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Leanness as sign of good health: SMEs in post-election recovery

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Last week, we likened the general elections in Nigeria, which happens every four years, to a wilderness or desert experience or even a recession; indeed a disaster– some kind of bind that grips everything and everyone, spelling uncertainty everywhere, from business activity to social welfare. We explained the similarity, which election season in our country shares with a recession. It was evident, from that discussion that SMEs in Nigeria pass through a near-death experience; something akin to a recession or probably worse, when inventories pile up, sales plummet and output shrinks. Disposable income crashes and the almighty consumer spending power vaporises. We christened this situation Desert, Wilderness or Purgatory experience – some self-mortification and purification processes in which some religious groups indulge.
Booms and burst do not last forever and so do wilderness and purgatory experiences. They all come to an end someday, and those that endured would have their lives back and continue to live. The challenge is that the benefits of a wilderness experience are not automatic. Only those businesses that have the discipline, and who follow through, will pick up easily after a disaster, and quickly return to profitability. Today, we look at life after political or election-induced recession, as a resource for the survival of SMEs. Without doubt, Nigerians, and in particular SME operators, cannot wait for the elections to pass this Saturday so they can have their lives back.

Unfortunately, the statistics on the rate at which small businesses reopen their doors after a disaster is a very sad one. As much as 60 percent of them never reopen their doors after major disasters, including fire, flooding, security breaches or serious system compromises. Comparing some of these disasters with the negative consequences of our general elections might appear like putting apples against oranges, they are comparable. The problem is that the bulk of our entrepreneurs are not famous for record-keeping, so they hardly know the massive disasters that have been hitting them ever since. Beside, when we consider the financial strength of the average SME in Nigeria we know that an “election recession” is a major one and actually something in the family of a tsunami. For our kind of SMEs, an election carries consequences that compare favourably with any other kind of serious disaster. Granted that unlike a regular recession, “election recession”, while destroying jobs, may also create some new ones, especially in the thuggery industry, but the net effect is still a minus for the economy. At the end of it all, there is a recovery to be achieved by all businesses, after an election in Nigeria.
For SMEs that want to recover quickly, the first thing to do is a proper and comprehensive environmental scan. Proper diagnosis, they say, is the foundation of any effective medical treatment. It is therefore important that the operator understands what happened to his business during the layover period. During layovers that occur in the transport field, the vehicle stops and passengers do a few things but they do not move forward along their routes. In the rail travel industry, passengers may disembark to change trains but the time they spend doing this is usually short compared to a layover that occurs in the air travel industry. Here passengers disembark, and sometimes wait for several hours to catch the next plane. So during this election recession layover, many things happened to the small businesses operated by our entrepreneurs.

The primary action, after the disaster therefore, is to review the business in general, and take inventory of what has happened to know the extent of the damage. This process begins with a determination of the status of its staff complement. During recessions, staff are let go and some are “stood off”. The company needs to know how many staff have been disengaged, how many are temporarily laid off and how many of these are available, should the company want them back. Obviously, many would have moved on and it is important to know how they may be reached or replaced if need be.

In a similar fashion, it is necessary to determine how many customers (those to whom the business sells goods and services) survived the disaster, and if they did, what is their capacity to return to regular, albeit, reduced business relationship from this new outset. What about the suppliers (the customers that provide the business with services or raw materials)? How did they fare? Having solid information about the customers prepares the business to be better able to take orders and deliver timeously.

The next important environmental scanning challenge is to review the state of contracts that may have been signed with clients, some of which may have been mutually varied on agreement or suspended. It is necessary to know if there is need for renewals and updating of agreements and contract relationships. This should go hand in hand with equipment review. There may have been modifications in equipment use and the relevant sources of those that are usually hired, needs to be reassured. In the Nigerian situation, advertising and publicity usually receive a boost during elections. It would be good strategy to see if those bill boards and other advertisement insertions on radio and television that pervaded the landscape, during the campaign periods, could provide leads to new streams of business, both in advertising and publicity in particular and other areas inn general.

There used to be a time when small was beautiful in business. Things have changed and companies are now better off big. Even policy makers tend to encourage companiesto expand their girths. This may be easily observed inthe financial sector. The Central Bank of Nigeria (CBN) has a history of compelling institutions under its supervision to consolidate, in order to gain financial strength and technical capacity. This helps them to take on big ticket transactions that were hitherto the preserve of foreign banks. It happened during the time of the then Governor of Central Bank, Prof ChukwumaSoludo. Once again, it is happening in the Microfinance Banking Sector. The CBN had recently directed all operators in the sector to increase their capital bases in accordance with their categories and amounts specified for each category – unit, state and national microfinance banks.

Be that as it may, small companies are more fleet-footed. They react quickly to stimuli and are not bugged down by bureaucracy. Their turn-around time is small and they can leverage their size to get things done faster. It is advisable that companies be lean in the immediate post disaster periods. Perhaps, we need to explain the meaning of leanness in this context. By this term, which is commonly used in business, we mean the ability of a company to create greater value for its stakeholders, using fewer resources. It has to do with efficiency and productivity rather than fat or thin; and more with principle rather than appearance. When a company applies the principle of leanness, it focuses on waste elimination, operational efficiency and value enhancement.

Actually, Nigerian companies have long been made small following the massive devaluation of the naira that occurred in the early days of this administration. As naira went down from about 150 to the dollar to about 400, before settling at its present rate of about 360 to the dollar, all businesses shrunk at the same rate the currency contracted in value. Once traders cannot replace the goods they had in stock with the proceeds from its sale, their businesses have shrunk. This is why inflation and devaluation ten to partner at such times.Truly, the business community in Nigeria has paid dearly for the economic policies we choose. However, this reduction in value is not leanness. The SMEs that will pick up fast after this “election recession”, are the lean, quick and fleet-footed players; not the fat, two-left-footed ones.

 

Emeka Osuji

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