'Charting a course through economic storms'
By Brian Chernett, Founder, The Academy For Chief Executives
The signs are already growing that 2011 is going to be as challenging to business as was 2010. On 15th February, it was reported that the consumer prices index (CPI) climbed 4pc in the year to January. The Telegraph reported Mervyn King, Governor of the Bank of England as saying that CPI could hit 5pc "over the next few months" - (Read: Mervyn King on the defensive as inflation hits double the target)
“Nonetheless, the UK's foremost central banker said the Bank's Monetary Policy Committee (MPC) thinks that trying to bring inflation back to the 2pc target quickly risks "undesirable volatility in output". A hit to growth could even see the target undershot in the future. Mr King continued to blame the over-target inflation on "temporary effects", citing the increase in VAT to 20pc at the start of the month, the fall in the pound and soaring commodity prices.”
Inevitably, this has raised the spectre of an increasing interest base rate (though few borrowers are paying anything as low as the current rate of 0.5%). Vince Cable seemed to indicate that he sees a rise in interest rates as “potentially very difficult” in an interview (Read: Vince Cable says interest rate rise would be 'very difficult').
As the FT notes, King makes it clear that rates will rise. In his letter to George Osborne, he said that “inflation was “likely” to return to the Bank’s official 2 per cent target on “the assumption that [the] Bank rate increases in line with market expectations”.
The FT reported comments by Andrew Sentance, a member of the Monetary Policy Committee stating ”that UK monetary policy will need to be tightened more and at a faster pace than markets expect to bring inflation back to its target range.” The FT adds “Currently, the futures market for UK interest rates suggests that three rate rises are expected by this time next year, bringing the Bank rate to 1.25 per cent, from its current record low of 0.5 per cent.”
So what does this mean for the majority of British businesses? One thing is very certain. There is very little we can do to change the views at Governmental and Bank level. What will happen, there is going to happen whatever we do in the short term. So it is better, I believe, that we keep generally aware of what is happening at a macro level and concentrate on running our own businesses as well as we can given the circumstances in which they will be operating.
Staying positive and not giving in to the pressure of bad news is important though we need to retain a realistic stance. What we believe is important, especially that we should believe that it is possible to steer a path through external factors and keep the business moving forward.
I know I’ve said this before, but it is still vital that you know your business numbers and watch for the early signs of danger, taking decisive action to mitigate that. There will always be opportunity, so keep a watch for that as well and move equally decisively to act on it where it fits with your outcomes.
What are the factors that will differentiate winners from losers in the next few months (and, indeed, at any time)?
• They know their desired outcome and keep steering towards it avoiding potential pitfalls and embracing opportunity when it fits with the outcome.
• They apply ‘sensory acuity’. Using their basic senses, especially what they see hear and feel, to generate intelligence and understanding of the market, of their customers and of their competitors.
• They are able to act flexibly when their intelligence tells them that they need to make changes. Speed of reaction may be all the difference you need to turn danger into safety and opportunity into benefit. At the very least, informed action will do no harm.
All this, of course, should be linked to the beliefs and values that underpin your business (see: Don’t forget your Beliefs and Values). Moving away from them may give a short term boost to business, but it is unlikely to be sustainable and it will certainly give out mixed messages to everyone associated with the business.
When the storms are raging, it is often best to concentrate on keeping course and direction and making some headway. Speed (of growth, especially) is less important. Storms always blow themselves out eventually. Be sure you’re still on course when they do and ready to pick up speed in calmer waters.
Brian Chernett is the founder of The Academy for Chief Executives and Chairman of Academy Group ACE2. Having stepped down as Chief Executive of the Academy, Brian is now developing his own coaching and mentoring business — Wisdom Forums - for senior executives and building a new charity, The Ella Foundation, to coach and mentor Chief Executives in Charities and not for profit business.
Watch a video of Brian Chernett, Founder of The Academy For Chief Executives, explaining how The Academy For Chief Executives inspires business leaders.
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