Beware margin erosion. Look carefully at pricing and explore where you can grow revenues by enhancing the value of your product or service, or even by charging properly for something you used to give away. Ensure that long term arrangements include the ability to increase charges with inflation.
Look carefully at costs. Do you spend money on anything that the market doesn’t value and isn’t essential?
Recognise that staff will, in general, cost more. Look carefully at how to increase productivity. Invest in automation, physical but also software and AI. The RoI increases as staff costs increase. The same applies to investing in (appropriate) training to enable your team to add more value more productively.
Check carefully the value of each role to the business and be discriminating. Respond to the pressure and pay well those roles and people that efficiently add value to the business, and fund that by being tough in cutting back in areas that are not so added value. (The idea of giving an equal inflation adjustment is for me an abdication. Management means being able to have honest conversations and helping people work out how they can add more value to the organisation – and then they can be paid more.)
And finally a severe warning! As I’ve said before, change causes winners and losers. Businesses in a down sector go bust as do badly run businesses. Shareholders lose money and staff are made redundant. Meanwhile businesses in an up sector do well and recruit, possibly after reskilling, the good staff. I’m arguing there is a lot of change and so there will be a lot of that sort of thing happening. Strategy, being in the right place at the right time, is more critical than ever.
To be clear: yes, I am repeating what I said before. I believe that everything I said last time remains valid. The difference this time is the added steroids. I think the changes are going to be more dramatic because of the Ukraine situation and also because I think the Bank of England is underestimating the way pay rise expectations in a time of inflation with staff shortages will persist.
Finally, for our overseas members, my usual apology. My comments are UK centric because sadly that is most of what I experience and most of our members, from whom I gain the insights are UK based. Having said that I have also looked at the global position and believe my comments are, with a few exceptions valid globally. I guess because the economy is pretty global now, albeit currently with a little de-globalisation happening.
Inflation is rising rapidly in the US and EU too, the economies there are also picking up rapidly and there are staff and semiconductors shortages there as well. The only key difference I detect is that the ECB is likely to be slower to raise interest rates than the UK or US.