Financial News. Edition 121. 2015

Background

ABC Limited started off in the automotive industry in 1962 and has faced a number of good & hard times in what has been an ever changing industry typically ‘owned’ by the big players.
However, be it foresight or luck, someone in the Research & Development department invested in ‘Green’ or ‘Sustainable’ Technology and this allowed ABC Ltd to steal a march on their rivals, many of whom thought this would be another FAD and would appease certain minority groups for a limited time.
Whilst it is true to say that ABC Ltd is considered, by many, to be in the Small & Medium Enterprise space. ABC Ltd considers themselve as big thinkers and it is fair to say as a leading light in the ‘Green’ space today.
They made a small profit last year with steadying revenues in what has been an extremely tough market. Some of their expertise has been utilised in Formular 1 Racing for Emission controls, and there are some that would expect a big take over in the future.
Moving forward to today and like many businesses in this industry, ABC Limited has had to manage multiple challenges ranging from employee retention to managing costs in a declining market.
We took time to catch up with ABC Limited at a recent Sustainability Awards event in Waldorf and whilst we asked the tough questions about workforce management, & cost management they were refreshingly honest when answering them.

The Discussion

We talked to Ms Ann Cook the Chief Financial Officer. Not surprisingly she led with some startling facts, “did you know that Employee turnover costs can be staggering: one estimate, by SHRM, the Society for Human Resource Management, is that it costs $3,500 to replace one $8 per hour employee when all costslike recruiting, interviewing, hiring, and training, reduced productivity, etc., are considered.”
She continued, “These costs are more difficult to manage in the current environment,where employees are now being seen as a key differentiator.With some industries seeing a turnaround in performance, employees are ready to move on, with the promise of greener pastures. ABC’s staff turnover could become a major concern, alongside the uncertain revenues and profitability".
The same report estimated that replacement costs amount to 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees.
When asked how ABC Ltd was addressing this, Ms Cook commented that they were looking at diversification and other potential markets, that ABC Ltd had made some Research & Development investments into some new technologies.
This though was against an alarming background of cost increases, “For the last two years we managed to reduce our spiralling costs, however at best we stabilised.Fluctuations in currencies and often unpredictable oil prices were difficult to legislate for. It did not help that we had a higher attrition rate in our financial teams and these were difficult times for our 22 000 employees and the 900 colleagues of our UK & Ireland subsidiary as we put pay freeze in place and paid no bonuses.”
We closed by asking Ms Cook about the future and she was surprisingly upbeat, confident that the new investments in ‘Green technologies’ by R & D and the sustainability program were starting to pay off and this would see ABC start to increase revenues & margins again. “Cost Management is now under control, major investments are made, and our outlook is positive as the market conditions look favourable for the first time in 7 years”.
We have three key initiatives in place for next year and they are already ‘work in progress’. We expect to be hiring again, driving increased revenue & profit and empowering our employees once again as we start to grow our business again. We asked Ann if she thought the results were sustainable, she said to vote ‘Green’.