Balancing Finances with People in 2024!

By Gry Tømte

Balancing Finances with People in 2024 is like walking a tight rope above a croc infested river… And let me tell you, it’s inevitable to have some slips. But whether you’re landing all the way in the river or catching your fall is in your control.

Not a single day goes by without me hearing news updates about just how much of a financial mess, the world is in.

I mean, not a big surprise considering governments across the western world were handing out cash like it was a lolly stuffed piñata during COVID.

We all knew the price was going to have to be paid at some stage.

But 11 interest rate hikes later, a rental market that feels more like a boxing match than an open for inspection - and we are all feeling the pressures.

And even though our industry is amongst the most resilient, bookings have dropped, clients decreasing the frequency of visitation, substituting high priced products for “dupes” (yeah, TikTok has made it a whole thing…), and more white spaces in the books have become the new normal.

At the same time, suppliers have to cover their losses so cost of goods have gone up, wages have increased due to a war on talent in a shrinking pool, and the government at the same time have decided to raise super and work cover.

Small Business Insiders reported the changes in shopper spending in 2024 appear to have had the most impact on small and medium sized businesses, with 41 per cent of small business retailers performing below, or far below, their FY23 forecasts and two-thirds of small businesses lacking business confidence and concerned or uncertain about the year ahead, per the Australian Retailers Association (ARA).

Part of the issue is that costs have increased by more than 10 per cent for one-in-three small-business retailers.

There is NO doubt that most service businesses are making less profits than pre covid.

And there are few things more anxiety-provoking than the fear of not being financially secure.

And as a result, many leaders show up a bit more stressed. A bit more short. A bit more triggered. And a bit more focused on driving numbers rather than giving people the motivation to hit those numbers.

Which doesn’t lend itself to an inspiring, fun work environment.

Because as much as you think you’re hiding the stress and fear, your team can 100% tell…

The fallacy of a People over Profit approach. I believe the reason why leaders are finding the current climate so hard to navigate is partly because the conversation rightly so has shifted in the past few years from just driving the numbers, to embracing a more empathetic, people-focused leadership.

And I think somewhere along the way, the ship has overcorrected its course, and the real message has been a bit muddled.

In our pursuit of a ‘people first philosophy’, it’s easy to unintentionally tip the scales too far, thinking it’s People OVER Profit.

But here’s the catch: Profit isn’t the enemy of people-centric leadership; it goes hand in hand.

Think of it this way - without a healthy bottom line, how can we ensure the financial security of our team? How can we fund their dreams, their aspirations?

A People first, THEN Profit approach.

A ‘People first THEN profit’ approach on the other hand means HOW you get to a financially strong business, isn’t by focusing on the outcomes ($$$) - but rather on how you, through building trust, empathy, and a safe space, can help your people feel inspired and motivated and onboard with your vision - so that the business as a result makes a profit.

And that’s bloody HARD when the chips are down, financial pressure sets in, and all you see are shrinking margins.

Fear means amygdala highjack. Which means an inability to see the forest for the trees.

So, we take the fastest route - straight to the outcomes. And we lose sight of the fact that our people are just that - PEOPLE. And when you stay in this fear state for long enough, it affects the culture, how people feel valued, and you make decisions based on current state rather than the long-term future.

A business that isn’t making a profit and has no way to turn things around, will need to make some tough calls.

Let’s look at a common scenario a lot of us constantly have to weigh up, the balance of immediate profits with investing time and money on your team’s development. Prioritising their growth might be costly, and hard to justify when margins are slim - but most of the time it leads to longer-term benefits, both in culture and profitability.

As long as there’s accountability involved to ensure growth is happening as a result.

You’ll see below, my investment in my team currently is absolutely sitting at a max. And it’s easy to lose sight of the long-term vision and benefits when times are tough, and fear sets in. This is where controlling your mindset comes in.

Or sometimes it becomes clear that that new hire simply isn’t going to get to where you need them to get to - even with all the help and support you can muster. The choice is between letting someone go or having the rest of the team (and your own mortgage!), going down with a sinking ship.

I’ve seen this more times than I can tell you!

“I just feel sorry for them, so I don’t have the heart to let them go” or “but they’re so nice”.

And then 6 months go by, and the business is nearly broke. Not a good strategy for you OR the rest of your team. It’s a scenario though that demands a lot of sensitivity and transparency.

Leaders need to be upfront about the reasons, empathetic in the approach, and supportive in the aftermath. This isn’t just about numbers; it’s about people’s lives.

These are just a couple of examples of the tough calls’ leaders need to make. And yes, they’re challenging. Yes, they’re most likely going to cause upset.

But by approaching these decisions with empathy, respect, and a genuine commitment to our people, we can navigate through them effectively.

My own tightrope wobbles. Let me be really raw and transparent here - and put it all on the table. In the past 2 months or so I’ve been walking that tightrope with a couple of hairy moments.

I’m in the middle of building our second clinic, and the build has been delayed and the cost has increased a faaaaaaair bit! And all the while, we go into a week fully booked, turning down clients - only to find that the day before our books shift completely, with clients rescheduling for next month instead. AND, because we’re future investing in people to make sure it’s all systems go when we open, wages are also through the roof.

If you’re across your numbers, you’ll probably be aware that in the industry your wage % for a company that has a long-term approach will likely sit around 35-38%. And yep, before you think I’m not aware of the 30/30/30 rule, I am. But that rule doesn’t apply to the current environment.

So, when I mention that our wage is currently at 50% it will probably give you an indication of why I might have been under a bit of pressure. Now, I know this is a calculated approach. Suffer now and be ready when the new clinic open - or scramble when the new clinic open and lose the momentum on opening….

So, I know I’m taking the right approach. But it doesn’t make it any less scary or triggering.

So, when the team asked for more full training days, more fun activities during work time, more time during treatments and “perhaps we can close Saturdays?” …. I was wildly triggered. I’m not proud of it! Ittook me a couple of days to really reflect on why I was so triggered and how I can balance a people first approach with the commercial needs of the business.

You see, about 8 years ago I had a business coach who was great with numbers. She taught me everything I needed to know about the financial health of my business and the mechanical aspects of business. But what was lacking was any kind of leadership direction, empathy for people and a roadmap of how to get to our financial goals whilst taking our people along on the journey.

I was so focused on growing the numbers and people were pretty much just a resource to help us get there. I thought that was normal!

The result? I had half my team walk out in a 2-week period! It was an extremely challenging time and I had PTSD for years. So, my confidence was broken. And I felt like an absolute failure. And what did I do? I over corrected! Big time! I went from only prioritising the numbers, to wanting to please my people at all cost - to avoid the same disaster happening again.

I spent and spent. Bought lavish gifts and regular champagne nights. I’d gone from Profit over People - to People over Profit.

And I realised that neither work very well. My team walked all over me. Nothing was ever good enough. And the more I gave, the more they wanted.

So, when I recently felt the tightrope wobbles, it brought all the triggers and memories back. And that’s exactly what happens. We, as humans, are shaped by the sum of our previous experiences. And the awareness of that is the first step to managing triggers when you’re navigating a stressful environment.

So, what do you do if things feel like they’ve gotten way off track?

Here’s 9 steps you can take to keep your balance:

1. Identify the Issue

Acknowledge that even the most skilled leaders can sometimes falter, particularly under financial pressures. It’s crucial to acknowledge when financial stress starts affecting your leadership style. This is about being honest with yourself, recognising when you’re slipping, and taking steps to realign.

2. Take Responsibility

One of our values at HÜD is “fk up, own it, learn and grow”. So, this one’s something I’ve had a fair bit of practice with.

As leaders we must take responsibility for our actions and the impact we have on the team. This includes openly acknowledging mistakes. Owning our actions and their impact on the team is a sign of true leadership. This isn’t just about admitting mistakes though; it’s about showing we’re committed to doing better.

3. Open and Honest Communication

Hold a team meeting to discuss the issues. This shouldn’t be a one-way conversation but an open forum where team members feel safe to express their feelings and concerns. As a leader you must listen actively and empathetically, without being defensive.

4. Rebuild Trust

Trust is often the first casualty in such situations.

Rebuilding it involves consistent, ongoing efforts. This includes following through on promises, being reliable, and showing a genuine commitment to change.

5. Reset Expectations

It’s important to recalibrate expectations, both what the leader expects from the team and what the team expects from their leader. This should be a collaborative process, setting realistic, mutually agreed upon goals and expectations,

6. Create a Supportive Environment

Implement measures that support a positive and fair work environment. This could be a regular check-in schedule, a mentorship program, or even team-building activities to strengthen relationships.

7. Developing Emotional Resilience

Encourage and provide resources for everyone, including the leader, to develop emotional resilience. This might involve workshops, training sessions, or even external coaching.

8. Monitoring and Adjusting

Keep an eye on the team’s morale and productivity. Be prepared to make adjustments as needed. It’s a continuous process of learning and growth for both the leader and the team.

9. Reflect and Learn

Encourage a culture of reflection and continuous learning.

What can be learned from this experience? How can these learnings shape better leadership and team dynamics in the future?

Things ARE looking up.

Retail is predicted to be back up in positive territory by December 2024, driven by net population growth, slowing interest-rate hikes, and the wealth effect of higher property prices.

As we travel through the WILD financial times of 2024, keep your finger on the pulse.

Understand and monitor your KPI’s weekly and balance it with the necessity of a people-first approach.

And continually check in.

Are you tilting too much towards financial outcomes at the expense of your team’s wellbeing?

Or perhaps you’ve swung too far the other way, risking the financial health of your business for short-term people pleasing?

The tightrope may be high, and the waters below may be daunting, but with the right balance, we can not only cross successfully but also inspire those we lead to do the same. Let’s embark on this journey together, with the confidence that our balanced approach will lead us to a thriving, fulfilling future for ourselves, our teams, and our businesses.

For more leadership wisdom and business conversations, jump onto Gry’s Instagram.

@grytomte