OPINION: From the late 1960s until about 10 years ago, Kiwis crossed the divide to find employment and live in “The Lucky Country”. In the 1970s, when things got a little dire here when Britain stopped taking our butter, between 1976 and 1982 over 100,000 New Zealanders settled permanently in Australia.

This exodus prompted then Prime Minister Robert Muldoon to point out that “New Zealanders who leave for Australia increase the IQ of both countries”.

The Australians, perhaps in response to Muldoon’s acerbic wit, responded with this question and response: “How do you get a New Zealander into a small business?” Give it a big one and wait.

Cutting-edge, but perhaps closer to the truth than we’d like to think, and perhaps helped by our antipathy to the “big poppies”? But making a profitable business in New Zealand is difficult.

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Steve Stannard says staff cuts essentially reduce the capital or size of a business.

David Unwin / Tips

Steve Stannard says staff cuts essentially reduce the capital or size of a business.

You can improve the profitability of an established business without increasing revenue by reducing costs. For most businesses, people are the biggest cost, so an often-used route to profitability is downsizing.

This is especially the case in large companies where the loss of a staff member can be hidden because it represents a smaller proportion of the human capital of that company. Staff reductions are almost instantaneous and easily measurable, so these are easy “wins” for the company’s bean counters.

The cuts have little short-term risk and are a known quantity. But they essentially reduce the capital or the size of the company.

In the longer term, problems associated with the elimination of human capital, such as the loss of specific or institutional knowledge, may materialize. The productivity and satisfaction of the remaining staff may drop, especially if the cuts impact the workload or the well-being of the remaining staff.

Kiwis are very risk averse. When there is a threat, we go around the wagons, ruminate, hui, and then only say something useful after the meeting is over.

We take a prudent approach to reducing costs, fostering the “organic growth” of any business activity. This is where you piss on something long enough to see if it will grow or die.

In the last 18 months, we have gone out of business and in entrenchment. But now we hold hands, wincing before the cane hits our fingertips.

The reason for this is obvious, but we must ensure that this attitude does not take hold.

The other way to improve profitability is to grow the business. This means investing, often recruiting new people and taking the risk that they will be productive employees.

Sometimes that means borrowing money to buy plant and equipment and then generating new income to pay it back. To grow, you have to try something new, move somewhere else, employ someone who thinks differently, or just be lucky.

A little pain for long term gain. These days, it is particularly difficult to attract new people and new ways of thinking.

But that’s exactly when we need a different approach, some smart thinking. Glass half full. Hard times always present opportunities for smart thinkers.

Case in point: Horowhenua councilors recently voted on whether they should create a grant fund of $ 5,000 per year to reduce the cost of e-waste disposal.

In other words, the council would subsidize the disposal of old televisions and computers so that those who discard them do not have to pay. Otherwise, many end up in waterways.

It would then be sent to Auckland or overseas for processing – for an additional fee. Palmerston North City Council has done something similar. It’s a half-empty glass approach that doesn’t create any local capacity here and costs taxpayers money.

On the other hand, a company based in Palmerston North has designed a machine that recycles electronic waste, extracting precious metals.

A half-full thinker would invest his money in this rather than paying for someone else to get rid of it.

Unfortunately, instead of having the first of them here in Palmerston North and dealing with all the old New Zealand computers, he will be heading to Sydney to sort out their e-waste problem. I really hope we don’t end up paying to send our stuff tossed over the ditch.

I’m sure there are other examples of this here and across the country, now and in the past. Recently, LanzaTech, Green Button and PowerbyProxi have all headed offshore.

Chips may be on the decline right now, but that just means it’s time to get smart and help turn small New Zealand businesses into bigger ones. It means helping the little poppies get bigger and taking risks.

Steve Stannard is a former academic and regular contributor to Stuff. He lives in Palmerston North and owns a small business.

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