, swears by the phone: it calls every customer after the loan has settled.

“We use something called the net promoter score – it’s an internationally-recognised metric used by Fortune 500 companies. We ask every client how likely they are to refer us to friends and as-

sociates out of 10. Nine and 10 is a positive one, seven and eight is neutral; anything less than that is a detractor,” explains general manager James Green. “We ask the reason for score – what we’re doing right and doing wrong.”

Green adds that the responses feed directly into training, and the overall scores are publicised within the teams as a motivational tool. Positive scores also get passed back to referrer – giving them more confidence in referring onto that broker.

“We can also ask if the client was talked to about insurances and other products – we can generate leads from that, and actually make money on the calls. Forty-eight per cent of people said yes to that, which is $1,500 every time one of those converts. We can also ask about things like property management, if it’s an investment, and catch anything else to provide rounded customer service – pick up promises from the broker or referrer that they’ve forgotten, for example.”

Green stresses that his favoured method of garnering feedback is over the phone, because e-mail responses skew results in favour of negative feedback. Another benefit that brings the process full circle is that the responses feed back into marketing communications.

“You can learn what creates a 10/10 experience, and what creates detractors doing this,” he says.

“Then you can segment those customers and tailor your marketing messages to them.”

service quality Service quality focuses on cumulative attitudes to organisations over a number of experiences, and often also takes into account management and employee perceptions of service levels.

APRIL 2012 BUSINESS STRATEGY | 35

CHAPTER THREE / LEADERSHIP AND MANAGEMENT

WHAT MAKES US

TICK?

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LEADERSHIP: KEY QUALITIES

EMPATHY COMMUNICATION PROCESS & TACTICAL ORIENTATIONS LOGIC

EYE FOR DETAIL

INSPIRATION

EMOTIONAL INTELLIGENCE & SELF-AWARENESS

‘BIG PICTURE’ VISION AUTHENTICITY

Source: Deloitte Leadership Academy

Understanding yourself and your employees better can take your team to the next level. Jill Fraser reports.

“A good leader possesses two key attributes, the ability to set direction and the skill to drive people towards that direction, motivate and align them and ensure that the direction appeals to their hearts as well as their heads.”

Their hearts?

Twenty years ago, an article on leadership would have reflected the domination of boardrooms by alpha males who believed that emotions and feelings in an office environment were about as relevant as children’s storybooks and as welcome as T-shirts, and probably kicked off with something like: “A good leader recognises that business strategy is a highly rational process of eliminating variables and maximising opportunities”.

Leadership in 2012 is a much more holistic concept: leadership training institutions such as Deloitte’s Leadership Academy use the analogy of children’s stories to encourage business leaders to tap into their own stories in order to become more open, honest, transparent and real – whereas employees wearing T-shirts is now a universal sign in

major corporations around the globe, showing that a relaxed dress code lifts staff morale, acknowledges individuality and potentially increases creativity and productivity.

Today, as expressed in the opening quote by Deloitte’s Leadership Academy chief and founder, Tom Richardson, good leadership engages the heart as well as the intellect, and encompasses a number of key qualities.

Richardson established the Deloitte Leadership Academy to expand the capabilities of leaders after recognising that ‘people, not PowerPoint’ drove organisational performance.

He has years of experience in the leadership stratosphere – working intimately with 15,000 of Australia’s top business leaders – and so is uniquely placed to explain why leadership is ‘a people game’.

“The characteristics and capabilities of good leadership are universal across almost all industries,” he says. “But it’s become more and more important in the finance industry because of the pressure around bonuses and remuneration.

APRIL 2012 BUSINESS STRATEGY | 37

CHAPTER THREE / LEADERSHIP AND MANAGEMENT

TECHNOLOGY: PROS AND CONS Leading in the future One challenge leaders at all levels of business have to adapt to is the relentless march of technology. Tom Richardson, Managing Partner, Deloitte Leadership Academy, says there are benefits and challenges.

“How do leaders engage with their people when they’re scattered around the world? Technology!” he says. “Technology is a powerful vehicle to carry messages and establish connection – intranet, email, videos, TV channels, webinars, live feeds. The biggest trap is a leader not understanding the purpose of each technology medium.”

BENEFITS: Technology is very powerful for listening and asking questions – and staff can answer and respond. Technology can prioritise. It also enables communication between people to build up a sense of community, which helps develop a sense of belonging in what could otherwise be a very difficult environment because of

“People will only stay in an organisation if they feel connected and engaged. They’re not being paid to stay there with bonuses anymore. The need for leaders in the financial services industry to build up their people skills has become increasingly important.”

Andrew Henderson, CEO of Leadership Management Australasia introduces the term “leadership charisma”.

“It’s to do with connection – a connection that makes me feel that my leader is charismatic and

“If you don’t understand yourself you’re never going to understand others – subsequently you’re never going to be able to motivate them” John Toohey the only way that connection will be established is if my leader has the emotional intelligence to understand me – what motivates me, why I’m here, how I react.

“Unless leaders understand and invest in their people, they will not be able to influence them because when they want to rally their team to do something the reaction will be ‘you only want us to do this because of what you will gain’,” he adds.

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geographic diversity and sheer volume that prevents you from literally walking the floors and relating to people. ore and more leaders’ messages are M delivered via video or voicemail – you can hold emotion in voicemail. Email is not so engaging. More engaging uses of technology are evolving all the time.

CHALLENGES: The many options and choices, which means added complexity. Whenever you have a message to deliver it’s essential to understand the right blend of technologies versus face-toface to ensure you’re not losing the personal touch. The complexity of all the available channels is the greatest challenge.

It’s important not to rely on technology all the time. Physical face time is often key to effective communication.

Source: Deloitte Leadership Academy

“But, if each individual knows from experience that their boss is invested in them, listens to them (consultative leadership) and honestly cares about them they will trust the leader’s decision on behalf of the team. That’s leadership charisma,” Henderson maintains.

NEUROSCIENCE IN ACTION A high trust factor is paramount in the leader/employee equation in the mortgage industry, says Professor John Toohey from the Business Psychology Discipline, Graduate School of Business and Law RMIT University, because of the nature of the business and the fact that a culture initiated and practiced at the top is mirrored down the line and will eventually shape customer relations.

Toohey familiarises his graduate MBA students with neuroscience to add weight and credibility to the argument that the most effective, charismatic leaders function from their emotions.

“Through neuroscience, which looks at how the brain operates, we have come to realise that decision making is primarily emotion-based,” explains Toohey.

“The emotional parts of our brain kick in long before the rational parts. The rational parts follow and try to make sense and contextualise.”

“A lot of men in business are afraid of that component, and don’t want to know about it. The executive education I’ve done in this area is fascinating: people have quite bemused smiles when I first tell them this but as they dig into it and I

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APRIL 2012 BUSINESS STRATEGY | 39

CHAPTER THREE / LEADERSHIP AND MANAGEMENT

IN THEORY: EMOTIONAL INTELLIGENCE The rules of the heart Professor Neal Ashkanasy from the University of Queensland is a world leader in the field of emotional intelligence.

He defines the concept as having • the ability to perceive emotions in yourself and others; • the ability to use this information in decisionmaking; • understanding emotions and their consequences; • the ability to manage emotions in yourself and in others.

According to research conducted by Daniel Goleman, another of the world’s leading proponents of emotional intelligence, “the higher up the organisation you go the more important emotional intelligence becomes”.

Goleman’s research suggests that emotional intelligence is twice as important as IQ and technical skills. He classifies EI as a framework of five elements: • HIGH SELF-AWARENESS – People with high emotional intelligence are usually very selfaware. They understand their emotions, and because of this, they don’t let their feelings rule them. They’re also willing to take an honest look at themselves.

• SELF-REGULATION – This is the ability to control emotions and impulses. People who self-regulate typically don’t allow themselves to become too angry or jealous, and they don’t make impulsive, careless decisions.

• MOTIVATION – People with a high degree of emotional intelligence are usually motivated.

They’re willing to defer immediate results for long-term success.

• EMPATHY – Goleman says this is perhaps the second-most important element of emotional intelligence. Empathy is the ability to identify with and understand the wants, needs, and viewpoints of those around you.

• SOCIAL SKILLS – It’s usually easy to talk to and like people with good social skills, another sign of high emotional intelligence.

Those with strong social skills are typically team players.

show them the research they begin to look more bewildered than amused.”

Toohey contends that an area of critical importance in business education is the nature of beliefs and biases. He teaches that the brain is highly plastic/durable. Beliefs belong to the irrational/emotional world, and a strongly-held belief can change the neural pathways of the brain (thus the plasticity).

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CAN YOU IMPROVE YOUR EMOTIONAL INTELLIGENCE? Researchers disagree over whether you can build your ‘innate’ level of EI. However, it’s generally acknowledged that you can train to be better at EI, like any other skills. Corporate psychology firm Mindtools suggests carrying out the following exercises: • OBSERVE HOW YOU REACT TO PEOPLE. Do you rush to judgment before you know all of the facts? Do you stereotype? Look honestly at how you think and interact with other people.

• LOOK AT YOUR WORK ENVIRONMENT. Do you seek attention for your accomplishments?

Humility can be a wonderful quality, and it doesn’t mean that you’re shy or lack selfconfidence. When you practice humility, you say that you know what you did, and you can be quietly confident about it. Give others a chance to shine.

• DO A SELF-EVALUATION. What are your weaknesses? Are you willing to accept that you’re not perfect and that you could work on some areas to make yourself a better person?

Have the courage to look at yourself honestly – it can change your life.

• EXAMINE HOW YOU REACT TO STRESSFUL SITUATIONS. Do you become upset every time there’s a delay or something doesn’t happen the way you want? Do you blame others or become angry at them, even when it’s not their fault? The ability to stay calm and in control in difficult situations is highly valued – in the business world and outside it. Keep your emotions under control when things go wrong.

• TAKE RESPONSIBILITY FOR YOUR ACTIONS. If you hurt someone’s feelings, apologise directly – don’t ignore what you did or avoid the person.

People are usually more willing to forgive and forget if you make an honest attempt to make things right.

• EXAMINE HOW YOUR ACTIONS WILL AFFECT OTHERS – before you take those actions. If your decision will impact others, put yourself in their place. How will they feel if you do this? Would you want that experience? If you must take the action, how can you help others deal with the effects?

“Leaders usually don’t understand this and therefore don’t get the impact,” he says.

The significance of all this, he says, is to highlight the relevance of self-awareness (what we believe, why and how we behave, and why) in what he refers to as “the psychology of strategy” for leaders to “inspire people to act in predictable ways”.

“I challenge managers and executive MBA students because usually they are very good at

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APRIL 2012 BUSINESS STRATEGY | 41

CHAPTER THREE / LEADERSHIP AND MANAGEMENT

LEADERS ON LEADING

Meg Bonighton

Cameron Clyne

What makes a superb leader?

Leading in public

MEG BONIGHTON, HEAD OF THIRD PARTY AND RELATIONSHIP CHANNEL, ANZ Ultimately, we learn the most about leadership through experiences – from those we have led, and from those who have led us. No leader is perfect, but through trial and error, and continued feedback, we’re always improving.

One of the most common questions we are asked as leaders is ‘how do you motivate your staff?’.

Understanding individual motivations is a complex thing. But what I try to remember is that humans come naturally to hard work and we are essentially hardwired with a desire to do quality work. It’s rare that you meet a person who intentionally comes to work every day not wanting to do well. I therefore focus my efforts on creating an environment where each person is able to access the motivation that’s already within them.

This is based on a few key things – clarity of role, access to the resources and tools needed to be successful, and always being treated with respect.

I’ve found that if I create this environment, my team is free to bring their own thoughtful mind, creativity, skills and background to make every success of their role and importantly, gain not just satisfaction, but enjoyment in what they do.

The other important thing for me is to continue the feedback cycle. I haven’t always got it right – I’ve learnt as much from the mistakes I’ve made as from the successful teams I’ve been part of.

Feedback from my team, my peers, and my boss is crucial to make sure I don’t stand still as a leader.

CAMERON CLYNE, CEO, NAB An important aspect of leadership is demonstrating the desire and ability to provide explanations and answer questions.

Australians give people a go – they appreciate people fronting an issue and making themselves available to explain decisions.

NAB CEO Cameron Clyne has recently started regular spots on 3AW’s Neil Mitchell talk back radio program.

These programs give people an opportunity to hear directly from a bank CEO on what decisions have been made and why.

There are people in the community who don’t understand how banks make decisions. Clyne believes that customers are at the heart of decision-making and whatever decisions are made, they must be explained to customers, potential customers and the general public.

NAB also wants to show that it takes its responsibility – both as an employer of 45,000 people worldwide, and as a top 5 company with millions of Australian customers – very seriously.

Clyne believes it is important to have the leadership to show staff that the conversations bankers are having with customers are the same conversations he is having publicly.

Customers are asking our bankers difficult questions about interest rates, cost of funds, policies and procedures. These are the same questions that Clyne is being asked on radio and is happy to provide the answers to explain the bank’s actions.

...it’s about understanding individuals, as opposed to seeing them through your own lens. identifying biases in others, and very poor at identifying them in themselves,” adds Toohey. “I tell them, ‘if you don’t understand yourself go and grow cabbages or do some other solo job’.

“Don’t pretend that you can go into a business and take a leadership role because you’ll only make a mess of it. If you don’t understand yourself you’re never going to understand others, you’re never going to be able to motivate them.”

LEADER, KNOW THYSELF Jason White and Juliet Bourke, human capital partners at Deloitte, who are in the business of

42 | BUSINESS STRATEGY APRIL 2012

creating “extraordinary leaders”, agree that self-awareness is a crucial element of leadership training.

Post-GFC, due to external market forces and related circumstances that prompted change, leaders with higher ‘emotional intelligence’ (self-awareness being a critical component of EI) have emerged at the forefront, reveal White and Bourke.

Successful leaders during the GFC ensured that communication with staff was increased 10-fold, often spending at least 30% of their time with their teams, says White.

“Whenever we experience a crisis, it’s an opportunity to reflect and minimise certain notes and amplify others, one of which has been becoming more inclusive,” adds Bourke.

A trend towards increased inclusivity and collaboration are by-products of a growing prominence in leadership 2012 prototypes on emotional intelligence and communication.

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EXECUTIVE SUMMARY

Lee Iacocca, former CEO, Chrysler Corporation, once said, “You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.”

Nido Qubein – businessman, motivational speaker, President of High Point University in North Carolina since 2005 and master of communication skills – says that the most common mistake made by leaders is “confusing the art of communication with the science of connecting”.

“Effective communication is not merely the transference of knowledge, data or information.

The heart and soul of effective communication relates to the ability to build a bridge of understanding. That means to connect with them,” he says.

“Something amazing happens when someone believes that the person communicating with them knows his or her fears, goals, aspirations and needs.

Qubein adds that when leaders really connect they use language that their people relate to, speak from their perspective and address issues they find important. The moment they do that the value of what they’re saying is heard in a modality in which people can relate and recognise the benefit to them.

“When this happens both the art and the science have been employed and communication has, as we say, clicked.”

Deloitte’s Jason White and Juliet Bourke sum it up. “We all know the ability to drive performance, be financially astute and commercial and deal with operating issues,” says Richardson. “Possessing the emotional intellect to understand where your workforce’s mindset is at, what’s driving their motivation and be a real person with them and build engagement has been proven to be crucial in retaining top talent.”

Bourke says that it’s about understanding individuals, as opposed to seeing them through your own lens.

“The ASX’s focus on diversity skills is causing leaders to sit back and question whether they are actually seeing the person in front of them, or simply making assumptions based on stereotypes,” she says. “Seeing the person accurately is about seeing their strengths, how they sit with other team members, their career orientation, and creating an environment in which you can pull together the best of everyone in order to create a high performing group in which everyone can excel.”

isn’t just about marshalling the  Leadership intellectual resources of your workforce: it’s about engaging their emotions too. of good leaders include empathy, logic,  Qualities ability to inspire, authenticity, an eye for detail and a ‘big picture’ vision, process and tactical orientations and emotional intelligence. a connection with your employees and  Making stakeholders and understanding them is key to being able to rally a team.



Neuroscience shows that harnessing emotions can be much stronger than the rational side of the brain, as this kicks in earlier and creates stronger neural pathways.

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CHAPTER THREE / HUMAN RESOURCES

THE

PEOPLE FACTOR Growing your business invariably involves one thing: staff. How can you attract the best employees – and keep them interested?

44 | BUSINESS STRATEGY APRIL 2012

HIRING Recruiting is often the first major task that a growing company has to confront, and getting it right can be a daunting task. Coming back to your core business strategy and working out your skills needs is the essential first step.

You need to sit down and think about the role they want the employee to fill, according to Advice Centre Consulting’s David Fox. “The most important thing, and something that is really not done well, is to get clarity around what the role is,” he states. “It’s not only the tasks involved in the role, but also what the role needs to achieve and what the measurements of success are.”

That could be as simple as deciding whether you need a loan writer or an administrator; however, it’s better to be specific. Fox argues that rather than employing someone to do ‘10 different tasks’, you should also bear in mind the future development of any role too.

Randstad HR director Tiffany Quinlan argues that thinking strategically about hires in context of your own strengths and weaknesses is a wise move.

“You need to be self-aware about where you’re lacking,” she says. “A new hire should complement you, not do what you already do – hiring clones doesn’t really work.”

Quinlan suggests that hiring someone with a different sales approach can open up new markets and client sectors, for example.

“You also need to think about what a new hire can offer you in terms of growing your business,” she adds. “Small businesses often don’t think about

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PERSONALITY TESTS DECODED There are a wide range of psychometric tests out there: here are some of the most popular and well-established • THE MYERS-BRIGGS TYPE INDICATOR (MBTI) is designed to measure psychological preferences in how people perceive the world and make decisions.

This 16-type indicator test is based on Carl Jung’s Psychological Types, • THE 16PF QUESTIONNAIRE (16PF) was developed by Raymond Cattell and colleagues in the 1940s and 1950s in a search to try to discover the basic traits of human personality using scientific methodology.

The test was first published in 1949, and is now in its 5th edition.

• THE NEWCASTLE PERSONALITY ASSESSOR (NPA), created by Daniel Nettle, is a short

what they can learn from people they employ. If you can get someone with a different skill set, a different background, they can add to your business.”

Skills might pay the bills – but it’s not the only thing you should worry about. Personality goes a long way too.

“You also need to make sure that the personality mix is correct. That’s essential for a smaller organisation, where you’re so closely aligned.”

Quinlan recommends carrying out psychometric or personality testing.

“A personality profile typically shows what an interviewee’s default behaviour is likely to be.

That’s the stuff you need to know; that’s what people revert back to when they’re put under pressure.

Mortgage broking can be a high-stress environment; you want to make sure that what you’re seeing is what you’re getting, and it’s actually more important in a small organisation than a big.”

Finding a personality profile is easy: Google is your friend here. However, you should make sure you’ve got the right kind of test for the role – if you’re hiring a loan writer choose a test tailored for sales profiles, for example. It may even be worth carrying out one yourself, adds Quinlan.

Finally, you should prepare yourself not to find the perfect match.

“One of the key things we say to businesses is that you’ve got to work out your ‘must-haves’ and your ‘desirables,” says Quinlan “You’ll never find the perfect candidate, but you can list the essential experience and/or skills. You have to be clear, in your mind what you need and what you can train.”

questionnaire designed to quantify personality on five dimensions: Extraversion, Neuroticism, Conscientious, Agreeableness, and Openness.

Many personality tests have been based on these ‘Big Five’ traits.

• THE DISC assessment identifies four personality types: Dominance; Influence; Steadiness and Conscientiousness. It is used widely in corporates.

• THE BELBIN TEAM INVENTORY is classed as a ‘personality test’, although its inventor, Meredith Belbin, argues that it’s not designed to assess personality. Instead, it measures preference for one (or more) out of nine team roles: Plant, Resource Investigator, Co-ordinator, Shaper, Monitor Evaluator, Teamworker, Implementer, Completer Finisher, and/or Specialist.

Finally, don’t ignore what’s right under your nose, especially if you already employ people.

“Pay attention to people you have: push them, give them opportunity, and give feedback,” says Jim Sharpe, Senior Lecturer at Harvard Business School’s Entrepreneurial Management Unit. “Keep a list of contacts you meet that might fit in your organisation: you are the company’s greatest recruiter. You will make mistakes, so move quickly to let a new hire go if it is not working.”

IN PRACTICE Oxygen Home Loans is a brokerage that has seen huge success since its inception, most recently winning Brokerage of the Year at the 2011 Australian Mortgage Awards. Its brokers also regularly appear in the MPA Top 100 and Young Guns lists. General manager James Green emphasises a different approach to recruiting.

“We don’t recruit when we need someone: we’re always recruiting,” explains Green. “Most businesses recruit around a job description – I recruit the person and write the description around them. That way I’m always meeting the right people, choosing people I want in our business.

“We recruit abilities and attributes – you can teach knowledge. I personality profile prospective brokers, and prefer ‘influencer’ types. In my view, they’re the best for anything client-facing. They’re the people who go out, connect, who are hungry and who build relationships; although they’re typically terrible with admin.”

Green looks for the opposite in support staff.

“Admin is the opposite. I want attention to detail, and they’re often introverted. You put the extrovert with the introvert, you have the perfect balance.”

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CHAPTER THREE / HUMAN RESOURCES

“While it’s important to get the skills right you also need to make sure that the personality mix is correct.”

Tiffany Quinlan

CAREER PROGRESSION One particular bugbear for smaller firms is how to provide employees with opportunities for career progression. Unlike large firms, the scope for internal promotion can be more limited, with role expansion reliant on company growth or employees “making a role their own”. The latter can be risky, especially if an employee wants to develop their job in a direction that may not be in line with your strategic aims.

Fox recommends sketching out scope for development within the role as part of the initial creation of the job description, as well as employing someone who is able to move into a more senior position.

Quinlan suggests sitting down with your employee and finding out their goals for the year can be a good way of providing career development.

“Maybe it’s an investment in learning; maybe it’s something else. Maybe it’s moving into another role, and shadowing someone else for a week,” she says.

“It’s a bit of a fallacy to ‘promote’ people by giving them a flash title but never change their job – that actually becomes a bigger demotivator,” adds Quinlan. “You should make a commitment to learning and development, but with an understanding of what you can control – and accept that you are going to lose people at a certain point.”

IN PRACTICE Green’s attitude towards developing employees is that training – particularly one-to-one coaching – is essential.

“It’s not that you can’t afford to train, it’s that you can’t afford not to train. I can hire someone with the right personality, right attributes, train them on call scripts, how to sell a home loan and link them up with a mentor and within a year they’re outpacing people who’ve been in the game for 10 years,” he says.

Green also gives employees solid three-monthly targets linked to the company’s overall strategy.

However, these aren’t just financial or performance targets – these are more wide-ranging.

“Every person in my team not only has targets for Oxygen, but they also have targets for health, personal time and family time,” he explains. “If you uplift someone on all areas, they grow. If you have one that’s down, it affects the other three. I don’t ask what the personal goals are – I just ask how they’re going.”

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INCENTIVES Staff incentives – financial and non-financial – are a common feature of most employee packages. While the effectiveness of financial incentives is the subject of fierce debate in academic circles, commissions are well entrenched as the backbone of mortgage broker remuneration – despite the growing fee-for-service movement.

However, while a simple commission split might be ample motivation for your loan writers, keeping non-sales staff engaged can be tricky. While few mortgage businesses are in the position to issue Silicon Valley-style equity share schemes to staff, other incentive plans are rife.

“In non-sales staff, the challenge you have is that they’re working just as hard as the sales guys, and seeing them getting the big rewards,” says Quinlan.

“Partly, it’s an education job: you need to teach your workforce that sales is a high risk environment: if you don’t work hard they don’t get anything.”

Team or company incentives can be a useful way for non-sales staff to share in company success, whether paid annually or quarterly. You can also run individual award schemes – ‘administrator of the month’ awards, for example.

“Obviously, if you only employ one administrator, you wouldn’t run an individual award scheme, but you can still acknowledge the role that person has played,” says Quinlan.

Non-financial incentives can be a powerful tool for sales and non-sales staff alike, she adds.

“The modern workforce is looking for flexibility and recognition. We empower our managers throughout the organisation to have the power to give employees time off if they’ve outperformed.

They’re high-performing individuals who will make that time up anyway.”

Loyalty leave, birthday and anniversary leave are all other low-cost incentive options that Quinlan suggests – but in her view there’s nothing better than the spontaneous day off for rewarding excellent performance.

Jim Sharpe, Senior Lecturer at Harvard Business School’s Entrepreneurial Management Unit, agrees that spontaneity goes a long way.

“Find opportunities to celebrate and recognise employees in a spontaneous way; food always works well, even better when food is shared with everyone pitching in,” he says. “Money seldom is the primary motivator for people, but being thanked and appreciated goes a long way. Single out great examples, spread the praise and do it at all levels.”

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EXECUTIVE SUMMARY

James Green from Oxygen Home Loans agrees that incentivising sales staff is generally ‘easy’, and that keeping support staff engaged is trickier. Oxygen makes sure that support staff know they’re essential to the operation of the overall business through team and company incentives.

“It’s very important that they feel part of the business unit – partly through leadership, and also informing them ‘if we achieve this you will receive that’. Everyone – sales or not – needs to be engaged and working towards the same goals.”

Sales staff aren’t solely incentivised on financial performance, though: they’re also measured on customer satisfaction.

SAYING GOODBYE Eventually, there will come a point where employees move on – whether to move to another job or set up their own business. Ideally, you’ll have some sense of if and when this is likely to happen, if you’re regularly discussing career development with your staff – but more often than not it will come out of the blue.

Therefore, you should make sure that you have a plan in place if a staff member leaves – whether that’s recruiting a successor, an internal promotion or just reallocating duties amongst existing employees.

Of course, there will also be situations where an employee is let go – whether that’s being fired or redundancy. Regardless of the reasons, it’s essential to treat everyone equally.

“You have to park your emotional issues and make sure that person leaves with dignity,” she says.

“They’ll tell 10 people if they’ve had a good ‘leaving experience’ – and 25 if they’ve had a bad one.

It’s important to send a message to other employees that they will be treated with dignity if they were to leave.”

Whether it’s an email or goodbye drinks, make sure the departure process is the same.

“Walking someone out, unless for an illegal offence, is sending a bad message,” explains Quinlan.

“If you’re walking someone out because they’re going to a competitor, make sure they can say goodbye to the people they matter to.”

Why all the fuss over graciousness? Well, it’s because the ‘boomerang effect’ is powerful.

“We have a Boomerang Club here at Randstad – those people who left, went elsewhere then came back,” laughs Quinlan. “Those leavers can return, months and years later – and can be valuable.”

practice is to plan your recruiting in line  Best with your business strategy – but it’s worth maintaining flexibility so you can take in talent if you find it. sketch out roles prior to  Thoroughly interviewing – particularly what it needs to achieve and how that will be measured. just hire skills or knowledge – personality  Don’t fit is essential, especially in a small company environment. Psychometric testing can be useful. sure that sales and non-sales staff are  Make being incentivised appropriately – including non-financial incentives. Good incentives for support staff are company/team bonuses. appraisals are essential to ongoing  Regular progression: you can ascertain staff ambitions and how they fit into your strategy. be afraid of people leaving – it’s a natural  Don’t part of business life. Make sure you can deal with staff departure in the short term, as well as having a longer-term succession plan.

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CHAPTER FOUR / IT

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BROKERNEWS.COM.AU

WHAT DO YOU NEED?

Source: Loanworks

What are the typical IT needs of the average mid-size brokerage?

MOBILE SOLUTIONS

COMMISSIONS

SALES ANALYSIS AND BUSINESS INTELLIGENCE TOOLS

MARKETING AND CRM TOOLS

ELECTRONIC LODGEMENT

PRODUCT SELECTION

FURTHER REQUIREMENTS

DEAL-CENTRIC AND CUSTOMERCENTRIC VIEWS OF DATA

NCCP COMPLIANCE, ESPECIALLY CUSTOMER NEEDS CAPTURE

DOCUMENT GENERATION, STORAGE OF SUPPORTING DOCUMENTATION

TRACKING/WORKFLOW ACROSS MULTIPLE USERS, TYPICALLY WITH AUTOMATIC EMAIL/SMS ALERTS

CORE REQUIREMENTS

You may be able to survive as a ‘man with a laptop’ for a while, but eventually you’ll need to consider an IT infrastructure. What are the pros and cons?

Technology is everywhere. Just look around at your local café – chances are you’ll see people checking emails on their smartphones, displaying presentations on iPads and diligently working away on laptops while wired into the office network.

The changing face of technology is the defining social trend of the early 21st century, which is why it’s essential that businesses have some kind of information systems strategy in place, especially if you have plans to expand. But how can you do this when the sands are constantly shifting beneath you?

NEEDS ASSESSMENT Like any other aspect of business strategy, IT strategy must be firmly linked back to your goals and targets within your core strategy and your operational needs.

What will you need in order to be able to fulfil your goals? So, if you want to make more of your existing customer base and follow up leads more effectively, do you need a better customer relationship management system? If you’re looking to free

up time currently being absorbed by NCCP compliance, do you need a better loan tracking and document retention system? If you’re aiming to open a shopfront, do you need to procure computers for new employees and associated software?

Barrie Gaubert from mortgage manager Iden Group recommends thinking a few years ahead before splashing any cash.

“Think about a two- to three-year timeframe of what you’re looking to deliver,” he says. “So, for example, when we bought a server it was with a threeyear horizon in mind. But we also ensured it was updatable, expandable, relocatable and could be linked to another server. You need to have positive forethought as to what your needs could be – particularly if growth occurs faster than you expect.”

Before parting with your hard-earned cash, it may also be worth carrying out a post-mortem on your existing systems. Providing broker-specific software solutions is a key plank of aggregators’ and franchises’ sales pitches to brokers: are you sure you’re making the most of what you’ve already got?

Deakin university information systems lecturer

the cloud The delivery of resources, software, and information to computers and other devices over a network rather than being installed on a device

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CHAPTER FOUR / IT

CHOICES, CHOICES...

The IT world is swirling with many different options for buyers – what are the pros and cons for each?

CLOUD-BASED SYSTEMS PROS

BUILD YOUR OWN SYSTEM PROS • You can design a system to your specification • It’s your intellectual property – you have complete control CONS • Time, cost and resource – if it is better spent writing loans?

• Compliance requirements – what will ASIC think?

• Will require maintenance and ongoing development • Industry-specific products will have benefited from the collective input of many different customers – is it worth reinventing the wheel?

• What support provision will you have?

• Pay as you go – you can save on overheads such as servers, internet connections, maintenance, back-ups • Access wherever you are, and access for smartphones and tablets – you can check the status of a loan while on the phone to the client or in their living room CONS • Reliant on web connections – may not be feasible in some locations • Offshore storage may present data protection issues • If seeking cloud just for archival, a terabyte external hard drive may be just as cost effective and more secure

A further consideration is the saleability of your business – a potential purchaser will want to see customer data with appropriate business processes and systems in place. Reliance on aggregator systems may again be insufficient.

“It may be the case that a hybrid solution is your ‘line of best fit’,” adds Macartney. “For example, you might use the tools supplied by your aggregator for product information while leveraging third-party software for your other requirements.”

Marie-Louise Van Der Klooster says the likelihood is that many people aren’t.

“It’s quite often the case that professionals pay for a package of software, but don’t use it to their full benefit – whether that’s because they’re using them inefficiently or it hasn’t been set up properly.”

Relying on aggregator solutions brings its own set of issues – particularly for the ambitious broker, says Wayne Macartney, national sales manager at mortgage software provider LoanWorks.

The most obvious impact of relying on aggregator solutions is the potential impact on your business if you decide to change aggregators. Independence from an aggregator may become more critical as a business grows.

“If the company has grown to several brokers with support staff then your software needs will have changed,” adds Macartney. “For example, you have a mixture of direct accreditations and an aggregated portfolio, or if you’ve diversified beyond home loans.”

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PROCUREMENT Your brand new IT strategy says that you need to upgrade your systems – but how do you go about finding the right solutions and/or providers?

Macartney says there are a number of factors that should be considered – not least of which is cost.

“Risk, compliance, flexibility and scalability are all factors to consider,” he says. “There’s a growing trend to consider the ‘total cost of ownership’ including the implementation, integration and ongoing costs. Do not underestimate the overhead of vendor management – choose a solution from a supplier who you feel you can work with in the longer term – and consider the impact of ‘vendor lock-in’ – being unable to switch to another product due to high switching costs.”

Macartney warns that you shouldn’t expect to find a “one-size-fits-all” solution – and that you shouldn’t expect a software or hardware solution to instantly transform your business.

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REMOTE WORKING The advent of smartphones and tablet computing has the potential to revolutionise mortgage broking, particularly in a customer-facing situation.

Many brokers have already grasped this fact: Clive Kirkpatrick, general manager – broker at St. George, says the bank’s research suggests that 30% of its brokers are already using iPads to access the bank’s resources and expects that share to grow substantially. As a result, it’s launched a dedicated iPad app for brokers.

“You can carry all the material that used to be paper on one device, and you can be sure they’re up-to-date,” says Kirkpatrick.

Indeed, rather than being a replacement for traditional computers, mobile devices are taking the place of traditional paper material.

“In a couple of years, the broker briefcase could be just a tablet computer. You’ll have the ability to share information in a number of ways, download forms, get customers to sign forms online and scan customer documents and submit that information to your own system or to lenders.”

Access to a web connection is necessary for a number of tools though, and saving documents to devices isn’t always possible at present. You should have clear policies on usage, device security and download – including creating an ‘approved app’ list.

SECURITY One issue that you need to take into account with any IT infrastructure is security – particularly as you need to deal with and store confidential client information. Barrie Gaubert from mortgage manager Iden Group recommends that you should put in place a documented disaster recovery plan.

“It’s a phrase used by companies – but whether it’s ready to be implemented in case of disaster is another thing,” he says. Iden Group has disaster recovery plans ready to be activated in at least eight different situations, including not being able to access buildings and servers in case of fire or flood.

“We have a cloud backup solution where our server is backed up in real time. If there’s a problem, we just make a phone call and activate the backup.”

Gaubert says that cloud prices and services vary greatly. Your cloud provider must have backup.

For businesses that are web-based, he recommends doing a regular data dump to ensure you can keep running in the event of an internet outage.

Other security issues to consider include ensuring your wireless server is secured to enterprise level, if you have one – standard WPA access is not sufficient. Access to servers for mobile workers should also be encrypted, ideally to L2TP level: this also allows you to disconnect access or kill devices remotely in case of loss or theft.

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CHAPTER FOUR / IT

EXECUTIVE SUMMARY your business grows, you’re likely to butt up  As against a need for greater IT provision. This should be anchored firmly to your core business strategy your current and future needs, as well  Consider as ambitions for the business – eg more employees, future exit plans sure you’re making the most of your  Make existing IT services – eg those provided by your aggregator



Consider factors such as risk, compliance, flexibility and scalability – and investigate the pros and cons of innovations such as the mobile web and the cloud

sure you have policies in place in relation  Make to IT use Make sure any software solutions aren’t too  advanced, and expensive for your needs Software is a tool, not a magic bullet to  transform your business

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“Software is not a magic bullet – your business success will not be based on a piece of software,” he says. “We see this continuously – one customer will leverage software as a business enabler, yet another customer will struggle to get value from it.”

Where IT will give you a competitive advantage, says Macartney, is if you use it to increase the efficiency and effectiveness of your business – and this means that you need to invest the time and effort in configuring it to do what you need it to do.

“Therefore, software should be flexible and configurable so that it fits your business requirements – you should not have to shoehorn your business into a proscriptive system,” he says. “You should also be able to tap into a vendor’s expertise and experience to make sure that you’re leveraging the inherent value of the software.”

Gauden agrees that off-the-shelf solutions should be customisable to your needs, and argues that you should look for standard infrastructure.

“So, for example, if I’m buying a CRM, I don’t want one that uses a proprietary database – I want something using a language like SQL,” he says. That also means that it’s easier to avoid vendor lock-in, because you can export data in a way that other solutions can understand.

Ultimately, Van Der Kloosters warns that you should be focused on what your needs are, however – and don’t be dazzled by all the knobs, bells and whistles. Quite often, she says, businesspeople are guilty of procuring a solution that’s far too advanced for their needs – as well as far too expensive.

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COLUMN / CASHFLOW

CASH FLOW

CRISIS? Keeping the money flowing is essential if you want to achieve your business goals. Michael Quinn highlights some quick and simple cash flow management tactics

Managing cash flow is a key concern for any business owner or manager. When a business is plagued with cash flow problems, it becomes difficult to capitalise on opportunities that arise. Even mortgage brokers are not immune to the effects of negative cash flow and are at risk of business failure. In fact, a large majority of business failures are a result of ineffective cash flow management.

The mortgage industry is a difficult one to manage cash in, as you’re liaising with a range of people at once. Whatever decisions you make, make them early and stick to them. Managing cash flow is something that you need to be proactive about, and make a plan for in advance. Your accountant or financial planning consultant should be able to assist you with setting goals and systems for reaching them.

You need to find a balance between accumulating money for the future (though there is a place for that) and using it to grow and expand. One of the best ways of doing this is setting up a cash system that gives you different pools of funds for different purposes.

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TELL-TALE SIGNS OF CASH FLOW PROBLEMS An inability to pay staff wages and superannuation on time Difficulty in paying what is owed to suppliers and creditors Unpaid taxes or unlodged Business Activity Statements

70%WORKING CASH

This is the money you use day-to-day. Be careful how you spend it but don’t be scared to use it. This fund needs to be liquid and accessible, but not enormous.

Look for cuts you can make here, and stick to a budget.

10%WORKING CASH RESERVES

This is the money that you set aside to cover large and regular expenses such as payroll, taxes and other fixed costs. Set a percentage of your regular trails to put aside for these items, and you’ll ensure you never miss a payment for your important creditors.

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SEEKING FINANCE If you aren’t bringing in enough money to contribute to these different pools of savings, or have ambitious expansion plans, you may need to seek out finance.

There are a range of options available to you to inject cash into the business but the two most popular are investor funding and bank funding.

INVESTOR FUNDING Investor funding is common among mortgage brokers.

It involves seeking out investment funding from private lenders. This is a risky manoeuvre, as the interest rates attached are often high. You’ll need to have a specific, measurable, achievable, realistic and timed (SMART) plan in place to ensure that, following the injection, your business will utilise the cash in such a way that will both help you to pay it back as well as to grow.

10%RESERVE CASH

This is where you keep money for growth and expansion opportunities, as well as any surprise threats. This includes things like capital expenses or acquisitions. Try to avoid using this for expenses. Any time you have a large commission or period of sustained earnings, shift some more money into this account in preparation for the future.

These are not repayments to renege on, so make these decisions cautiously – and this is where a clear business strategy will be priceless.

BANK FUNDING The same applies when seeking bank funding. A bank loan or overdraft might be a solution for you to increase the amount of cash in your business quickly, but this is a decision to be undertaken only when you have a very clear idea of what you want to achieve with this money, and how it will enable you to repay the bank while still growing.

Some businesses turn to bank loans first as they can be turned around quickly, but remember that your credit history is at stake with this decision.

10%EMERGENCY FUND

Sometimes referred to as a “war chest”, the premise of this strategy is to keep money in reserve to act as a hedge or to fund expansion. Many small businesses make the mistake of not keeping an emergency fund: if you go through a sustained period without closing any loans or collecting any commission, you may find yourself stuck.

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COLUMN / BUSINESS RESOURCES

ASSISTANCE

REQUIRED In need of a little help? Here’s a roundup of some useful business resources GOVERNMENT HELP

THE LAW

With 620 business schemes across Australia – albeit many targeted to specific industries or segments of the community – there’s scope for businesses to obtain some assistance. A full list of grants can be found at business.gov.au/grantfinder

You don’t have to employ expensive lawyers to cover off every aspect of business law: a wealth of information is available online.

STRATEGY HELP Don’t want to shell out for a business coach?

Government agency Enterprise Connect offers a free top-to-bottom analysis of your business, carried out on-site. The scheme aims to highlight: strengths and weaknesses of your business; strategic issues; potential areas for business improvement; and potential areas for growth.

Further info: enterpriseconnect.gov.au EMPLOYING PEOPLE Training and development grants are common: the most well-known is the Australian Apprenticeships scheme, which offers a range of incentives depending on various factors. The Experience+ scheme also offers financial incentives and assistance for employing ‘mature’ (45 and over) workers.

Further information: australianapprenticeships.gov. au; deewr.gov.au/employment/programs/expplus

CREDIT LICENSING One website every broker should be familiar with is the ASIC website, featuring full details of your obligations under NCCP as well as credit representative and licence holder registers.

Further information: asic.gov.au EMPLOYING PEOPLE The government’s business hub, business.gov.au, contains an excellent section on the law and practice of employment. It also includes information about a number of other aspects of doing business. Proforma job offers, contracts and policies are also widely available online.

Further information: business.gov.au TAXES The Australian Taxation Office’s business page contains a range of up-to-date information about your taxation obligations Further information: ato.gov.au/businesses

INDUSTRY RESOURCES Various industry players also provide a wide range of assistance for brokers – some free, some not.

PEAK BODIES The MFAA provides a comprehensive professional development program, including a mentoring scheme, a national PD event schedule, online courses and training via a number of registered training organisations. The FBAA also provides a comprehensive PD event schedule and offers training via RTOs. Further information: mfaa.com.au; fbaa.com.au LENDERS Lenders run a range of schemes, often in tandem with segmentation programs – eg making business development available to top-tier brokers for free or at a

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discounted rate. Examples of this include CBA’s Process Excellence scheme and Westpac’s Davidson Institute courses.

Further information: contact relationship managers for more information.

AGGREGATORS Professional development offered by aggregators is nothing new – what is changing is that aggregators are increasingly opening up PD events to brokers outside their networks. Vow Financial’s Vow Academy webinars are free to access industry-wide; elements of Connective’s PD program are also open industry-wide.

Further information: vowacademy.com.au; connective.com.au/support/learning

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