Whose responsibility is it? #8

I would like to follow up the discussion on the growth agenda that has continued to focus on the 5% per annum however that may be defined. The GDP measure is largely one that focuses on consumption and is essentially value-added recognition minus importation rather than a profit figure. It does not take into account whether or not we sell what we produce above or below the cost of production. So revenue growth may not be the same as increased profit. This is article is just an attempt at simplifying the discussion.

In any regard, despite the flaws, GDP is used as an indicator of growth in the economy over a period of one year. In our case it is often distorted by the economic activities in the underground economy that may not be captured in the official measurement, and which may fluctuate in response to internal societal demand-driven conditions. In fact this may extend to activities outside of the domestic market (e.g. the drug trade).

Growth however is a comparative that we measure what we did in a prior period with what we did in the last. Last year January my height was X centimeters and this January it was X+10, so I have grown. Very simple measurement!

If we measure growth and express it in percentages then we can realize that growth on a smaller base can be much larger than the percentage on a higher base. If vendor A has annual sales of 1 million and increases to 1.5 million that is 50% growth. If vendor B has sales of 2 million and sells 2.5 million (the same increase in dollars of A), then that only represents 25% growth.

Therefore it is possible for different sized firms to grow at differential percentages but not necessarily by absolute dollar values. If a large company grows at 1% it may vastly surpass the dollar sales of a small firm. Very simple basic arithmetic! So why make simple points in the discussion? Well it is necessary to have a common understanding of growth if we are to set goals that can be measured. The growth must be related to size, ambition, and competence of management.

Let us examine a few larger companies revenue growth in the 1st Q 2016 versus 1st Q 2015 (while bearing in mind that 2016 was dominated by the lethargy of elections and other “distractions”). (Please note that I have included profit as this will impact how much tax they will have to pay. ) These are all listed companies and revenue is noted first and profit second:

  • NCB 11.61% 10.20%.
  • Sagicor Group 7.87% 39.71%
  • Carreras 7.72% 16.51%
  • GraceKennedy 14.31% 148.44%
  • Carib Cement 11.17% 236.29%
  • Jamaica Broilers 9.23% 21.73%
  • Kingston Wharves 22.25% 49.41%
  • Hardware and Lumber 12.72% 40.46%
  • Berger Paints 11.78% 25.75%

These nine companies cross over between Medium and Large (by local standards), and Small and Micro (by international standards). In all cases they are in fairly mature industries that have been around for decades or centuries, and none are in the “rocket science” emerging industries with massive intellectual property values. In fact the ownership of valuable intellectual property if present, would have sky-rocketed their share prices based on their current performance (almost like a multiplier effect).

If these were pharmaceutical companies who had developed a new treatment or cure for some chronic or lifestyle disease there stock value would soar to many multiples of their book value. If these companies can grow at over 5%, then what about the SME’s that have a lower base and an extremely low or unmeasurable percentage of market shares. They can grow by huge percentages without even making a noticeable dent in the world markets.

So whose responsibility is it for them to take that initiative? It cannot be the government or Michael Lee Chin.

It is the responsibility of owners and managers to lead the process, and the employees to promote efficiency and results that can be sustainable. The agility with which a business can move/change is usually inversely proportional to its size (small=fast; big=slow). Since we have a proliferation of sole proprietorships and under-funded businesses this would seem so simple, but that is not the case.

Regrettably what we have is a mindset roadblock that disables our economy. This roadblock has two main components (not collectively exhaustive):

  • A serious lack of originality/invention/innovation in our home markets as opposed to what we display in markets that we migrate to is evident. The Jamaican abroad is a dynamo displaying ingenuity, management, influence, leadership, cooperation, advancement, teamwork; all leading to success. The diaspora lives the real Jamaican dream of moving upward, while at home we live the nightmare of mediocrity and decline.
  • We believe that everything must be shrouded in secrecy, and that we all have a means of selling the best and differentiated sky-juice even though we buy the ice and syrup from the same suppliers. It is a syndrome called megalomania that suggests that we believe that we are the greatest even though we have no validity in that argument.

The result has been the local development of an individualistic, uncaring, unsharing society that by its very nature militates against growth. Therefore in examining the success factors overseas versus the general local failure, I suggest that there is an element of inherent concerns, thought processes, opportunities, societal organization in each community (home and abroad), that contribute to the way Jamaicans perform. But they differ considerably here and there.

Business growth from small to large is a collaborative process requiring investment, imagination, shared ownership, and transparency in order to grow locally and internationally.

I am a proponent of consistency in business, but I must assert that this does not mean being static or worse, living in the past. I say consistency with a view to strategic objectives. If we own a restaurant that caters for breakfast, lunch, and dinner in a tourist destination, then it must open on time every day, and must offer the items offered on the menu; WITHOUT EXCUSES.

If we operate a bank then the published opening hours must be adhered to. If we say 15 minutes to change your car’s oil and filters, then you should always have new oil and filters in stock, and the service persons should be on time. These few examples when extended across the total economy, may on their own, produce more than 5% growth immediately.

If we offer a great service then why should we have a single location and ignore viable alternatives. Imagine all banks, chartered accounting firms, cable services, and taxi operators in Kingston, but not in Montego Bay, Mandeville, Spanish Town, Port Maria, or Port Antonio, what a fiasco that would be.

If that service/product/brand is really good then why must the Jamaican market be the only place to do business with a population of 2.8 million? This is the thinking required for export and FDI. Growth does need planning and motivation, and a dose of implementation. Who should think these elements through? Where should direction come from?

My advice is that planning and motivation is a function of management and employees working in unison and with mutual respect, moving towards a single vision led by management. If we do other than that then we do not deserve the title of manager.

But whose responsibility is it to tell managers and owners of their duty? Is it all left to Michael Lee Chin?

Is it left to the Government? I don’t think so.

So each of you figure that out.