The UK government has, since its October Budget, faced ever-louder criticism over changes to taxation. The cost of employing staff will increase this April with changes to employers’ NICs, and businesses have responded with various cost-cutting methods. Controversial changes to Inheritance Tax on farms and family-owned businesses are expected to remain in place, with farmers taking to the streets in protest.

This has been followed by the return of President Trump, bringing with him widespread change at a pace never seen before by a government. The threat of tariffs, the backsliding on diversity, equity and inclusion (DEI) and the dismantling of long-standing institutions are being felt the world over. It is hard, if not impossible, for politicians and businesses to ignore.

It comes at a time when UK businesses are under intense financial pressure. Costs continue to increase yet cannot always be passed on to customers, wage inflation challenges talent attraction and retention, and inflation remains an issue. Margins are squeezed from all directions.

It is increasingly clear that business as usual does not work in unusual times. It is time to reevaluate business models and pivot again.

For some businesses, that will mean a long, hard look at what and how they trade, asking difficult and existential questions: ‘Will the market exist for the products and services offered in the future?’ ‘Can new markets or products be found?’ ‘What needs to change in the business?’ And ‘how will that change look and be managed?’

For others, it will mean continued investment in people whilst ensuring they work in ways that are best for the business, or significant investment in new technology, notably AI.

Operational opportunities

Businesses will benefit from reviewing their operational practices. If businesses improve and optimise the operations, the nuts and bolts, of the business to find and deliver greater efficiencies and effectiveness, they will be better placed to address and embrace a fast-moving economic and political landscape.McKinsey & Company, in an article titled Today’s good to great: Next-generational operational excellence, argued that high-performing businesses regularly review and reimagine five areas of operational excellence: Purpose and strategy; Principles and behaviours; Management systems; Technical systems; and Technology.

Purpose

Businesses need to understand and articulate why they exist. A clear and compelling purpose becomes a common cause for the entire business to rally around. Direction and strategy on how it can be achieved are needed.

We at Kreston Reeves defined and committed to our purpose in 2020: ‘to guide our clients, colleagues, and communities to a brighter future’. This purpose guides everything we do and informs our decision-making.

Principles and behaviours

Businesses cannot truly live by their purpose or achieve any of their strategies without the right culture, behaviours and values. Businesses can focus on building this through trust. They are expected to hold high standards in the way they do business, treat employees and customers, their position in the communities in which they operate, to the planet and their shareholders and owners. It is linked to the point above.

We have seen several large US-based businesses with global footprints choosing to ‘sunset’ their DEI operations, and it remains to be seen whether that will happen here. I don’t believe it will.

In fact, strong DEI policies and a clearly defined way of operating are likely to help UK companies stand apart from their peers and competitors. They will become a point of competitive advantage.

Those principles and behaviours will actively encourage innovation, new ways of working and, ultimately, operational excellence. They do not hold a business back.

Management systems and structures

Businesses recognise that the workplace and the way we work are changing. The Financial Times in February carried a report (‘Gen Z has turned against taking middle management roles’) which said half of those aged up to 27 do not want to take middle management roles, dismissing it as “high stress, low reward”.

Businesses need to reevaluate the way they develop leaders, finding ways for the different generations now employed in businesses to not just work together, but find new and effective ways of working that deliver opportunities and growth.

Technology and technical systems

Businesses must also look to invest in technology and the improved processes and systems technology will deliver to eradicate operational inefficiencies whilst maximising productivity and value. If they don’t, they won’t have the resources or capability to seize opportunities and will simply fall further behind. Alongside that, investment in technology
must support and enable rather than replace the personal touch. ‘Being human’ and ‘making it personal’ are two of our core values and something we know our clients value; it remains vitally important for most businesses.

How we can help

This ‘inside out’ approach to operational efficiency will create the foundations on which a business can pivot, grow and thrive.

It is often challenging for business owners to take a step back from the day-to-day operations and find time in their busy diaries to think, question and strategise over the future of the business.

It is here that we can help, drawing on our experience across hundreds of businesses, playing the role of a critical friend. We often act as a sounding board to founders, business leaders and boards, supporting them in their journey towards building a sustainable business.