Introduction

Family trusts have become a popular way of conducting small business operations in New Zealand.  There are a number of persons who form and operate the trust.

Settlor

This is the person who establishes the trust and signs the trust document.  They may transfer property other than the initial settlement to the trustee to be held on trust.

The initial settlement amount is usually relatively small (usually less than $100) with more substantial assets being transferred or loaned after the trust has been settled.

It is important that the initial settlement is actually paid to the trustee.

Trustees

The trustees are responsible for all aspects of the day-to-day management, investment of monies etc., relating to the trust.  Subject to the terms of the deed of trust the trustee can be a natural person or a company.  The number of trustees will usually be determined by the deed of trust.  The trustees have extremely wide legal and trust responsibilities for the administration of the trust.

The trustee holds assets for the benefit of the beneficiaries of the trust.  The trustee of a discretionary trust generally has the power to make distributions of profits and capital to any beneficiary or beneficiaries.

Trustees are governed by the Trustees Act 1956 and owe significant obligations to the beneficiaries of the trust.  A trustee should be fully aware of its, his or her obligations before accepting any appointment as a trustee.

Trustees (including corporate trustees) are liable for debts of the trust.  Directors of corporate trustees need to ensure they fulfill their duties under the Companies Act, otherwise they may become personally liable for debts of the trust.

Trust deed

The trust deed is prepared by a solicitor or administered by an accountant or other person using a suitable precedent.  It sets out:

• The purposes of the trust (i.e. who can benefit)
• What the trustee can do
• Investment powers
• Borrowing powers
• Period of the trust (cannot exceed 80 years)
• Names of settlor, beneficiaries, trustee and appointor(s)

Beneficiaries

Beneficiaries are those people for whom the trust was created.  The beneficiaries of a trust can be divided into a number of groups:

• Primary beneficiaries – normally (but not necessarily) the settlors and present and future children
• Secondary beneficiaries – normally future grandchildren and great grandchildren
• Tertiary beneficiaries – other trusts, religious organisations, charities and so on
• Final beneficiaries are the beneficiaries who benefit at the end of the Trust

Business activities

The trust, through the trustees, can conduct virtually any type of business activity that is approved by the trust deed in basically the same way as any other business activity operates.

Appointor(s)

The persons who have the powers of appointment are stated in the trust deed.  Subject to the terms of the deed of trust the appointor(s) have the right to add and remove trustees and beneficiaries, and to approve permitted changes provided for in the trust deed.  The extent of these powers can be customised to suit individual circumstances.

Distribution of profits and capital gains

The trustees of a discretionary trust decide how to distribute profits and capital.  The trustee is not bound by any fixed or predetermined percentage of distribution.

Taxation

The trustee of a family trust pays income tax on taxable income that is not distributed to any beneficiaries.  The trustee rate of tax is currently 33%.

Income distributed to beneficiaries (other than minor children) is taxed at the beneficiary’s marginal rate.

Family trusts are a very effective structure for those people entering into a business who do not have existing creditor exposure, but wish to protect assets against future risks.

The reasons for settling a trust include protecting assets from future creditors; protecting assets from future relationship breakups; preserving assets for a single limb of a blended family; and inter-generational asset protection.

In the majority of cases any distribution from a trust to a child under the age of 16 will be taxed at the trustee’s tax rate.

Any net loss derived by a trustee cannot be distributed to beneficiaries of a trust in order to be offset against other income derived by them.  The losses are carried forward to be offset against future earnings of the trustee.

Advantages

The advantages of a trust include:

• Assets may be able to be protected from a variety of people and organisations, such as:
• Creditors
• Family
• In limited situations, asset and income tested benefits and assistance
• Income can be distributed or paid out for the benefit of family members
• Care must be taken to administer balances owing to beneficiaries carefully. Any distributions that are unpaid can be demanded as well as being included in the property of the beneficiary for relationship property and other purposes
• The trust is ongoing.  It has a life of up to 80 years, unless it is wound up and distributed earlier

Disadvantages

Disadvantages include:

• Naturally, there are additional legal and accounting costs to set up a family trust
• There are further ongoing compliance costs to administer a family trust properly. Tax returns and full financial statements must be prepared on an annual basis if the trustees own income producing assets.  In addition, the trustee must maintain resolutions approving financial statements, beneficiaries’ distributions, and all major transactions.  These may also be minuted.  The skills of a good accountant must usually be employed
• A good knowledge of trustees’ responsibilities is required. It is not wise for anyone to agree to act as a trustee until they are fully aware of their duties and responsibilities
• Disgruntled beneficiaries have the power to sue trustees where trustees have acted in breach of trust. Whilst this is rare, it is happening more frequently and it reinforces the need to be fully aware of duties and responsibilities
• The IRD are able to pursue all trustees for debts of the Trustee regardless, even if a trustee is only acting in the capacity as corporate trustee

Trust Losses

Net losses incurred by the trustee in one year are generally available to carry forward against net income in subsequent income years.  Losses cannot be passed on to beneficiaries.

Where the trust is a shareholder in a look through company (LTC), any losses from that LTC can be used against the trustee’s net income.

Asset Protection

Property and investment assets can be segregated from any business venture of significant risk into separate trusts.  Assets can be protected:

• From potential creditors
• In the event of a relationship property dispute
• For children’s education
• So that in limited situations, government income/asset tested benefits are still available

The basic idea is for you to gift your assets to the trust.  This can be done in a lump sum or progressively.  Say for example you sell an asset (your family home) to the trust.  Prior to the abolition of gift duty the usual arrangement was for an interest free loan to be made by you to the trust.  The loan to the trust was then ‘forgiven’ by way of gift at the rate of $27,000 per annum per person without incurring any gift duty.  A husband and wife or de facto or civil union partners can jointly reduce the loan at a rate of $54,000 per year.

A benefit here is that when John and Mary’s house is sold to the trust for $500,000 any increase in value belongs to the trust, not to John and Mary.

Provided the trust is a fully compliant discretionary trust, the house should be protected.  The debt owing to John and Mary of course will not be protected until forgiven (gifted).  The couple could suffer a business disaster but the trust assets can be legally separate, if the basic legal principles have been followed correctly.

Now that gift duty has been abolished, it is possible for assets to be gifted directly to a Trust without a gifting program.  Whether assets should be gifted immediately or progressively will depend on the donors’ circumstances.  However, advice should be taken before any significant gifts are made to ensure there are no adverse consequences from the gift.

Matters to take into consideration before a significant gift include:

• Whether the gift will mean that any entitlement to a residential care subsidy (or other means tested benefit or allowance) might be compromised, either now or in the future
• Loss of control over the asset
• Whether the gift might have the effect of defeating a creditor’s issues
• The donor’s solvency
• Whether the gift could comprise relationship property

Distribution of profits

Once the trustee has made a distribution to a beneficiary (the distribution does not have to be by cheque – it can be a journal entry), then that money legally belongs to the beneficiary.  The trustee may be empowered by the trust deed to utilise beneficiaries’ current accounts for the benefit of the trust – with or without interest.  However, any balance attributed to a beneficiary, together with any gains, remains that beneficiary’s property.

Capital profit distribution

The trustee may have the discretion to distribute capital to various beneficiaries.

Claim on balance in current account

A beneficiary who is ‘sui juris’ (20 years old), can claim the balance in his/her name in the beneficiary’s account.  He or she is also entitled to request a copy of the financial report each year together with other trust documents.

Trustees’ responsibilities

A trustee’s role is not necessarily onerous but does carry particular legal significance and specific responsibilities.

A beneficiary can sue a trustee for a wrong-doing whilst acting as trustee that constitutes a breach of trust.

Trustees may wish to notify beneficiaries of their status when each beneficiary attains the age of 20 years.  However, in the absence of any provision in the deed of trust, there is no obligation at present to do so.

Trustee’s decisions, whether made formally or not are called Trustee Resolutions.  Good practice requires that each trustee resolution is recorded.  Where a contemporaneous record of a decision is not made, the trustees should ensure that the minutes of the next trustee meeting record the resolution that was made.

Trustees’ meetings should be minuted and the trust documentation should be carefully maintained.  Some examples can be found in the section on trust minutes.

It is also imperative Trustees are aware of the extent of their liability for debts of the trust (including directors of corporate trustees)

If you would like to discuss what a trust would entail or what your responsibilities might be as a trustee, please contact us.  And, of course, your solicitor can also advise you in this matter.

Introduction

A key performance indicator (KPI) is a measure designed to track critical success factors in a business. KPIs provide a statistical measure of how well an organisation is doing. To be effective, KPIs should be few in number and focus on vital areas in the business.

KPIs differ by industry, business and even departments within a business.

For example, a retail business may have as one of its KPIs the percentage of its income that comes from return customers, a school may focus on its KPIs on graduation rates of students, and a Customer Service Department may have as one of its KPIs the percentage of customer calls answered in the first minute.

Whichever KPIs are selected, they must reflect the business goals, they must be key to its success, and they must be quantifiable (measurable).

If a KPI is going to be of any value, there must be a way to accurately define and measure it. ‘Generate more repeat customers’ is useless as a KPI without some way to distinguish between new and repeat business. ‘Be the most popular company’ won’t work as a KPI without some accurate method of establishing the company’s popularity and comparing it to others.

You also need to set targets for each KPI. For example, a manufacturing company’s goal might be to reduce the cost of rework (fixing, repairing or even redoing an aspect of product) by 50%. After the KPI has been properly defined, and a way to accurately measure it has been set up, the KPI becomes a clear target that everyone’s attention is focused on.

Once you have your KPIs defined, ones that reflect your organisation’s goals, what do you do with them? You can issue KPIs as a performance management tool, but also as a carrot. Post the KPIs everywhere, in the lunch room, on the company’s intranet, even emailed to key team members. Visibility of performance helps to create accountability.

Show the target for each KPI and the progress towards that target. Some organisations even refer to the KPI summary or dashboard as the Company Scorecard.

Generic KPIs for SME business

The following is a checklist of generic KPIs that can apply to a wide range of businesses:

• Average employee tenure
• Training expenditure as % of revenue
• Average employee turnover, 3 year rolling average
• Average talent turnover, 3 year rolling average
• Average absenteeism per employee, in days
• Job satisfaction index, based on survey
• % of employees who would recommend the company as an employer
• Employee productivity
• Workplace accidents as a % of total number of employees
• Sales per fulltime equivalent employee
• % of wages to sales

Customer service KPIs

• Customer satisfaction index
• % of revenue that comes from top 20% of customers
• Average customer spend per transaction
• Average customer spend per year
• Customer transaction frequency
• Average lifetime value of a customer
• Customer contribution to gross profit
• Complaint rate
• Customer attrition rate

Sales and marketing KPIs

• Average number of accounts per account manager
• Cold calls converted to new customers
• Customer door count
• Number of transactions as % of door count
• Conversion rate from prospects to sales

Product KPIs

• Contribution to gross profit by individual product lines
• Product obsolescence rate
• Product exceeding ‘use by date’ ratio
• Product return rate

Risk KPIs

• Litigation threats to the company
• Litigation claims on the company
• Complaints from the Commerce Commission, local councils, other Government departments, or consumer watchdogs

Financial KPIs

• Stock turn
• Gross profit margin %
• Expense analysis as % of sales
• Net profit margin %
• Price to earning ratio
• Return on total asset value
• Debt to equity ratio
• Current assets ratio
• Net transferable assets backing
• Debtor days
• Work in progress days
• Creditor days

Introduction

You can greatly improve your chances of succeeding in today’s marketplace if you focus your efforts on addressing the business issues that face your key customers. Consequently, it is more important than ever that you know ‘the voice of your customer’ and that you use this knowledge to create competitive solutions that deliver real business value.

Your Customer Advisory Board resource book

Listen to your customers

Imagine one of your customers sitting down at a luncheon with several other business owners. The subject of your business comes up. What will your customer say about you and your company?

Will it be positive? Will it be negative? Or worse yet, will it be nothing at all? Will your customer, instead, be silent, listening carefully to what’s being said by others while internally running down a list of comparisons of your company versus the other companies being discussed?

It’s a given that customers are thinking about you and the service your company provides. Even if they aren’t talking about you to other business owners, they’re evaluating your company every time you provide a service. They’re also evaluating your company every time you answer the phone, return a call, or send out an invoice or other correspondence.

Ironically, it’s often the non-technical aspects of what you do that are noticed most by customers. We know that customers often leave a company not because the company was technically incompetent, but because of the way they were treated.

It comes down to the issue of perceived indifference. You know, the little things that communicate to the customer that they aren’t as important to the company as they think they should be.

What are your company’s areas of perceived indifference? Your phone procedures? Your invoicing procedures? The way you serve customers? The amount of contact with your customers? The attitude of a team member? Delivery of product?

Whatever your issues of perceived indifference, you owe it to yourself to find out what they are and fix them — now! Every day you wait, you risk losing a customer who feels unheard or uncared for.

So, how do you determine your issues? we’ve found the best way to reveal what those issues are is to ask. Here’s the really important part, you must really listen to your customers. They already have the answers and are more than willing to share them.

When you think about it, wouldn’t it be better to get your customers talking to you directly about their concerns, frustrations, and desires rather than telling someone else? Of course it is, but the benefits don’t just stop there.

Here’s the interesting part.

You and your team probably already know much of what your customers’ concerns are. It may be that the greatest benefit from the feedback you get at the CAB will help you set your re-engineering priorities.

Based on the intensity level of your customer feedback, you’ll know which issues need to be addressed and in what order.

Beyond that, your team will be motivated more than ever before by the feedback. You see, for the first time, you and your team will be held accountable to a whole new level of customer expectation.

This is a day like no other in your business. For many companies it’s truly a turning point and the beginning of great things.

How many customers?

The number of customers that attend these meetings should be between 8 and 12 people. It’s critically important that you keep the numbers small enough to ensure that the group is manageable. It’s also important that each person has the chance to participate.

For group dynamics, the best number is around 10 people.

How long should it run?

It really depends on the overall objective. Your meeting should run for around 2.5 hours. The length really depends on how much feedback you need and the group dynamics.

Time allocation

The amount of time you need to allocate for the meeting is quite straightforward. You need to be there to introduce your facilitator. Then you can leave.

When the meeting is over, you need to come back in the room (your facilitator will normally give you a time and/or locate you at this time) and thank your customers with a quick ‘thank you’ speech.

At this point, your customers typically want some refreshments and then they leave.

After your customers leave, it’s important to have all the business owners allocate time with the facilitator to discuss what your customers have said and what you need to do about it. This follow-up session usually takes one hour.

The venue

The room setup has to be open and one where people can communicate easily. A boardroom style works best because everyone is facing each other.

Place jugs of iced water, glasses, and bowls of mints (or something fun) on the table. Remember, it’s a nurturing exercise. Your customers should also be issued name badges or place cards printed in a large font so that everyone can see the names clearly.

Once you’ve thanked your customers for giving their time and you’ve introduced your facilitator, the best thing you can do is leave! Now that will be very hard. But if you want the best results, it’s important that your customers see your facilitator as a neutral party. Without you in the room, you’ll find your customers will be much more open and more prepared to offer their opinion without feeling intimidated.

By removing yourself from the meeting you’ll also save yourself the trauma of taking simple comments on your business as personal attacks, which they never really are anyway.

And, of course, remember that the entire meeting is being taped, so you won’t miss out on anything.

Recording your CAB

Obviously taping your CAB is extremely important because the information that comes out of the meeting will be truly valuable.

Make sure you have sufficient tapes for 3 hours and that the equipment is set up and tested before the meeting starts.

In addition to recording the event, your facilitator will be making good, clear notes during the meeting so that the consultation with you afterwards is more meaningful.

Time of day

The time of day is not as important as matching it to the scheduling needs of your clients. Some companies have found a breakfast meeting easiest. Others have found that an extended lunch or late afternoon works best. There are no hard-and-fast rules.

You need to be sensitive to commuter issues and the geographic location of the participants involved.

Introduction

When you have your employee’s employment confirmed as ongoing (after the trial or probation period) it is important to manage their performance. This should be delegated to the employee’s manager (eg customer service manager or business manager).

This chapter contains the following topics:

• Feedback and Career Development Review
• Training your team
• Solving problems

Feedback and Career Development Review

Give regular feedback

To effectively manage performance, the employee’s manager should give each team member regular and ongoing feedback both:

• Informally (day-to-day coaching) and
• Formally (as part of their career development review)

Having regular feedback ensures that there are no surprises at review time and that any ‘bad habits’ have not been given the opportunity to set in.

The best way to have an employee listen, accept and respond to feedback is to provide continuous and informal feedback. Saving your performance discussions for remuneration-setting time is the worst time to get someone to engage with you, acknowledge a performance issue, and participate in designing a solution. If you have the performance discussion at remuneration-setting time, you are asking them to put their income at risk.

Career development reviews are also referred to as performance/employee appraisal. Career development reviews are regular reviews of your employee’s performance.

Aims of Career Development Review

The aims of an employee’s career development review are to:

• Facilitate communication between employee and the employer
• Give feedback on performance
• Identify training needs
• Document criteria used to allocate rewards
• Form a basis for salary increases, promotions, disciplinary actions, etc

Timeframe

We recommend you carry out a career development review for each team member once a year at the very outside.

Salary review: Once a year this process should also incorporate salary reviews for team members.

Inputs

Collect the following documents you need to carry out the career development review process:

• Current position descriptions
• Employment agreements
• Copies of past reviews and action plans

Four weeks before review date

Print a Career Development Review form and issue it to the team member. Ask them to complete and return it to you.

Three weeks before review date

Request a written performance evaluation from the team member’s team leader.

Two weeks before review date

Collect team member’s and manager’s reviews. Set a date and time for the review interview with the team member and manager (allow 1 hour for the review process).

Review both forms and note any suggested areas for development.

If training is needed then investigate options and costs (see the section on training).

If a salary review is also to be undertaken consider the current salary level and proposed increase (if any) and complete the Salary Review Form.

Review

Hold the career development review with the team member and their manager to cover all issues raised. Discuss areas and opportunities for development. If relevant, also discuss salary review, outcome and options with the team member.

Draw up an action plan.

After the review

when a salary review results in a change to the team member’s salary:

• Complete letter to the employee confirming the changes, and
• Complete the Variation of Agreement

Personal File

Arrange for the Variation of Agreement to be signed by both parties and file on the employee’s personal file together with the completed career development forms and the Salary Review form.

Payroll

Update the payroll system.

Training your team

Introduction

One of the keys to successful performance management is a structured training and development programme for your team members. This programme should meet all professional and skills requirements for continuing education. However, more importantly, it needs to act as a catalyst for the ongoing development of your team.

A structured training and development programme will probably include a mix of internal and external sources.

Use the training and seminars planner for an overview of training for individuals and the team as a whole. The planner helps to identify when team members are available to attend and ensure that all team members receive training.

Long-term development

Training needs are often identified during team members’ career development/performance review (See the section on Career Development Review). Training needs identified this way will help set training goals for up to a year in advance.

Continuous development

Sometimes spot training needs will emerge. For training requirements identified outside of the performance management development process, encourage your managers to evaluate training needs continuously using the Training Requirements Checklist. Review these regularly.

Training Tools and Resources

Build up Training Tools and Resources Guides for key positions. Use the team’s existing position descriptions to identify tasks commonly performed. Note relevant internal training resources and procedural guides which relate to training in required skills. This will cut the time putting together a training session or sourcing external training agencies.

Internal training:

Where cost-effective, implement internal training programmes for groups of employees.

Wherever possible, it is a good idea to make the session interactive. This can be done by case studies, role-plays or simply talking about client examples. Ensure participants are encouraged to ask questions, particularly about how the training can be applied to your clients.

To get the most out of each session ensure pre-reading is circulated and completed beforehand. Run the training program using the internal training checklist. Evaluate the effectiveness of the training using the Course Review form.

External training

Where team members request training from an external provider, ask them to submit the Course Request form for approval by the relevant manager. Complete the registration forms and arrange payment.

Enter onto the training and seminars planner by marking the name and time employees are to attend the course.

Course Review

Ask all team members attending external training programs to complete a Course Review form.

If applicable, a presentation on the program should be made at the next team meeting or internal training session on relevant items.

Once the training has taken place, collect the Course Review form and evaluate the effectiveness of the training.

Solving problems

Introduction

In an ideal world, businesses manage performance using tools such as regular informal feedback and formal review, supported by a well-planned and implemented training strategy.

In the real world, however, sometimes problems do arise and it is important to manage them proactively.

Types of problems

Problems which can arise include:

• Poor performance, where the employee is not meeting the reasonable expectations of their job
• Incapacity, where an employee is incapable of doing their job for a period that the employer cannot reasonably be expected to sustain. Usually, incapacity occurs for health reasons
• Incompatibility, where there is a fundamental breakdown in the relationship between two or more individuals, such that they can no longer work together
• Misconduct, or some form of wrongdoing. Usually it will involve deliberate wrongdoing, but there may be circumstances where an employee acts so carelessly that it amounts to misconduct (i.e. gross negligence or recklessness)

Seek advice

Where any of these problems arise, the employer should seek advice on a suitable course of action as soon as possible. Open and clear communication with the employee, good process for managing both the communication and follow-up, and documentation of each stage of the process are givens. However, in the same way that common sense is often not as common as we’d like to think it is, it is often much easier to see with hindsight how a difficult situation could have been managed better.

Any of the problems mentioned above could conceivably lead to a disciplinary or dismissal process. If an employee feels they have been unjustly treated, they may lodge a personal grievance. If an employer is found to have managed the situation without a fair and reasonable process, they are potentially liable before the Employment Relations Authority or Court.

Employment agreements

Every collective and individual employment agreement must contain a clear explanation of the processes for resolving employment relationship problems. This explanation does not need to be complex or long. It should be written very clearly, so everyone knows what processes they are required to follow, what their rights are and what happens when a problem is raised.

Mediation

It is important that all parties, in good faith, try to resolve any problems directly. Some may be able to settle their differences quickly through a mediator with less formal support and cost than a formal process. The Ministry of Business, Innovation, and Employment provides a free mediation service which can help.

Grievances

The Employment Relations Act gives all employees the right to pursue a personal grievance if they have any of the following complaints:

• Unjustifiable dismissal
• Unjustifiable action which disadvantages the employee
• Discrimination
• Sexual harassment (by someone in authority or by co-workers)
• Racial harassment
• Duress over membership of a union or other employee organisation

An employee has a right to raise a personal grievance case under the Employment Relations Act 2000. This must be done within 90 days of when the grievance occurred or came to his or her attention.

As noted above, if the employee has been given notice of dismissal during a trial period, a personal grievance may not be raised for unjustified dismissal though one can be raised for other reasons such as disadvantage, discrimination or harassment.

Test of justification

If an employee brings a personal grievance against an employer, the test of justification is applied to assess the fairness of an employer’s actions in relation to a disciplinary action or dismissal.

The Employment Relations Authority or Court must consider the following minimum requirements of a fair and reasonable process in making a decision as to whether or not the actions of the employer were what a fair and reasonable employer could have done in all the circumstances.

The Authority or Court must consider whether the employer:

• Having regard to the resources available, sufficiently investigated the allegations against the employee
• Raised his or her concerns with the employee
• Gave the employee a reasonable opportunity to respond to those concerns
• Genuinely considered the employee’s explanation (if any) in relation to the allegations

Other factors may be taken into account by the Authority or the Court. The law also makes clear that an employer’s action cannot be viewed as unjustified solely because of mistakes made in the process, if those mistakes were minor, and they did not result the employee being treated unfairly.

Our Advice

To sum up: communicate, follow up and document. Follow fair and reasonable process. Above all, seek early advice from an employment specialist.

Introduction

What’s the secret to success in business? Here are 16 things to start you thinking.

Contents

This guide contains the following topics:

• Effective leadership
• Outstanding customer service
• Strong product and industry knowledge
• Strong management capability
• Effective staff performance management
• Tight working capital management
• Understanding the key drivers and therefore the key performance indicators in your business
• Marketing ability
• Understanding the difference between marketing and selling
• Sufficient set up and working capital
• Strong quality control
• Excellent business systems (systemisation)
• Good knowledge of the competition
• Willingness to network
• Work on the business
• Appoint proactive business advisors and involve them in business development
• In summary

Effective leadership

Leadership characteristics

The leadership characteristics required to navigate a business in good times and bad are considerable and should never be underestimated. Many of us are simply not cut out for the demands of owning and leading a small or medium sized business. Probably just as well, as we need the vast majority of the working population to naturally take their place as employees.

It is often said by management gurus that whilst managers ‘do things right’, it is the leader that ‘does the right thing’. As such, leaders must be prepared to make difficult and sometimes unpopular decisions.

Attributes of effective leaders

The most effective leaders possess the following attributes in business:

• An ability to conceptualise the whole of a business
• An ability to problem solve
• A decisive nature, after careful research and enquiry, as opposed to acting impulsively
• A tendency to make judgements that regularly turn out well for the stakeholders in a business
• High levels of self confidence and determination
• High levels of drive and energy, sustainable over long hours when needs must
• A recognition of their own strengths and weaknesses, therefore surrounding themselves with the right team that ‘fills the void’
• A willingness to make difficult decisions and persevere during tough times
• Strong interpersonal skills. Leaders don’t just interact with customers. They deal with staff, professional advisors, financiers, salespeople and business alliances
• A willingness to know when they are out of their comfort zone and seek advice from a range of sources

Outstanding customer service

Love your customers

You have to love customers to lead and manage a successful business. And yet so many owners of small businesses don’t. Take for example the ‘Fawlty Towers’ style restaurant we have all experienced in our own town or community. The owner doesn’t understand the needs of his or her customers, sees them as nuisances and interruptions to a busy day, and falls far short of delighting customers.

Excellent customer relations

Well run businesses have excellent customer relations. To summarise, they:

• Understand the needs and wants of their customers very well. They invite feedback (both good and not so good) from their customers, seek their advice on customer advisory boards and focus groups and are constantly staying ‘tuned’ to their changing product and service demands
• Show genuine empathy towards their customers. This is often best demonstrated when a customer calls to complain about an aspect of service or delivery. The right attitude of genuine concern and an ability to listen and get to the very heart of the problem can convert an initially irate customer into your strongest advocate
• Don’t just provide products and services, but see themselves as supplying solutions to customers’ needs and problems
• Treat each interaction with a customer as an opportunity to develop a stronger service relationship. Their business is relationship-based rather than transactional
• Develop highly defined customer communication systems, taking the accuracy of their customer relationship management database very seriously
• Go the extra mile for customers. Their products and services are not necessarily priced to compete with ‘big business’. In stark contrast, they realise that people will often pay just a little more to have their expectations met or even exceeded
• Have a good understanding of the demographic profile of their customers. This helps to define the profile of future customers and is incredibly valuable for marketing purposes.
• Engage with customers: on the phone, on the shop floor, even at the customer’s business premises, where appropriate

In a world of ‘Consumer sameness’, provide the personal touch that differentiates.

Strong product and industry knowledge

Ignorance drives customers away

Great businesses know everything they can possibly know about their product. This is one of the most obvious but least applied characteristics of a successful business. We have all experienced the restaurant where the waiter doesn’t know the key ingredients in a menu item, or the sales assistant in a book shop who has no knowledge of a well known author’s latest release. If ignorance of one’s own product drives customers away, imagine how those same customers gravitate to the business where the entire team is passionate and knowledgeable about the entire product or service range.

Having great product knowledge includes:

• Ensuring customer facing staff are fully trained on products and services. This includes staff who take phone calls and enquiries from customers or handle web based orders and requests
• Updating staff regularly as products change and new ones are developed and released
• Ensuring that staff standards are sustained during weekends, public holidays, and when key staff are on holiday or on training courses, so that on any particular day customers still experience staff with great product knowledge

Strong management capability

Do things right

Just as leaders do the ‘right things’, it is the responsibility of management to ‘do things right’. A business without effective management will experience the following symptoms:

• Quality control problems
• Inconsistent customer experience
• A significantly lower standard of customer service
• Poorly managed staff
• Poor cost and wastage control
• An inability to get new products and services to market on time and at the right price
• Financial performance that is well below that of industry peers

Good managers have the following attributes:

• They are highly organised.
• They finish a task once started.
• They are detail oriented.
• They are decisive.
• They demonstrate a consistent and stable approach to staff management.

Effective staff performance management

Important characteristics of a great staff manager

Effective staff management involves managing right across the range of poor, indifferent and great staff performance.

Important characteristics of a great staff manager include:

• Appreciation of a job well done
• Being intuitive when it comes to morale, stress and the needs of key team members
• Providing a great working environment
• Being consistently loyal to the team
• Being aware of salary benchmarks in the industry
• Understanding the factors that motivate individual staff members, whether they be financial or otherwise
• Rewarding great performance
• Establishing clear expectations to staff, by way of well structured induction programmes, defined job descriptions, a job title that conveys the right status and defined and well communicated performance standards
• Providing job security through effective communication
• Providing a platform for growth and improvement through training and professional development
• Implementing feedback systems that make it clear when staff are and aren’t performing
• Implementing formal staff reviews, conducted at least six monthly
• Dispensing discipline tactfully — praise in public and admonish in private
• Demonstrating a clear communication style
• Providing an appropriate level of ‘open door’ time, so that air time is given to concerns, problems and ideas
• Being decisive as a manager, rather than being perceived as dithering or procrastinating

Tight working capital management

Introduction

Effective working capital management encompasses the tight management of cash, stock, work in progress, debtors and costs in general. Let’s look at each of these components of working capital.

Cash management

Strict policies and procedures around cash and cash registers, the banking of cash and cheques and the recording of sales must be implemented. The staff need to know that the business has strong cash controls in place to detect misappropriation. The team are likely to observe and copy owner and manager habits. For this very reason, staff should never witness an owner taking cash from a cash register, or even paying wages ‘under the table’.

Stock management

Many retail businesses now have excellent point of sale systems that enable them to identify the stock turn rate for each product line. This in turn enables managers to identify problem stock lines, reorder levels and most importantly, the stock that is generating the greatest contribution to gross profit (the difference between the selling price and the cost of product sold).

Stock represents future cash. Without strong stock management considerable sums of money can be tied up at the expense of business liquidity.

Effective stock management is also about reducing the wastage and shrinkage that results from staff and customer theft, product obsolescence and damage, poor ordering and invoice checking systems and ineffective product display and placement protocols.

Importantly, a physical stock take should be periodically undertaken. No business should rely solely on its point of sale system to tell them how much stock they must have on hand. A physical stock take can help to identify the value of shrinkage and wastage to a business.

Businesses should periodically review or audit their gross profit controls. We can provide you with a ‘Gross Profit Checklist’ that helps you to identify weaknesses in stock and cash management that could be robbing your business of significant margin (profit).

Work in progress management

Trades, service providers and professional service firms all carry work in progress (WIP). WIP is also future cash. If you don’t have strong cost recording systems backed up by strong billing systems, the dollar value of the WIP you are carrying can blow out, drying up cash flow.

To keep WIP to an acceptable level, ensure the following systems are in place:

• Implement a WIP recording system (preferably computer based) that captures all costs including materials, subcontractors, staff time and other chargeable expenses
• Analyse WIP balances and the progressive costs within each job WIP balance on a regular basis
• Bill promptly. Consider progress or interim billing to keep WIP balances down and maximise cash flow
• Regularly monitor jobs where costs have been incurred yet no revenue has been earned
• Calculate the profit on each job on a monthly basis, or earlier if the job is complete. Compare this to budget expectations and follow up job cost blowouts with appropriate staff members

Debtor management

Debtor management is all about systems. Systems are safety nets. The fundamentals of good debtor management include:

• Credit checking of new customers
• Clear terms of trade signed by customers
• Enforceable personal guarantees that ensure a business can recover outstanding money from a company shareholder or trustee of a family trust
• Providing multiple payment options including credit card and even debtor finance
• Invoices that capture the right amount of detail and therefore pre-empt customer queries
• Prompt billing
• Preparation and analysis of an aged debtors report, on at least a monthly basis
• Immediate contact with customers who step outside of your terms of trade
• A dripping tap philosophy when it comes to bad payers
• Stopping credit to bad payers
• Engaging a debt control agency to enforce recovery

Cost control

The fundamentals of cost control include:

• Setting a detailed budget of costs prior to the start of a new financial year
• Regular monitoring (at least monthly) of actual costs compared to budget
• Communicating cost blowouts to appropriate staff members
• Conducting a regular ‘Cost reduction review’

Understanding the key drivers and therefore the key performance indicators in your business

Effective KPIs

A key performance indicator (KPI) is a measure designed to track critical success factors in a business. KPIs provide a statistical measure of how well an organisation is doing. To be effective, KPIs should be few in number and focus on vital areas in the business.

KPIs differ by industry, business and even departments within a business.

For example, a retail business may have as one of its KPIs the average customer spend whereas a Customer Service Department may have as one of its KPIs the percentage of customer calls answered in the first minute.

Whichever KPIs are selected, they must reflect the business goals, they must be key to its success, and they must be quantifiable (measurable).

We can provide you with a sample KPI list that suits your business or industry as your start point for implementing a KPI monitoring system.

Marketing ability

Create a plan

Many businesses remain a secret in the market place. That is, potential customers have little idea that they exist, or if they do, the full range of products and services available. Marketing should not just be aimed at the new customer, but also at organic growth achievable from existing customers who may not be exposed to all that a business can provide for them.

The following list identifies just some of the activities that a strong marketing focus should cover:

• Creation of a marketing plan. A marketing plan should be concise and its resulting action plan should be based on clearly defined activities that combine to create marketing gravity. This does not need to be a 30 page document crammed with grandiose ideas. Rather it is a simple table of actions, identifying clearly the action, who is responsible for managing the action, and an achievable target date.

Understanding the difference between marketing and selling

Sales proposals need to be followed up

Marketing and selling are not the same thing. Marketing involves making an offer to an existing or potential customer, whereas selling involves following up the offer and closing the sale. Many small businesses are not effective at following up sales proposals, to their financial detriment.

Businesses need:

• Processes that increase sales follow up activities
• KPIs that monitor sales follow up and close rates
• To recognise that some staff will need more sales training than others

Sufficient set up and working capital

Be prepared

Businesses need enough capital to set up a business and enough working capital to fund normal growth as well as future expansion. Many business owners are shocked to discover that as their business grows, so does their investment in stock, work in progress and debtors, culminating in tight cash flow.

The business world is littered with clever entrepreneurs who can’t start or sustain their business due to lack of start-up or expansion capital.

Strong quality control

Document quality control procedures

Quality control is one of the cornerstones of growth and consistent customer experience. Periodically a business should undertake a quality review, assessing the internal and external costs of mistakes, rework and defective product manufactured.

The reasons for poor quality are often a lack of quality assurance procedures. Such procedures should be documented in an internal Quality Manual.

Excellent business systems (systemisation)

Consistency is key

Systemisation is the implementation of procedures and simple documentation outlining all tasks that need to be carried out in a business.

Systemisation reduces your overhead when it comes to training new staff, keeping existing staff performance and efficiencies up, and handling crisis situations when a key staff member leaves or gets sick.

One of the most important benefits of systemisation is consistency. Your customers may love you and you may treat them exactly the same all the time, but if you want to grow, or go on holiday, someone else needs to be able to deliver exactly the same consistent results. This can only be done through systems.

Many businesses have a systems manual, some more prescriptive than others, and these may be a bound paper document or kept in electronic form.

Good knowledge of the competition

Know thine enemy!

It is far better to overreact to potential competition than underrate the competitors to your business or industry.

Every business should conduct an annual review of its competitors, assessing what they do well, what they don’t do well and comparing their pricing, customer service and marketing strategies. If you aren’t familiar with your competitors’ strategies, then it’s time you acquired this knowledge.

Willingness to network

Understand the value of networking

Successful businesses understand the value of networking. Aspects of your business network should include:

• Suppliers
• Businesses from the same industry, particularly in non-competing locations
• Professional networking organisations such as BNI and Chamber of Commerce
• Business associates
• Your business advisory network, including bankers, accountants and other business advisors and financiers

Work on the business

As opposed to working in it

Business owners and managers who spend healthy amounts of time working on the business as opposed to working in it, reap the rewards of their research, analysis and resultant planning.

Successful businesses conduct planning days at least on an annual basis. These days are an opportunity to force physical separation from the day to day operational aspects of the business, focusing on strategy, growth and improvement. Such days should have an advance agenda and involve key business advisors where appropriate.

Following on from a structured planning day, it can be incredibly valuable to remove yourself physically from the business on a weekly basis for short periods of time to ensure implementation of actions raised during the planning process.

Appoint proactive business advisors and involve them in business development

View your accountant as a virtual CFO

Successful businesses recognise the need for strong and transparent relationships with bankers and financiers. It can be beneficial to forward regular management reports to these important business alliances.

The accountant is perhaps the most underutilised of professionals. Successful businesses draw on the key strengths of their accounting firm, viewing them as a virtual and part time Chief Financial Officer, a role that every small business would dearly love to employ but cannot afford in the traditional sense.

Your accountant’s business and financial reporting skills can be used in the following ways:

• To facilitate monthly or quarterly financial and business focus meetings, critically reviewing the performance of the business and its cash flow and profitability
• To benchmark the business’ performance with that of peers within the same industry
• To help establish KPIs for the business and implement systems for their monitoring
• To facilitate your monthly Directors’ meetings

In summary

Ensure success

Business success is rarely accidental. Conversely business failure can often, with the benefit of hindsight, be entirely predictable.

The above summary of the key characteristics of a successful business summarises succinctly the attributes, skills and behaviours required to ensure business success.

This guide contains the following topics:

• The eight fundamentals of family business
• Spouses in business
• Conflicts within family businesses
• Dispute resolution

The eight fundamentals of family business

1. Family involvement in any business has to be an integral part of the business’ successful future and therefore provided for in the business plan.
2. Incoming family members should have a skill set that is needed by the firm. The recruitment process should embody the procedures used for non-family appointments with proper employment contracts in place and regular appraisals undertaken.
3. The existing controlling family members (often the founders) and the newcomer(s) must discuss the dynamics of succession prior to any new blood joining. These discussions must be formal and minuted and are an opportunity to ensure there are no misunderstandings going forward.
4. An induction process should be implemented so the new member is fully immersed in the systems and culture of the business, and ongoing training provided for.
5. Financial implications must be considered including remuneration levels, buying in opportunities, business expansion and its funding and security of shareholding in the event of a relationship break down and the paying out of departing family members.
6. If the plan is to sell to the newcomer, a formal succession plan needs to be prepared with a timeline put in place so there are no misunderstandings. The succession plan should be regularly monitored.
7. Ongoing communication between the key players is essential and formal management meeting times ‘carved in stone’.
8. The appointment of a non-family member to the business’ governing body should provide an independent approach to important strategic matters and may provide an initial ‘go to person’ in the early stages of conflict resolution.

Spouses in business

Introduction

A large number of small to medium sized New Zealand businesses are run by spouses working together.

The stereotypical contracting firm where the husband is on the tools and wife runs the office is still the ‘norm’ for thousands of Kiwi firms.

What processes and systems need to be put in place to ensure these very closely held businesses work?

Successful business planning

Successful businesses plan ahead and document decisions, processes and responsibilities. If the business is newly formed you can get the planning done at day one which includes role descriptions for the spouses working together.

If a spouse is joining an existing business operated by his/her partner then their involvement needs to be carefully thought out, written into the business plan and agreed upon by both spouses.

As with any new appointment the newcomer will perform much better if they are inducted properly and given a thorough understanding of the business’ goals, values and processes. Courses and seminars may be useful in ensuring the incoming spouse has the skill set necessary for the role.

Effective meeting time

Communication between spouses is a critical success factor in any family run business. Regular meetings should be held and minuted where the business’ performance is reviewed and decisions made on key areas. Time for meetings should be allowed within normal business hours so the meeting is formally conducted and not held while eating the evening meal!

In some instances where an independent advisor, eg accountant, mentor or coach is appointed this person may be used to chair the management meeting.

Financial management

Strong control of this essential aspect of business is vital. Cash flow and profitability needs to be monitored and measured closely as financial problems will impact not just on the business but probably on the couple’s relationship and family life.

If one spouse is responsible for the business’ finances, the other spouse should be regularly updated on financial key result areas so if any problem arises it can be tackled jointly and hopefully resolved quickly.

If possible it is prudent that business assets be kept separate from private assets to ensure that the business can continue to operate if the business breaks down.

Relationship breakdowns

Relationship breakdowns are prevalent and can have an adverse affect on the success of a business. A happy couple may see no reason to doubt the solidity of their relationship, and therefore, no reason to provide for the business’ future in the event of a breakup.

A precedent for preparing for a relationship bust up is the need for life insurance. No one in the prime of life expects to die but they sign up for life insurance just in case they do! The odds of a relationship breakup are probably higher than dying early so a written agreement at the time of starting a business together or, when a spouse joins is necessary and should include the following:

• How and who will operate the business during the critical period between breakup and settlement;
• What access will the resigning partner have to business information in the interim;
• What rules will apply to the financial running of the firm eg paying bills out of the business account, signing loan documentation;
• How and who will value the business;
• Over what period the departing spouse’s equity will be paid out.

Seek advice

Obviously when a new spouse joins his/her partner’s family business the provisions for dissolution can be included in a Property Relationship Agreement (ie pre-nuptial agreement) and is strongly recommended.

This and other structural matters can be discussed with advisors such as a chartered accountant or lawyer. An effective way of covering all the bases is to have a round table meeting with key advisors so that many issues are flushed out, discussed and acted upon.

Conflicts within family businesses

Introduction

Being in business with others will often present challenges and the potential for conflict.

Involving family members in the business mix can introduce dynamics that may require firm management skills to focus the attention of family employees on the critical business issues.

What are the potential areas of conflict?

Generational attitudes and values

• Throughout the ages the family head and the young heir have ‘locked horns’ over the latter’s desire to introduce change to business process and the former’s stubbornness to maintain the status quo. Now more so than ever with rampant changes in technology, the processes of manufacturing, retailing, farming and service delivery are being constantly revolutionised.
• Handing over the reigns from the old to the new guard progressively and successfully can trigger angst between family members.
• Differences in work ethic and hours or work can result in disharmony and misunderstanding.

Financial contributions and expectations

• Younger family members may require higher remuneration levels than the previous generation at their stage.
• Capital contributions may be unequal resulting in uneven distributions of profit.
• A retiring family member may still be on the payroll on an ‘earnout arrangement’ placing pressure on a business cash flow.
• Finance for expansion may require security to be provided inequitably.

The influence of extended family

• The relationship between immediate family members may change with the influence of spouses and in-laws.
• Relationship breakups place stress on individual family members and if no pre-nuptial agreement is in place can lead to an extended period of uncertainty while business interests are valued and the departing member paid out.

Personalities

Many organisations when fitting a job vacancy will ask the candidates to undergo a behavioural profile such as DiSC or Myers-Briggs. Obviously a dominant outgoing person would not fit the bill for a back room processing job and placing a family member in a business is no different. At times family members brought in will not be an ideal personality fit for their job. After all, they could be ‘a chip off the old block’ and clash with their parent(s) or sibling(s).

Dispute Resolution

Introduction

Despite putting in place the recommended agreements, policies and procedures, disputes can occur and escalate in a family business. The older the business and the more fragmented the family ownership becomes, the potential increases for disagreements on management style, remuneration, capital input, expansion, succession planning and frequently control.

How do family businesses deal with a meltdown between their members? Firstly, the sparring/warring factions must agree that the business operations (including staff) must not be put in jeopardy and a rational dispute resolution approach taken.

Agreements put in place to handle disputes should be dusted off, read and followed to the letter. It is good practice for the disputing parties to write down their grievances so there is no misunderstanding in their resolution and application of the agreed upon processes.

Get objective help

If the in-house procedures for resolving the dispute are unsuccessful, it is time to seek advice from the business’ close advisers, e.g. Chartered Accountant, Lawyer, Mentor. Often these advisors will have a close association with the business and family but can provide an objective view of the disputed matters as they are outside both the management team and family.

Mediation

If the trusted advisor feels too close to the family to recommend a compromise or solution, a professional mediator may be appointed to listen to the parties and try to broker an agreement. While a mediator does not make a binding decision on either party, it is in the interest of both sides to mediate a settlement to avoid expensive, stressful and prolonged legal action.

Arbitration

If the dispute is of a serious nature, or both parties are intransigent, arbitration may be the way forward. The family agreement signed by both parties may provide guidance on the organisation or individual that should be appointed to arbitrate on the dispute and make a binding ruling to settle it.

An arbitrated decision may be able to be appealed to the Family Court or High Court in which case the legal system should provide the remedy.

Introduction

Good customer service is easy.

Once you have been through the hard work of attracting customers, and have successfully sold them something, you will want to encourage repeat business. It is far easier to sell more to your existing customers than it is to find new ones.

One of the keys to attracting new customers and keeping existing customers is your customer service.

Good customer service is very easy to give, whereas changing a customer’s mind once you have let them down is very very difficult.

Plan your business’ customer service culture and stick to it. Post a list of customer service tips in your staff area and ensure everyone follows them.

Contents

This guide contains the following topics:

• Set your service up right
• Planning your customer service style
• Top tips for great customer service
• Delivering great service

Set your service up right

Start with the right people

All team members who come into contact with customers, particularly reception, front of house and sales people, need to have the right attitude.

You can give a team member more skills and knowledge through training, but a good attitude cannot be taught.

If a team member has a negative attitude, or worse, no attitude at all, move them away from the customers before it impacts on your business.

Educate your team

Your team members should be armed with as much knowledge as possible. If a customer has to go somewhere else for the information they need e.g. the internet or another business, you have lost them.

Give your team the tools and authority they need to look after customers well.

Reward and recognise

Recognise your team members’ outstanding customer service and publicly reward them for it.

Happiness is key

Happy team members = happy customers = happy business.

Focus on making your business a happy place to work and the rest will take care of itself.

Planning your customer service style

What is a style

You may already have your own style, but it is important as a business owner, that all of your staff take a similar approach to customer service.

This generally falls into one of two categories: The Best Mate or the Butler.

The Best Mate

One successful approach to customer service is the Best Mate approach.

This is where you treat your clients as equals, but as good friends who you would do anything for. You may tease them and push the boundaries, but never lean into the disrespectful.

When you build a community of customers who see you as a friend, they are more likely to take your advice, trust your judgement and also bring their own friends into your circle.

The best mate approach relies on trust so keep your promises. Give your clients the heads up when your have a new product or service you think they’d enjoy.

Keep their experience personal and ensure your team members know the client’s name, preferences and can help the customer just as well as you can.

The Butler

The Butler approach is about good old-fashioned service. Clients are addressed as Sir or Madam and introduced as Mr or Mrs.

The Butler is knowledgeable but subservient, and is polite and patient at all times.

The customer feels special and valued and knows they’re in capable hands. They won’t hesitate in recommending your business as you’re the soul of professionalism.

The Butler approach relies on discretion and professionalism, so no banter around the clients or gossip. Always ensure everything is followed up and right the first time.

This approach works well when each team member has certain clients they look after — the client feels special and the business holds a certain type of exclusivity.

Conclusion

In reality most business’ customer service culture floats between these two and the nature of the business and the personality of the business owner will generally determine what approach the customer service takes.

The main thing to take away is that the entire business’ customer service needs to be consistent across all team members. If a team member is not naturally suited to a customer service role, some things can be learned, but the safest solution is to move the team member into a role with less client contact.

Top tips for great customer service

Listen

No matter what the client is saying, you need to be completely present. Listen to what they have to say and respond accordingly.

The customer is not the enemy. Orders, invoicing, pricing and quoting can wait — the client talking to you should always be your sole focus.

Acknowledge

If you have walk-in customers ensure they are always acknowledged immediately. But be careful sales staff — you don’t have to harass them to let them know you’re aware of their presence.

If a client emails, email them back immediately, even just to say you will follow up tomorrow.

Help

Consider yourself there to solve problems, whether you are solving the problem by providing the right product or service, or by making a phone call to a distributor, service provider or business associate.

Keep your promises

We’ve all heard it before — under promise and over deliver. Never ever promise something you cannot deliver on.

If you do promise the world to make a sale, be prepared to make it happen personally, don’t expect someone else to make it happen for you.

If you say you’ll call back by 3pm, call back by 3pm.

Follow up

If you pass something on to a third party, always ensure you know the outcome for your customer.

Don’t let another business’ poor customer service affect yours.

Be professional

You can be friendly without being unprofessional.

Malicious gossip, complaints and general griping have no place in customer relationships.

Value

Even if the client or prospective client is not buying something from you right now, they may come back and they will certainly tell others if you treat them badly.

All queries have merit. If you can help someone on the spot, even for free, they will come back and bring others.

Value every customer whether they are paying you money or not.

Don’t judge

Never take a client at face value. The scruffiest, most downtrodden-looking person may be a business-savvy millionaire. The well-dressed, charmer may be a thief.

Treat every customer as you would expect to be treated and refrain from passing judgement.

Keep cool

No matter how frustrating a situation, never get angry or defensive.

Your client may be having a terrible day and you are just bearing the brunt of it. Maybe a product has broken or a service has been performed badly. Don’t take it personally.

Be a practical problem solver and take it as a personal challenge to send them away with a smile on their face.

Delivering great service

Mystery Shopper

If you need to spot-check your business’ customer service, consider hiring a mystery shopper to go through a typical customer experience. Have that person report back on how they were treated and what they experienced.

Start with a phone call where the shopper asks a prescribed question, then have the person walk in off the street and make an appointment or shop for a product.

Put systems in place

Professional customer service relies on good systems that all team members follow, for example procedures for answering the phone in a professional manner or greeting customers when they walk through the door.

No matter who a customer deals with in your business, they should receive the same high levels of service.

Having a basic systems manual and some checklists will help your team deliver consistently good customer service.

Introduction

One of the most important things for a small business is to have the right software in place.

Buying software is no longer as simple as it used to be. As well as the standard option of simply purchasing a computer with the software pre-loaded, there are also many other software types available.

Contents

This guide contains the following topics:

• Software families
• Software types
• Cloud computing
• Software guide

Software families

Introduction

Many businesses may require a combination of systems. For example, a large sales business which looks after its own advertising may need an office suite, point of sale software and a design suite.

Office suites

An office suite is a collection of software designed for email, word processing presentations and spreadsheeting.

The most commonly used office suite for Windows is Microsoft Office and this is generally pre-installed on computers, with the option to purchase a licence after a 30 day trial period.

Licences are available online or from retailers, and have costs attached.

Apple Mac users also have the choice of iWork, Apple’s mac-only office suite, as well as Microsoft Office for Mac.

One suite which is becoming more popular is the open source suite OpenOffice.

All of these suites include word processing, spreadsheet and presentation software.

Most office suites also include integrated email functionality.

Design suites

A design suite is a collection of software for design purposes, desktop publishing and web design.

The most commonly used design software for desktop publishing and graphic design is Adobe Creative Suite which has different packages depending on whether it is destined for print or web media.

CAD

A CAD system is a Computer Aided Design suite used by architects, interior designers, surveyors, engineers and the list goes on.

Most CAD systems are designed for a specific need, eg ArchiCAD for architects, CivilCAD for civil engineers.

These programs are absolutely essential to industries that rely heavily on plans and line drawings or engineering specs.

There are also free solutions such as Google SketchUp.

CRM

A CRM system is software designed to manage contacts and sales opportunities.

These customer relationship management systems are absolutely integral to a sales business and there are many generic and specialist solutions available.

Accounting

Accounting software is key to any business and generally includes debtor and creditor management, invoicing and GST.

There is a large number of small business accounting packages available for Windows computers. Your accountant can recommend the best solution for your business.

There are fewer options for Mac users, many of whom prefer Xero’s cloud solution.

Point of sale

Point of sale software is designed for retail and wholesale and generally includes database and stock management.

These software solutions are often industry specific depending on whether they are for retail, wholesale, food service or hire businesses.

Specialist software

Many types of businesses have specialist software available to them. Before investing in generic software, search the internet for solutions and ask your industry peers.

Anti-virus software

Anti-virus software is essential to any small business.

This software will scan incoming emails, email attachments and websites for malware (malicious software) and viruses.

There are many different types of anti-virus software available online such as Norton, TrendMicro and Avast! among many many others.

Software types

Freeware

Freeware is software which is essentially free but often restricted.

For example, a free version may have limited functions, advertising or watermarks.

Much freeware is restricted to personal use and cannot be used in small businesses, however there are some.

Open source

Open source software (OSS) is software that has been created collaboratively and allows users to further develop it by providing the source code.

What this means is that OSS is generally free. Much like freeware, OSS is often used as a platform to sell the user higher-spec software.

Examples of OSS:

• Mozilla Firefox (internet browser)
• OpenOffice (office suite)
• Open Document (Microsoft Office document format)

Open source office software is a viable and economical option for small businesses; however you need to be aware that a business using an OSS suite like OpenOffice may run into trouble when trying to exchange documents with businesses using Microsoft Office.

Proprietary software

Proprietary software is software that is owned by an individual or a company (usually the one that developed it). There are almost always major restrictions on its use, and its source code is almost always kept secret.

Software as a service

Software as a service is a term given to web-based (cloud) software which is paid month by month.

There is a wide variety of software as a service available, some of it software you may subscribe to for a limited time, for example SurveyMonkey which you may only use for a few months.

Some software you may use for an undetermined length of time, such as Xero accounting software.

Most of these types of software have policies where you can downgrade or cancel with a month’s notice or less.

This sort of a plan can be very good where cash flow is an issue, or if you do not have a larger server.

Operating system

An operating system (OS) is the software which drives the computer.

For most PC users this is Microsoft Windows and comes pre-loaded on the computer when it is purchased.

For Mac users this is MacOS which also comes with the computer. Mac users can choose to install Windows if they prefer, using a programme called BootCamp which comes with their Mac, but it is tricky for a novice and may not be necessary.

Operating systems can be upgraded without having to upgrade the computer itself.

Cloud computing

Cloud computing is where a business subscribes to some or all of its software as a service. There are many benefits to working in the cloud, as well as a few drawbacks.

Cloud computing has three main characteristics:

• Subscription based — cloud software is typically sold on demand, by month, week, day, hour or minute
• Elastic — cloud software is often able to be customised so that you use as many or as few features as you need
• Provider-managed — this type of software is typically managed by the provider meaning there are no updates or patches to be run on the user’s computer

The ‘Cloud’

The ‘cloud’ is the slang name for the undetermined area that cloud software lives in.

This term came from the mind-map style diagram generally used to depict the internet.

Devices

A major benefit of cloud computing is that you can run the software from almost any device with internet access. This can include:

• Your desktop PC
• Your laptop
• Someone else’s computer
• Internet café
• Smartphones and tablets

This guarantees flexibility and access from anywhere in the world with an internet connection.

Installed interface

Some cloud solutions include an interface installed on your computer to ensure you can access offline files. This is generally referred to as the ‘client’.

A good example of this is Dropbox document storage where you can edit the files on your computer and when you are next connected to the internet they automatically update in all locations (ie smartphone, tablet, laptop and PC) if they too are connected to the internet.

No IT contracts

Another major benefit of cloud software is that it is always up to date as of the latest release. You never need to run updates except for on any installed interface software (the client).

Cloud users also enjoy the absence of an ‘IT Guy’, as cloud computing is generally more robust because it is kept so up to date.

if support is needed, most cloud software companies have a support department waiting to help.

Off-site storage

Cloud solutions are particularly favourable where off-site storage is desired. This is useful for many reasons, for example:

• No server required, only a PC or other device
• Risk management in case of fire, theft or natural disaster
• Backing up data off-site

Add-ons

Cloud solutions often have ‘add-ons’ available for specialist purposes. These are often done as clip-in modules which are made available for an extra fee.

For example, popular cloud accounting software Xero (www.xero.com) also has add-ons available for:

• Payroll
• Inventory
• CRM
• Job Tracking
• E-commerce
• Time tracking
• Point of Sale
• PayPal

This means that a business can have a fully integrated software suite without major up-front costs, which retains the flexibility and benefits of software as a service.

Services such as this one generally work on a price per user per month basis.

Microsoft Office 365

Microsoft also offers a complete office software suite as a service. This is an excellent choice for small businesses concerned about set-up costs.

Office 365 starts from around $10 per user, per month, so for a 1–10 person business it is extremely economical.

Office 365 software includes the full Office Professional suite and Microsoft exchange, removing the need for a small business server or exchange server.

Benefits of cloud computing

Cost

Cloud computing can save money for smaller businesses, both on hardware, software and ongoing maintenance.

Collaboration

Users can work together on the same projects and set of documents or accounts from anywhere in the world.

Flexibility

Ability to move documents between, or work on them from different devices is a real advantage.

Cutting edge

Users are virtually guaranteed the latest software without having to run major updates or pay for upgrades.

Downsides to cloud computing

Internet

You must have a good, reliable internet connection to get the most out of the cloud. Dial-up and satellite broadband users may have problems.

Also, if your internet’s down and the programme is completely web-based, ie has no ‘client’ installed, you will not have access to the programme.

Service outage

Much like the internet, the service provider itself may have an outage. This is also a concern, as most ‘maintenance’ periods are scheduled to avoid the northern hemisphere working day — ie they’re right in the middle of ours.

Security

Many people have very real concerns about security, especially hacking, when all their data is on the internet. There are good reasons for this — Google’s cloud email system Gmail has been hacked multiple times.

However, most cloud solutions have military-grade security and any instance of hacking is very rare in the grand scheme of things. A normal server-based system would probably be easier to hack into.

Software guide

Open source software available

• Office: OpenOffice.Org
• Design: OpenOffice Draw
• CAD: Google Sketchup
• CRM: FreeCRM.com
• Accounting: Ledger, GNUCash
• Point of sale: Cash Register, FreePOS
• Anti-virus software: AVG, Avast!, Avira

Proprietary software available (PC)

• Office: Microsoft Office
• Design: Adobe Creative Suite, CorelDraw
• CAD: Google Sketchup pro, industry specific CAD programmes
• CRM: Sage, Microsoft CRM, Salesforce
• Accounting: MYOB, Quicken
• Point of sale: Counter intelligence, industry specific POS systems
• Anti-virus software: Much available

Proprietary software available (Mac)

• Office: Microsoft Office or iWork
• Design: Adobe Creative Suite
• CAD: Google Sketchup pro, industry specific CAD programmes
• CRM: Elements CRM, Daylite
• Accounting: MYOB, Quicken
• Point of sale: Checkout, Lightspeed POS
• Anti-virus software: Norton, McAfee, Kaspersky

Software as a service

• Office: Microsoft Office 365
• CRM: Capsule, Communigator
• Accounting: Xero
• Point of sale: Vend

Operating system

• Windows
• Mac OS (for Mac only)

Introduction

Queries and complaints are a reality in any business.

A well handled query is a great step toward increasing business, just as a well handled complaint can prevent you from losing business.

It costs five times as much to gain a new client as it does to retain an existing one.

Professionalism and follow-up are the two keys to successfully managing queries and complaints.

Contents

This guide contains the following topics:

• Managing queries
• Managing complaints

Managing queries

Train front of house/reception team

A large proportion of client queries will come through a front of house role.

Whether this is the person who answers the phone or staffs the front desk, it is important that this person is courteous and helpful.

It’s a good idea to train front of house staff to answer frequently asked questions. Consider writing a basic document of 10 frequently asked questions — this will be invaluable.

Don’t forget to keep your team in the loop of any marketing or media which may generate phone calls and enquiries.

Any person who makes an enquiry should be added to the customer database if not already there.

Advanced queries

Ensure that team members know the correct way to pass a query on to another team member if need be.

Email is the best way to pass on queries as they can be easily read and tracked. Include:

• Name of person enquiring
• Phone number
• Email or address if relevant
• As much detail about the query as possible
• Level of urgency

Follow up

It is imperative that all queries are answered in a timely fashion, whether the answer is what the customer wants to hear or not.

After a query is answered, it may also lead to a sale or the engagement of a service. It is important that this is passed on to the relevant team member to follow up.

Take a universal view

Take a universal view of enquiries. What else may interest the customer? What team members need to know that an enquiry has been made?

Think about what flow-on effect the enquiry may have and who may be interested that the enquiry was made.

Managing Complaints

Attitude

Don’t think of a complaint as necessarily a bad thing. The customer is not the enemy and it often takes courage for someone to voice their displeasure.

Although there are always serial complainers, 90% of those who complain just need your help and are disappointed or frustrated with something.

Clients generally want less than you think and will probably be complaining in the hope of remaining a client with you. You need to be sincere and to want to help them, because if you don’t this will come across in your voice.

You need to solve the problem using the following steps to try and ensure that the client becomes or remains loyal:

• Establish a rapport
• Discover the problem
• Offer a complete solution
• Cement the relationship

Look at a complaint as an opportunity to improve part of your business.

Professionalism

It is imperative that complaints are handled professionally and with a set process to ensure that nothing is misplaced.

If there is someone in the business more appropriate to deal with the complaint, pass the customer on immediately so that the customer does not tell their story in full only to be told ‘this is not my area’.

The person managing the complaint is responsible for bringing a resolution and seeing the process through.

Start by listening to the customer attentively and note down the details of the complaint and whether the client has suggested any particular course of action.

Oral complaints

When a complaint is received by telephone or face to face, listen to the client. Take notes on a complaint form while they get the problem off their chest.

Follow this script to ensure each complaint is dealt with in a consistent way:

‘Thank you for bringing this to my attention. I’m sorry that this has happened (or that you feel this way), and I will do everything that I can to resolve the problem.’

Request more details, by using phrases such as ‘Could you give me a few more details on that’ or ‘Could you expand on that point please?’

Ask how the customer would like the situation resolved.

Tell the client what you are going to do to resolve the problem, and ensure that you do whatever you say you will. Then thank the client for bringing the problem to your attention.

Written complaints

When a letter or email of complaint is received, or poor comments are received on a feedback form, contact the client by telephone to discuss.

If this is not possible, ensure a reply is sent same day.

Promises

Do not promise anything you can’t deliver — this may make the situation far worse.

Simply advise the client you will investigate the complaint and make contact with them once all information has been gathered. Give a time when you will contact them.

Resolution options

When considering options for resolving the complaint consider the following:

• Provide an additional service or product to the client that has a high perceived value to them but low actual cost to the business
• A future discount to a predetermined value
• A credit or gift voucher. This is a last resort option and must be approved by the appropriate manager

Resolution

Complete the complaints form noting the solution to the complaint and ensure the complaint is resolved. Completed forms are handed to the Office/Administration Manager to enter into the customer database and file.

Contact the client within 24 hours of the original complaint with a resolution. Seek assurance from the client that the matter is resolved to their satisfaction and confirm the resolution in writing.

If the client is still not happy, request a meeting at a time that is convenient to them to resolve the issue.

Introduction

Trading entities need to be aware of legislative environment, which imposes restrictions both on them in their individual capacities and on the entities they represent when promoting goods and services.

Fair Trading Act

The Fair Trading Act aims to ensure that the market for selling is an informed one. The Act prescribes certain behaviour when selling goods and services, and it is being interpreted liberally by the courts.

The main features of the Fair Trading Act are:

• A non-criminal prohibition against conduct and trade which is misleading or deceptive
• Specific criminal offences relating to false representations about goods, services, land and employment
• Civil remedies which include injunctions, damages, corrective advertising at the defendant’s expense, and other orders of the court directing compensation or restitution

The most important section is section 9:

“No person shall in trade, engage in conduct that is misleading or deceptive or that is likely to mislead or deceive.”

Commerce Act

The main restrictive trade practices are as follows:

• Price fixing, making it unlawful for two or more competitors to agree or enter an understanding relating to prices, margins or discounts for goods and services
• Resale price maintenance, making it unlawful for a manufacturer or wholesaler to set minimum or actual prices for resold goods
• Exclusionary provisions, making it unlawful for groups of competitors to reach an understanding in order to restrict provision of goods or services to another competitor
• Contracts containing provisions which substantially lessen competition in the market
• Abuse of a dominant market position by restricting entry, hindering competitive conduct or eliminating other businesses from the market

Consumer Guarantees Act

The Consumer Guarantees Act is intended to provide protection at the end of the chain of supply of goods and services. A set of statutory standards called ‘guarantees’ is attached to the goods and services sold to consumers. The Act applies to all goods and services of a type ordinarily acquired for domestic or personal use. The Act does not apply when goods and services are acquired for re-supply in trade, or to be consumed in production or manufacture.

Your business may need to review insurance cover in order to ensure that any increased potential liability arising as a result of the Consumer Guarantees Act is covered appropriately.

Health and Safety in Employment Act

The Health and Safety in Employment Act 1992, which came into force on 1 April 1993, has wide ranging implications for all those involved in the workplace.

Ten fundamental principles provide the foundation:

• Comprehensive coverage for all work situations
• Clearly identified and defined responsibilities
• Promotion of excellence in health and safety performance
• Improved hazard identification and control methods
• Involvement of employees in health and safety issues
• Health and Safety training and education
• A dual approach of incentives and penalties
• Regulation of specific hazardous situations
• Government intervention to reduce compliance costs
• Active promotion of administration of health and safety

Employers must take all necessary practicable steps to ensure safety of employees while they are at work.

The Act sets out these obligations:

• Providing and maintaining a safe working environment
• Providing and maintaining facilities for the safety and health of employees at work
• Ensuring that all plant is designed, arranged and maintained so it is safe for employees
• Ensuring that employees are not exposed to hazards
• Developing procedures for dealing with emergencies which may arise while employees are at work

Employment Agreements

The very act of employing staff automatically creates legal obligations for both parties.

The Acts relevant here are the Employment Relations Act 2000 and the Holidays Act 2003.

These obligations or ‘rules’ must be in writing. This provides employers and employees the opportunity to understand exactly what the rules are.

An individual employment agreement must contain the following aspects:

• The names of the parties
• Description of position and work to be performed
• An indication of where the employee is to perform the work
• The hours to be worked
• The wages or salary payable
• Holiday and leave provisions
• The employee’s rights in contracting out situations
• The process in the event that the business is sold to a new employer, outlining both what will happen if the position will transfer to the new employer and what will happen if the position will not transfer or the employee chooses not to transfer to the new employer
• A plain language explanation of the services available for the resolution of employment problems, including a reference to the period of 90 days within which a personal grievance must be raised

Privacy Act

The Privacy Act sets out 12 information privacy principles in respect of the following identifiable issues:

• Collection of information
• Storage and security of information
• Access by the individual and correction of the information
• Updating and disposal of information
• Use and disclosure of information and unique identifiers

Businesses will need to be wary of sharing information among groups. A breach may arise when information is shared for a purpose unrelated to the purpose for which it was obtained.

Emissions Trading Scheme

The Climate Change Response Act 2002 provides for the implementation, operation and administration of a greenhouse gas emissions trading scheme in New Zealand that supports and encourages global efforts to reduce greenhouse gas emissions.

The Emissions Trading Scheme (ETS) is the price-based mechanism established by Parliament to:

• Reduce net greenhouse gas emissions below business-as-usual levels
• Comply with our international obligations, including our Kyoto Protocol obligations

It involves all sectors, including agriculture and forestry. MAF administers the scheme for the forestry and agriculture sectors, in conjunction with the Ministry for the Environment and Ministry of Economic Development.

Businesses involved in activities which come under the umbrella of the ETS need to familiarise themselves with the scheme and their obligations under it.

Other Legislation

The Resource Management Act 1991 was enacted to promote sustainable management of natural and physical resources.

The Act provides that any use of environmental resources (air, land or water) which may arise from taking the resource, or discharging into it, requires that a resource consent is in place.

Introduction

Think about whether you wish to include provisions for a trial or probation period in the employment agreement for this position.

The Employment Relations Act 2000 contains provisions for both ‘trial’ and ‘probationary’ periods for new employees. It is important that the employer and employee are clear about what provision applies to them.

The Ministry of Business, Innovation and Employment website (www.employment.govt.nz/) contains essential and useful information you need to be aware of to ensure that you comply with legal requirements.

Fact sheets

The following outlines some key information about trial and probation periods. For detail, see https://www.employment.govt.nz/starting-employment/trial-and-probationary-periods/.

Trial period

Key points

Employers may offer trial periods of up to 90 days to new employees. This can only be applied to new employees so it is important that an employee does not start a job before signing an agreement providing for the trial. Trial period provisions must always be in writing.

The trial period prevents employees from bringing a personal grievance for unjustified dismissal within the trial period. This law came into effect to ease the process challenges for businesses.

You and the employee must both bargain in a fair way about a proposed trial period. This includes considering and responding to any issues raised by the new employee.

Note that the 90 day period refers to calendar days and begins on the day the employee commences employment. An example clause is on the next page.

Notice of termination must be given within the trial period, even if the actual dismissal doesn’t become effective until after the trial period ends.

An employer and employee may agree to a trial period only once.

We recommend that you have regular reviews during a trial period as you would with a probation period.

Sample clause

The following is a sample of a clause you can include for a trial period if it is applicable to you and agreed to with the employee:

The parties agree that this employment is subject to a trial period of [Number of Days] pursuant to Section 67A of the Employment Relations Act 2000. The trial period shall begin on the date the Employee enters into this agreement and end on [Enter Date]. The Employee acknowledges that during this trial period, the Employer may dismiss the Employee by giving prior to the end of the trial period one week’s notice and that the Employee is not entitled to bring a personal grievance or other legal proceedings in respect of that dismissal.

Probation period

Key points

If an employer and an employee wish to have a probation period, they must agree to this in writing at the start of the employment relationship. You should ensure the probation period is covered in the employment agreement. A sample clause is provided below.

A probationary employee is a permanent employee who is yet to be confirmed in their position and the probation period provides time for this to occur. The key difference between a probation period and a trial period is that a probationary employee retains full rights to take a personal grievance in the event of being dismissed during the probation period. There is no time limit on a probation period.

According to the Ministry of Business, Innovation and Employment, a probation period provides time for the employee to show that they are suitable for the position. Although the employee is on probation, this does not affect their statutory entitlements to annual holidays, sick leave etc. During the probation period, the employer should act fairly and reasonably in all matters.

The following apply during a probation period:

• The employee knows they will be under close and critical assessment
• The employer needs to clearly state expectations and the employee needs to show they are suitable for the position by meeting those expectations
• The employer and the employee have agreed to review the employment at the end of the probation period

The aim should be to ensure that your expectations are clear to the employee and that the employee can meet these. During this period the employee is entitled to whatever training, supervision, support and resources are deemed necessary by you.

Sample clause

The following is a sample of a clause you can include for a probation period if it is applicable to you and agreed to with the employee:

Employment is subject to a probation period of [number] months during which time the Employee’s performance will be reviewed in weeks [enter weeks for reviews]. The Employee will be entitled during this period to whatever training, supervision, support and resources may be deemed necessary by the Employer, and will be advised at the performance review meetings of their work performance in relation to the standards required of them. The Employer will clarify the standards required.

The Employer may extend the probation period to enable the Employer to conduct additional performance reviews. Notice of the extension of the probation period and the length of the extended period will be given to the Employee in writing before the completion of the initial probation period.

One week’s notice of termination of employment may be given after two performance reviews or at the final performance review if the Employer considers that the Employee has failed to meet the required standards.

Where the Employer terminates the agreement under this clause, the Employer may elect to pay one week’s wages in lieu of notice.

On successful completion of the probation period, the Employer will give written confirmation to the Employee of the Employee’s position with the Employer.

4-weekly reviews

If you and your employee agree to a trial or probation period, we recommend you include three 4-weekly checkpoints during a 12 week period. This ensures the employee is fully aware of your feedback on their performance and there are no surprises at the end of the period.

You should arrange for the new team member, their immediate supervisor and the Team Leader to meet at the 4, 8 and 12 week points to review the team member’s progress and address any issues. Ensure that the appropriate review form is used for each meeting.

Introduction

The purpose of good induction is so that the new employee starts to see how things work in the firm and where they fit in, meaning they are integrated well into your team.

Sometimes firms make the mistake of not inducting new employees. In these instances, the employee may be left to their own devices and have to determine for themselves the basics of the firm. This can make them feel isolated and leave them with negative impressions of the firm. Not inducting new employees also results in time and money being lost.

Before the new team member arrives

Take some time to plan the induction. Start planning when you know you have a start date for the new team member so that you have an induction programme ready to send with the letter of acceptance.

Base your plan around the induction programme.

The new team member will need to meet with certain key personnel. They’ll need to be shown around. They may need to be shown how to operate different equipment. They will need to spend some time with whoever has responsibility for HR matters to complete required documentation. They will need a workstation and to be fully equipped to begin work.

Scheduling time with key people

If other people are involved, liaise with them and put together a schedule that will ensure the new team member has quality time with the people they need to meet without undue disruption to everyone’s working day.

Give each of the key people a copy of the induction programme and checklists and a clear understanding of why the new member is spending time with them. Brief them that it is important that they sign off on the new team member’s copy of the induction programme to record that the team member has received training in this specific aspect of their job. This is particularly important for any aspects of the job where knowledge of approved health and safety policy and practice is required.

Make sure to allow sufficient time to complete the induction.

Preparing for Day One

Organise to have any necessary furniture and equipment supplied by the start date.

Put together an information pack for the new team member’s first day:

• Team Member booklet setting out the business’ policies and practices
• New Team Member form for their contact and other details

Make sure the receptionist and the team knows when the new team member will arrive.

Work through the Pre-Induction Checklist in the Employer Documentation Kit to make sure you have covered everything.

Day One

The Business Manager (if you have one) or CEO (for smaller businesses) should greet the new team member personally upon arrival.

Undertake the induction with the new team member, using both the printed programme and new team member booklet.

Everyone understands that first day on the job can be stressful as the new employee strives to take in large chunks of information, learn everyone’s names and make a favourable impression. The existing team members can also find it something of an unreal situation as the ‘newbie’ is in a learning phase and their ‘real’ job hasn’t started yet. Shouting a morning tea can help break the ice, if the work situation allows.

Catch up with the new team member before close of day to debrief and review what has been signed off on the induction checklists and what has yet to be completed.

Completion of induction

When induction has been completed and the new team member and key people have signed off on the induction programme and checklists, take a copy of the new team member’s induction programme and checklists for their personnel file.

This should be standard practice but is particularly important in the event where at some future stage any issue of employer liability might arise, for example where health and safety matters are concerned. The employer in such a case may be called on to demonstrate that the employee has been fully trained in the approved practices and policies, for instance in the safe operation of equipment.

Administration following induction

Following the completion of induction liaise with the person or work area responsible to make sure they:

• Set up the employee’s personal file
• Set up the new team member in the payroll system. Both the employee and employer KiwiSaver contributions must be made from the employee’s first pay. An opt-out notice will only take effect after 2 weeks from their start date and the employee has up to 8 weeks from their start date in which to opt out. If the employee has not nominated a deduction rate, deductions are to be made at the default rate of 3%. See the section on KiwiSaver for more information.
• Advise Inland Revenue by posting the KS1 employee details form no later than the next Employer Monthly Schedule due date

Introduction

Our typical SME business clients can be largely unaware of the responsibilities and therefore risks of being a Company Director. In addition, these clients rarely receive any form of formal training in these areas and can be ignorant of the benefits of conducting effective monthly board meetings. Add to that the fact that many of our company clients are ‘mum and dad’ businesses without the support that larger or franchised businesses enjoy and you can begin to imagine the benefits to be gained from learning and applying such skills.

Client Benefits

Clients don’t know what they don’t know. They will often make general remarks such as ‘We need more business direction’, or ‘Our business controls us, we aren’t in control of it’, without necessarily connecting that lack of direction or control with a need to govern and strategically plan the business more effectively.

Clients need to be reminded of the benefits of proper governance by way of structured monthly Directors’ meetings. These include:

• Working ‘on’ rather than just ‘in’ the business. The monthly directors’ meeting provides an opportunity to work on the governance and strategic areas of the business, rather than only managing the typical day to day events.
• A structured agenda forces your clients to review all functional areas of the business: Operational, Financial, Human Resources and Marketing.
• Such meetings will generally have a time limit, forcing more time efficient sessions.
• Appointing someone to the role of chairman tightens the meetings and diffuses conflict between directors, particularly in ‘mum and dad’ companies.
• Appointing the accountant in the role of ‘virtual chairman’ enables the client to also use the accountant as a sounding board for all manner of business ideas and issues.
• By applying the correct rules of conduct at the meeting, the directors eventually grow to view the Board Meeting as part of the normal operation of the business, and not something that needs to occur because there is a pressing problem in the business.
• The necessary keeping of meeting minutes and documenting and following up of action plans encourages decisions to be implemented rather than just verbalised.

Client Selection

We should all be aware of the risks of being deemed a Director of a company, by virtue of assuming the unofficial role of ‘Virtual Chairman’. We should only select clients whose businesses are financially sound.

Selection criteria should include:

1. The business is likely to have a future, i.e. viable.
2. The business is solvent.
3. Your clients value your time and are prepared to pay your premium charge rate.
4. Your clients have a history of implementing plans and ideas.
5. You enjoy a great rapport with these clients.
6. Your clients are competent within their business.

Timing of the Meeting

Directors’ Meetings should eventually be restricted to three hours, with many capable of being concluded within two hours.

Initially, it may be that the meetings take considerably longer than this. As people settle into their roles, start to observe the rules of conduct and eventually circulate their board reports to Directors on time, session times will shrink back to something reasonable.

Location of the Meeting

Most clients see value in conducting the meeting in your board room, rather than at their premises. They can avoid interruptions by staff, and having the meeting at your place of business provides an increased level of professionalism. There will of course be occasions where the clients’ place of business is appropriate, particularly where a new product or other resource needs to be viewed by the Directors.

Rules of Conduct

1. Appoint the Virtual Chairman — usually the accountant. The accountant simply chairs the meeting. He or she is not the Chairman of the Board, but simply facilitates or guides the meeting.
2. Board reports (Operational, Financial, Human Resources, Marketing etc) are circulated at least five working days prior to the meeting. It will need to be established in advance who is responsible for compiling each of the various reports.
3. An agenda is prepared and circulated at least five working days prior to the meeting.
4. Minutes are kept and definite actions required are noted in an Action Plan. Encourage your clients to complete such minutes and Action Plans.
5. Minutes and Action Plans are circulated to Directors within 48 hours of the meeting.

Introduction

Interviews are best regarded as mutual exchanges of information rather than inquisitions. Remember that you are selling your firm to the potential employee as much as they are selling themselves to you.

You need to find out whether the person would make a good addition to your team. They want to find out whether they would like to work with you.

It is always useful to discuss family at some point in the interview. The quality of the candidate’s family relationships says a lot about the person and their ability to fit well into an organisation.

You should consider attitude as well as skills. Skill can be enhanced, whereas attitude cannot easily be changed.

Involve any relevant team members in the interview process. Their feedback is often very useful.

Tips on conducting the interview

Engage in natural conversation with the candidates. This is important so you get a good feel for how they may or may not fit into the team.

Keeping this in mind, the following are areas you should ensure are covered during the interviews:

• Brief history and mission of your company
• Discussions around the position description
• Discussion around skills required
• Discussion around applicant’s skills and experience
• Identification of broad remuneration range
• Discussion around applicant’s strengths and weaknesses
• Discussion on next steps (e.g. if they are successful in this interview, there will be skills checking, behavioural profiling and a second interview)

Some specific questions are provided on the next page as a guide for you to use if needed.

Questions

The following are provided as suggested questions you can use as a guide to ensure you cover the basics:

• Tell me about your last role
• What did you enjoy / dislike about the role?
• How would you describe your core competencies?
• Do you have any limitations or areas you’d like to improve on?
• Describe a difficult situation and how you handled it
• How do you handle conflict?
• What motivates you?
• What de-motivates you?
• Why do you want this job?
• What do you see as your biggest learning curve for this role?
• Describe your computer skills (for Word, PowerPoint, Excel, ranging from beginner through to advanced)
• What are your salary expectations for this role?

Do not ask

In accordance with the NZ Human Rights act, you cannot ask any questions related to the following areas:

• Sex, pregnancy and birth
• Marital status
• Religious beliefs (or lack of)
• Ethical beliefs
• Colour, race
• Ethnic or nationality origins
• Disability
• Age
• Political opinion
• Employment status; being unemployed or being a recipient of the benefit

Introduction

To dismiss someone, employers must have a significant reason for the dismissal and also dismiss the worker using a fair and proper process. Even if you have a good reason for dismissing someone, if you do not follow the correct procedures, you may be found to have unjustifiably dismissed that employee. The employee may be able to bring a successful personal grievance claim against you under the Employment Relations Act (2000).

If you dismiss someone you must follow correct process and procedures. One useful resource is http://www.employersguide.co.nz/

However, remember that an employee can bring a grievance claim against you, so ensure you:

• Notate all issues and resulting action and
• Seek legal employment advice

Reasons for dismissal

There are five common reasons why an employer may wish to dismiss an employee:

• Misconduct (includes serious and less serious misconduct)
• Incompetence
• Incapability
• Redundancy
• Illness

Fair procedure

This is one of the elements that is required when dismissing an employee as referred to previously. What constitutes a fair procedure depends on the circumstances of each case. If no procedure is spelt out in the employment contract, then for general misconduct, a fair procedure includes:

• Verbal warning
• Written warning
• Second and final written warning
• Termination (with a notice period)

Errors to avoid

The following list is by no means exhaustive but contains some of the most common everyday errors employers make:

• Employers tend to allow emotions dictate their actions rather than addressing the issues.
• There is a tendency to allow events to build up rather than dealing with them as they occur. They let employees ‘get away’ with minor infringements….then ‘blow up’.
• They dismiss without giving warnings.
• They dismiss without giving the employee the opportunity to give their side of the story.
• Warning letters are frequently not adequate.
• Employers fail to record the events.
• Employers fail to record the sequence of events.
• Some feel that if they bring pressure to bear on an employee the employee will go away.
• They dismiss without giving a notice period.
• They dismiss without referring to the employment contract.
• Employers make positions redundant rather than dismiss for the real reason.
• They employ other staff to fill a position they have made redundant.
• Employers often confuse a ‘good reason’ for dismissal with following correct procedures.

In other words, an employee can do something serious which justifies dismissal (say theft) but if the correct procedures are not followed by the employer, the whole dismissal may be found to be unjustified.

Planning

During the planning and preparation phase of your recruitment exercise, when you undertake a position analysis and identify the skills required to do the job, consider whether you will want to use skills testing at some stage of the recruitment process.

Where it’s relevant to the position, we recommend that you carry out skills testing for shortlisted candidates.

Skills testing may include:

• Typing
• Spelling
• Maths
• Microsoft Word / Excel / PowerPoint

External testing

If a specific skill at a specific level of competency is required, think about how you can test for this and whether external skills testing will be necessary when you are ready to interview shortlisted applicants. External skills testing can save time and money.

For instance, agencies can test applicants for skills and level of competence in Microsoft Word, Excel, PowerPoint and other programmes for a moderate rate in return for a detailed report on applicants’ test performance.

The results provide objective data which can identify whether the applicant is at a beginner, intermediate or advanced level of skill with the software.

Using recruitment firms

If you do not have adequate internal resources to conduct your own skills testing, you can outsource testing to a recruitment firm.

Skills testing one applicant in Word, Excel and PowerPoint costs approximately $180 plus GST. Discounts can apply if you are testing more than one applicant.

Candidates can sit the tests at the recruitment agency’s offices, at your offices, or the candidate’s home. Using a recruitment agency’s offices ensures a controlled environment for testing.

If you determine that external skills testing is required, contact the testing agency to discuss your requirements and flag that you will be scheduling shortlisted applicants for testing.

Flag to applicants during the initial interviews if you will be conducting skills testing and at what stage of the process.

Introduction

A robust and detailed client database is an important tool for any business.

There are many types of databases that a business may use depending on the type of business and the computer applications available.

Contents

This guide contains the following topics:

• Database basics
• Types of database
• What to record
• Maintenance

Database Basics

Data

The data that is recorded and tracked can vary widely depending on the business area, geographic location and target market. The core areas that databases record generally cover:

• Contact details
• Customer preferences
• Communications history
• Sales history
• Actions
• Payments

Databases can also record additional details specific to the business, for example, a bike shop may record whether a customer enjoys mountain-biking, road cycling, competitive track cycling or triathlon.

A contracting business may record ongoing service contracts. Hair salons may record details of previous hairstyles.

Purpose

When you have a robust customer database you are able to:

• Provide after-sales and follow up service
• Track complaints, service issues and repairs
• Follow buying patterns and preferences
• Communicate and market to your clients
• Target your marketing
• Encourage loyalty and repeat business

Types of Database

General

There are myriad types of client database programmes available, and some businesses may choose software which is industry-specific. For example Hairware, Menumate and HirePOS.

There are some standard systems which can also be tailored to suit a business’ requirements.

Manual system

This is the most basic and non-integrated system of database, generally consisting of an excel spreadsheet of customer details, a quote book and a returns/repairs book.

This may be fine for some businesses, but unless the spreadsheet is very complex it will not be useful for much more than mass mail-outs.

Access database

Most businesses with Microsoft Office will already have Microsoft Access, which is a very good database program.

The program does come with some wizards to help you set up databases, however once they’re set up they will need someone with good computer skills to customise and maintain them.

You can produce excellent reports and specific information, but again this will require someone with great technical skills and possibly a lot of time.

Basic contacts database

There are also specific contacts-database programmes available online which are out of the box solutions that can be easily customised to service such tasks as bulk mail-outs and email marketing initiatives.

Much of this software is free, however may not be as helpful as industry-specific or CRM software.

CRM system

A Customer Relationship Management (CRM) system is a purpose built database geared toward sales. This type of database records detailed information about clients including sales information and tracking.

A CRM system is the best available for a sales database, however it may be excessive for businesses whose main focus is not sales.

There are many CRM products available online or from software retailers. Systems can be in the cloud, server hosted, or simply on one computer. Pricing plans range from per user/per month basis, to boxed software that needs updating every couple of years.

Most CRM systems generally integrate with Microsoft Outlook for accessing email, calendars and contacts. Many CRM systems also have integrated email marketing ability.

Accounting software database

Many companies have accounting systems where all their clients’ details are recorded for billing purposes. Most of these types of databases also have the ability to add unique fields and record additional information outside of the accounting data.

The benefit of using an accounting system is that you can tell when a client last made a purchase, however the drawback is that it may not be as sophisticated or customer-oriented as a full CRM system.

Accounting systems are available out of the box or as cloud solutions.

Computerised point of sale systems

POS systems are excellent for retail/wholesale businesses as they generally record comprehensive client details, sales histories and often make loyalty and reward systems easier.

POS systems are excellent for retail/wholesale and food service businesses. Again these are available out of the box or as cloud solutions.

Industry-specific systems

The world is full of software developers and there’s a high possibility that someone out here has designed a customer database with your business in mind. The challenge is finding them.

Search the internet for “customer database software for [your business type]” and see what you get. There are plenty of software development companies in New Zealand doing some great things

Custom built solutions

If your business is unique or you have special requirements you may wish to consider having a database built for you. This may be more effective than an out of the box solution, cheaper than an industry-specific solution and less time-consuming than building your own Access database.

A custom solution may set you back anywhere between $1,000–$10,000 depending on how sophisticated it needs to be and how many users you have.

If you choose this path you will need to be very sure of what you need. Write a detailed plan and brief for a software developer to follow.

Using multiple systems

You may find that an accounting system is not flexible enough, or a CRM system is too sales-oriented, so you choose to run multiple systems.

There is nothing wrong with this, in fact it may give you the greatest range of options. However you will need to be careful about maintaining your databases and ensuring they all have the same details.

What to Record

General

Before you choose a system, it is a good idea to sit down and work out exactly what you need to record and how you want to use it.

For example:

• Do you just want address details for marketing?
• Do you want to start a rewards programme?
• Do you want to set up client appointments?
• Do you want to record purchases?

Standard details

• Name, address and phone details
• Company details
• Email and website
• Contact (e.g. emails, phone calls etc)

Personal information

• Birthday
• Age demographic
• Preferences

Business information

• Contacts
• Roles
• Business size

Sales information

• Purchases
• Orders
• Quotes
• Returns and repairs
• Enquiries

Service information

• Appointments
• Contracts
• Documentation

Maintenance

General

If you are going to lavish time, money and effort on setting up a client database, don’t simply forget abut it once it’s in place.

Nominate a champion

You will need to assign the database management to one person in your business and ensure that they maintain the database — or databases — in a systematic fashion.

Poor database management can have flow-on effects for marketing, loyalty programmes and communications, so regular maintenance is critical.

A well-maintained, easy to use client database is an asset to any business.

Maintain as you go

As well as having one person who looks after the customer database, all team members who have direct contact with clients should check details such as postal and physical addresses, email and website details and phone numbers whenever they speak to a client.

Introduction

Good systems are key in the successful day-to-day operation of businesses.

Having robust systems in place makes it easier for a business to expand or set up multiple locations. It also makes it easier for a business owner to work on, rather than in, their business.

Contents

This guide contains the following topics:

• What does ‘systemisation’ mean?
• Writing Procedures
• Where to keep procedures

What does ‘systemisation’ mean?

Definition

Systemisation is the implementation of procedures and simple documentation outlining all tasks that need to be carried out in a business.

Systemisation reduces your overhead when it comes to training new staff, keeping existing staff performance and efficiencies up, and handling crisis situations when a key staff member leaves or gets sick.

One of the most important benefits of systemisation is consistency. Your customers may love you and you may treat them exactly the same all the time, but if you want to grow, or go on holiday, someone else needs to be able to deliver exactly the same consistent results. This can only be done through systems.¹ 

Many businesses have a systems manual, some more prescriptive than others, and these may be a bound paper document or kept in electronic form.

One of the world’s most famous examples of systemisation is fast-food chain McDonald’s. Because of their stringent standardisation and systemisation, coupled with the vision of a true entrepreneur, they have been able to expand from 9 restaurants in 1955 to over 31,000 outlets worldwide today.

Anyone who travels will tell you that although not as exciting as trying the local roadside food vendor, McDonalds is the safe choice, as the core products, for example a cheeseburger, are almost identical in every one of those 31,000+ restaurants.

Your business is unlikely to have 31,000 branches. Your people, your ideas and your innovation are what make you special. But good systems are what will make your ship sail smoothly in the right direction even if you’re not at the tiller. And those cheeseburgers will meet your customers’ expectations, and then some, every time.

Benefits of systemisation

• Jobs are done consistently and in the same way with the same outcome
• Customer service is always of high quality no matter who is dealing with customers
• If key team members are unavailable, others can fill in with minimal disruption and disorganisation
• Makes it easy to train and induct new team members
• Having a process written down makes it easier to delegate and properly utilise inexperienced team members
• With set systems, there’s less time wasted when doing tasks, so time is better used and the business is more productive

Glossary

• System – a collection of processes and procedures
• Process – the way in which a task is undertaken from start to finish
• Procedure – a set of written instructions for replicating the process

Writing Procedures

Introduction

Setting up a systems manual can be a daunting task, and it is certainly not a quick process.

How much you document is up to you. Focus first on the tasks most crucial to your business’ operation.

Record tasks

Ask your team members to write a list of the tasks they perform on a regular basis. Here are a few examples to get you thinking:

• For an administrator, doing the wages, invoicing, debtor control, GST or FBT is crucial.
• For sales it may be preparing a quote and following it up with clients, then placing an order.
• For a manufacturer it may be how to use a certain machine.
• For food service it may be how to prepare a certain dish, or how to clean up at the end of the day.

Planning your procedures

Once you have identified the tasks, group them as crucial, necessary and lower priority.

Break each task down into its main components – don’t forget you need to include when the task is handed over to another team member and what their part is.

Writing your procedures

When you have a list of the top priorities and what is involved, ask the team member who manages the process to record it.

They will need to write a step-by-step procedure for how to perform the task from start to finish.

Think of it like a recipe. Start by listing who is involved and any resources or external agencies involved.

Then move into what needs to be done and how.

If you refer to any resources, ensure you say where they can be found. For example, the Director may not necessarily know where the payroll software is, just as a salesperson may not know where the banking deposit book lives.

Where to start

Starting a procedure sounds simple, but it may be more complex than you expect.

You will need to decide where a process starts:

• Is it a letter from a client?
• Does a customer walk through the door?
• Is it when something breaks?
• Does it depend on a certain day of the month (e.g. the 20^th)?

Where to finish

Just like starting, it can be difficult to decide where the process actually ends, or even becomes a new process.

For example, a process may end with something being put on file, or it may end after a follow-up phone call.

You will also need to consider, if that follow-up phone call is a process in itself, you may want to split it up to avoid long convoluted procedures.

Testing a procedure

The true test of whether a procedure works or not, is to get someone who has never undertaken the tasks to try doing it by following the procedure.

Some key points may be left out as they are second nature to the person who performs them. If the rookie who is testing the procedure stops and has a question, or needs clarification, those extra details will need to be added into the procedure.

Where to keep procedures

Introduction

Depending on your sort of business, you may need one or more methods of keeping your procedures on hand.

Hard copy

Keeping hard copies can be useful for industries where it is not easy to access an electronic copy.

Although it is a good idea to have a bound hard copy available, it is probably more useful to keep individual procedures and tools in the vicinity of where they need to be used. For example:

• Keep a laminated copy of the clean-up procedure on the wall by the mop cupboard
• Magnet the coffee machine maintenance instructions onto the fridge
• Keep safety procedures on the wall in their respective areas
• Keep the phone answering checklist by the phone

Soft/electronic copy

The safest way to keep your procedures is in one central, electronic place.

This means that when a procedure is updated, everyone has access instantly without having to print too many new copies. Below are some options.

Network files and folders

This is a quick and easy option for business, where procedures are simply saved in folders on the computer system.

Pros: Free, easy to set up

Cons: Not easy to find procedures if you don’t know what you’re looking for. Not accessible from outside of the computer system

Microsoft SharePoint

SharePoint is an excellent programme for managing processes, as users can use a keyword search to find what they need.

SharePoint is generally run as an intranet (internal internet) and can often be accessed off site.

Pros: Very slick and easy to use, great for larger businesses/multiple locations

Cons: There is a cost involved and you will need to dedicate some resource to managing the setup and administration process.

Wiki

A ‘Wiki’ is a series of web pages which can be edited.

Wikis can be free to set up depending on how many users you have, and there are many free solutions available online.

Most wiki packages contain html editing software, so you need little or no technical knowledge to set them up.

Pros: Simple and easy to set up, potentially free

Cons: Wikis are generally kept up to date by many users, not just one administrator.

Document management system

There are also document management systems available, some of which are industry specific.

These are standalone computer programmes which allow you to index and search your documents.

Pros: Documents can be easily imported without changing formats

Cons: Potentially expensive

Footnotes

1      http://www.philipscott.com.au/

Legal status and requirements

Under the Employment Relations Act (ERA) you must supply a written agreement to your new employee and they must sign it to indicate acceptance of your terms and conditions of employment. Until it is signed, it remains a draft Employment Agreement. The employer signs it before sending it out with a letter of offer. The prospective employee signs it to signify they accept the terms and conditions of employment. It may be, when the prospective employee reviews the draft, that some issues require clarification or further negotiation to finalise the draft.

Once it is signed by both employer and the prospective employee it has legal status as a contract. Once signed by the candidate, both of you must hold a signed hard copy.

Where an employer has provided an employee with an intended agreement the employer must also retain the ‘intended agreement’ even if the employee has not signed it or agreed to the terms and conditions specified in the intended agreement.

An intended agreement cannot be treated as the parties’ employment agreement if the employee has not signed the agreement or not agreed to the terms and conditions specified in the intended agreement. Make sure your records clearly distinguish between which have been sent out as intended agreements and which have been finalised.

Putting together the employment agreement

Employment agreements will vary across different industries and employment groups. You may already have standard employment agreements for your business. We recommend that you have these reviewed from time to time by your legal advisor to ensure they comply with legal requirements.

If you want help with individual employment agreements, you can use the Employment Agreement builder on the Ministry of Business, Innovation and Employment website.

CCH Workforce Manager also contains employment agreement templates along with guidance on policy and legal requirements (https://www.cch.co.nz/ or 0800 500 224).

Alternatively you can use a specialist provider, such as one of those listed below:

• The Employment Relations service offered by the Ministry of Business, Innovation and Employment
• Employers Assistance Ltd, https://www.employers.co.nz/ or 0800 15 8000
• Employers And Manufacturers Association (EMA), https://www.ema.co.nz or 0800 800 362
• Federated Farmers of New Zealand, https://www.fedfarm.org.nz or 0800 327 646
• Or, of course, your local or preferred legal specialist

What needs to be in the Employment Agreement?

In general terms agreements should contain full details of all the matters discussed with the employee and should cover any potentially contentious issues. These would include:

• Use of the firm’s telephone and payment for any telephone calls
• Rules relative to working of overtime and who will authorise overtime
• Specification of meal breaks and the regular breaks that every employee is expected to take
• The position relative to any damage caused to company vehicles or plant and equipment and who will pay for it
• Rules pertaining to the use of an employee’s vehicle and the reimbursement that the employee will receive for that use
• Details should be included in the agreement of what the employer wants the employee to do — this should cover full details of the job specification and the terms and conditions of that job
• Non-competitive clause, if any, should be included

The employment agreement should also cover such issues as:

• Redundancy
• Dismissal
• The type of leave that is available
• How to deal with grievances (this is mandatory under the Employment Relations Act)
• Disputes
• Performance management

It is also a good idea to state the employer’s policy on issues such as discrimination and sexual harassment in the workplace.

The section titled ‘What to include in the Employment Agreement’ sets out more detail of what should be included in an Employment Agreement.

Changes to agreements for existing employees

It is sometimes necessary to change an employment agreement for an existing employee, for instance when changes to employment conditions arise out of changes to employment legislation.

Under Section 63A (2) of the Employment Relations Act, when implementing any change to an employee’s employment agreement in addition to getting the employee’s consent, an employer must do at least the following:

• Provide to the employee a copy of the intended agreement, or the part of the intended agreement under discussion
• Advise the employee that he or she is entitled to seek independent advice about the intended agreement, or any part of the intended agreement
• Give the employee a reasonable opportunity to seek that advice
• Consider any issues that the employee raises and respond to them