Corporate Retrenchment to Drive Entrepreneurship in 2017

As 2017 begins, it is an ideal time for an entrepreneur to reflect on the year that was and begin to plan the year ahead.  2016 has been a mixed year filled with success, failure, joy and some sadness.  Discussions over a cup of coffee with many of our clients, colleagues, friends and family have revealed that many people want to see the back of 2016 and look towards better opportunities in 2017.

Interactions with many prospective clients in 2016 revealed that many corporate organisations find it extremely difficult to make decisions quickly and engage in continuous dialog through endless meetings. This trend seems to be taking hold in the South African market and does not bode well for entrepreneurship as small and medium enterprises do not have the resources to sustain long lead times before an opportunity is converted into a sale.

Being business advisors, we began to question the inability to make decisions. The obvious answer is that many corporate organisations are cuttings costs and budgets in light of an adverse trading environment. However, even in a tough economic environment, organisations still need to look for innovative solutions that drive efficiencies and take advantage of opportunities that could increase revenue.

Upon further analysis, it is clear that an organisation’s ability to make strategic decisions is dependent on the knowledge, skill and experience of its human resources. The trend over the last decade, of people frequently changing jobs, has resulted in a resource base that is less experienced and hence more hesitant to make decisions on new technology and ways of doing things. As a result, numerous role players become part of the decision making process, making consensus even more challenging. In such situations, it almost becomes easier to make no decision rather than decisions that are in the best interest of the organisation.

The lack of proactive decision making will lead to a crisis of some sort, requiring corrective action in the future. At crisis stage, the safe option is procuring the services of well established brands at significantly high costs. So what began as cost saving will result in significant costs down the line. There is however, an opportunity for small and medium enterprises to subcontract or partner with larger established companies.

As our current economic environment continues to change with growth levels being extremely low, corporate organisations will need to make strategic decisions to position for future growth. Without making strategic decisions, growth in profitability will come from technological efficiencies and a reduction in human resources.

Our expectation of 2017 is that many organisations will be considering the retrenchment of human resources in an effort to maintain profitability. Those that are fortunate enough to retain employment will be required to increase their workload. Circumstance will drive entrepreneurship as a viable option for those who are retrenched or those that seek an alternative to formal corporate employment. To date high corporate salaries has deterred many skilled entrepreneurs from starting their own businesses, so perhaps uncertain times or the possibility of retrenchments ahead in 2017 will stimulate entrepreneurial activity.