Tight fisted spending: the business mental illness

EDITORIAL >> AUSTRALIAN business at all levels seems to be afflicted by a strange wasting disease. It’s not physical – it’s fiscal.

Anyone with any sense in business is thrifty. We at Business Acumen are too.

However, our observations are that this elemental business common sense has deteriorated into a mental affliction that makes little sense and very few cents. In fact, it seems to be a huge factor holding back business progress at all levels in Australia. 

Business people we talk to, right across the spectrum, say it simply: “Nobody wants to spend any money.”

Here’s our theorem (and, because we are Australian and like to colourfully tell it like it is, let’s call it the Spending Sphincter Syndrome):

We think business leaders in Australia were so spooked by the after-effects of the Global Financial Crisis (GFC) – the ensuing tightening of the big banks on business lending to SMEs; the loan-valuation ratios squeezes that took vital cash out of the system; and the record numbers of business failures and insolvencies – that all those panicked savings measures and ‘emergency’ financial procedures that were driven during that crisis have not come off.

Of course there are other ongoing disruptions – not the least of which is the impact of digital technologies and those pesky new business model challengers – that are helping to perpetuate the Spending Sphincter Syndrome.

It’s like a black cat ran in front of all our commercial vehicles at once – business leaders have left their handbrakes on as a prudent precaution.

SUB. STANDARD

We have been seeing it in the very basic and crucial area – for us – of subscriptions. We charge $99 a year for a combined print and digital/online subscription and $49.50 for the digital-only.

Most business people agree that this is not a lot of money – a tank of petrol – and there is a very high chance that knowledge found within Business Acumen’s print and digital pages will help to leaders form strategies and introductions worth, well, more.

Acumen has always helped to create business opportunities through knowledge and publicity.

Not only that, we instigated a policy in 2015 of actively prioritising content featuring our subscribing and allied companies – especially member organisations of Queensland Leaders, NSW Leaders and Victorian Leaders – and we have made a point of alerting potential new subscribers to this advantage.

We thought we were imagining things when some of Australia’s, and the world’s, biggest companies – who were contacting us seeking free publicity, generated by PR companies on huge monthly retainers – produced these peculiar e-mail responses:

Major PR agency, in behalf of a multi-national client: “Unfortunately I don’t think this spend is something we will have budget for, but thank you for sending over the details – I will keep them on file …”

Direct from the communications department of a major international airline: “Our advertising plans and budget for the remainder of the financial year have been allocated and set in place … We also would not be in a position to become a subscribing organisation.”

One of the world’s biggest software companies: “We don’t have any budget for subscriptions …

PR company for one of the world’s biggest accounting firms: “… if our client is interested, we will contact you …”

One of Australia’s biggest construction companies: “We’re not looking to add any new subscriptions at the moment but please do feel free to follow up in 2016.”

One of Australia’s biggest accounting software companies: “I spoke with my manager about this and unfortunately it’s not something we can go ahead with right now. But thank you so much for keeping on my back about this. As soon as we have allocation for this, I’ll get back to you.”

One of Australia’s top project management companies: “I have had feedback from the MD and we are not going to subscribe.”

A declining Australian industry association: “Thank you for the information however at this stage we are not looking to take on a subscription.”

The communications department of a top-two Australian telco (the other one is a multi-subscriber): “Thank you for reaching out however at this stage we will decline your offer.”

PR representative of a major publicity-hungry Australian online retailer: “No thanks re [client] subscribing.”

PR company specialising in financial services area: “It’s a no on this occasion.”

Top-level superannuation company: “I have spoken to the CEO and unfortunately we are not interested at this time.”

Australian business software company: “We completely understand what you have outlined, however we will not be subscribing. We appreciate the articles that you have published and ones you may do in the future.”

One of the banks owned by one of the Big Four banks: “Thanks for the opportunity but we’ll pass on the subscription - however, I do hope you editor finds our research interesting enough to report on it.”

And last, but certainly not least, from a representative of one of the world’s largest and most profitable technology companies: “The feedback from our team … is that as the current budget stand[s] for this financial year – they are not in a position to subscribe. This is on their radar for next financial year, so perhaps they will revisit then.”

These are just a few glaring examples. As we have featured all of these companies in coverage over many years and continue to be kinder to them than they are to us, we have not named them.

We have certainly modified our views of these organisations and how they are currently doing business.

We present these written responses to illustrate the pattern that bedevils business in Australia in a much wider sense.

BROAD BRUSH OFF

Sadly this kind of affliction is not just rampant in the media area, judging by feedback we get across the small business spectrum. In different ways, most small businesses are finding the same impacts of this anti-spending syndrome.

In every case, this is the result of an edict from company leaders that there is no extra-budget spending to be made, no matter what the opportunity or the marketing consequences.

“We are not spending money outside budgeted amounts.”

“We will not take on any new commitments.”

“We cannot let spending get out of hand at this time.”

“We run a tight ship.”

“No-one is authorised to spend outside budget.”

In every case, these companies have the idea that not spending, no matter how small, is prudent and managers down the line are rewarded for being brutally tight. There are positive consequences for this within the company, no matter what the negative consequences are externally.

In many cases, an opportunity is not communicated up the line, to where it should be dutifully considered, because those below know what the sphincter-tightened answer will be and it is easier – and more career prudent – to say no at the source.

Be fiscally prudent (and the word embedded in prudent is ‘rude’)

While this mood works in a crisis, for a short period of time, it is anti-growth and anti-innovation. It stifles the development of new business relationships.

As one frustrated software developer CEO – a subscriber, who asked not to be identified – so eloquently put it during a recent interview: “I am sick of hearing how companies want to ‘go forward’ with us or ‘form an alliance’ or ‘develop a relationship’ or ‘collaborate’ with us – but don’t want to spend any money right now or ‘haven’t got a budget’ for it.

“However, they do ‘want to work with us’ … so if we would care to do a bit of preparatory work for them, there may be budget allocated in the future.

“What is going on? How is not paying any money at all actually construed as doing business in Australia?”

Diagnosis: Australian Spending Sphincter Syndrome. (Acronym intentionally not used).

www.businessacumen.biz

 

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