Business Essentials Vol 4. No 6
Dear Esteemed Member,
It is no news that the economy is in recession. That businesses are worse hit by the economic despair is to say the least. We had shared in the past editions, several tips on coping strategies to stay afloat. One other necessary ingredient is the place of sound Corporate Policies. We have, thus, devoted our opening shot to the important subject.
We had also been inundated by members on Government’s recent policy of enforcing the ‘Speed Limiter’ through the Federal Road Safety Commission on the position of the Association on the matter. As you well know, NECA’s position would be premised on the legality or provisions of the law on the matter. We, therefore took a cursory look at relevant provisions of law and other issues concerning the ‘Speed Limiter’.
Our regular Labour and Employment Law Review and Upcoming Training Programmes were not left out.
Have a pleasant reading.
In this Issue:
- Managing Corporate Policies During Recessionary and Recovery Period
- HR Humor: Get Rid Of All Slackers
- Press Release
- The Speed Limiter: What’s in it for Corporate Enterprises
- Labour & Employment Law: Jurisdiction of the National Industrial Court (Mr. Slawomir Panta vs. Dal Trade Nigeria Limited) (2014) 50 N.L.L.R. Pt 166, P. 417 NIC
- Upcoming Training Programmes
Managing Corporate Policies During Recessionary and Recovery Period
It is quite obvious that the country’s economic honeymoon is over, Oil, the prime mover has run into rough waters. Many firms are folding up due to dramatic decline in domestic industrial production as a result of insufficient raw materials and spare parts. There are wide-spread manpower contractions (redundancies) both in private and public sector of the economy. The Federal and some State government cannot meet their financial obligations. The high rate of unemployment is one of the most serious consequences of the economic recession in Nigeria which now cuts across graduates of tertiary institutions and professional managers.
We use this column to speculate on the management policies which businesses operating in the country are likely to emphasise during and after the Recession/recovery period. Given the variety of businesses in Nigeria (in terms of size, ownership and nature of operations), it will be meaningless to talk in general terms about corporate policies. Therefore, the column will concentrate on the policies of companies in the Organised Private Sector.
The Concept of Corporate Policy
Among the management task which falls within the province of top management, strategy and policy are the most prominent. The broad moves, based on a company’s appraisal of its mission, its environment, its own resources and its top management values are formalised into the company’s master plan which generally called “strategy”. But strategy is useless if it is not activated and implemented. Thus, policy “concerns” the organisational methods, procedures, and practices associated with the implementing and executing strategy.
Since policy is integrally related to strategy, a good way to approach the subject is to appreciate the process of strategy formulation and implementation.
As businesses in Nigeria look beyond the Economic recession/recovery period, the following questions dominate the horizon:
- What “basic directions, major thrusts, and overriding priorities” shall we concentrate on?
- What guidance shall we adopt in every aspect of our operations (production, marketing, finance, personnel) in order to stay on course?
In order to answer the first question, each company must examine its mission, objectives and goals within the following context:-
- Environmental Appraisal: i.e the opportunities and threats in the Nigerian environment (economic, socio-cultural, legal-political, etc)
- Company Outlook: i.e the company’s strengths and weaknesses ( in term of its human and non-human resources) if it is to be able to tap the opportunities and/or withstand the threats in its environment,
- Strategic Moves: i.e as the company examines its products- market mix, it determines what direction(s) it should take, what move(s) it should make to achieve the desired results.
In real life, the nature of a company’s market (whether growing slowly or rapidly) and the company’s competitive position influence to a large extent the strategic clusters which are appropriate for a company’s profile.
Once a company has chosen a strategy (or cluster of strategies) to pursue, it must develop policies which will serve as a guide to action. Policies may become necessary in the following areas:
- Marketing (product line and customers, marketing mix, etc).
- Research and Development
- Human Resources (manpower planning and development, selection, training, remuneration, welfare, discipline, etc)
- Finance (sources and uses of funds).
These considerations will provide the answer to the second question raised earlier.
Analysis of Corporate Policy
- Purpose, Objectives and Goals of Nigerian Businesses
An organisation’s mission and its desired long-run results are determined to a large extent by that organisation’s management philosophy which is in turn shaped by the nature of ownership and the values of the dominant interest groups in that organisation.
One of the main effects that the economic recession situation will have on Nigerian businesses is the emphasis on economic measures of success such as efficiency and return on investments. Organisations that are not properly run will die. Associates of multi-national companies which find relations with their “parent” companies increasingly tenuous because of increasing difficulty of off-shore sourcing of production inputs may be forced to fend for themselves. Companies that used to enjoy seller’s market conditions have suddenly found their warehouses filled with unsold stock. They will have to adopt competitive postures in order to survive. We expect business organisations to emphasise more rational management technique
- The Nigerian Environment
An organisation’s environment can be defined as the limits (physical, spatial, psychical, etc) of its opportunities and threats. The ability of top management to perceive the environment of its business has been found to be crucial to the organisation’s success.
The Nigerian business environment has two critical features. Firstly, it is highly dependent on external trade for its production inputs and the slightest unfavourable development in that sector can have devastating effects on the domestic economy. This is because the main source of earning foreign exchange is oil. Since 1981, there has been a sharp drop in oil revenues. This has led to the country’s inability to earn enough foreign exchange to pay for the huge imports of foods and raw materials. This has in turn hurt production and employment levels. At the same time, companies which have relied heavily on local raw materials have had new business opportunities thrust at them.
The second major feature of the Nigerian economy is the dominant size of the public sector. The government is the largest single employer and the biggest businessman. It also has a monopoly of the coercive power of state. Since government is made up of people with flesh and blood, some government policies may be nothing but a summary of the personal values of people in government.
In addition to the foregoing economic and legal-political aspects of the Nigerian economy, the socio-cultural factors have started to play a major role in recent times. For example, religious fanaticism, insurgency, kidnapping and armed robbery have threatened the security of the nation, life and property. Such insecurity can influence labour mobility and shift work, and location of operations.
With the growing emphasis on the cultivation of raw materials for local industries and cash crops for export, many farmers may be attracted out of food-farming. That can pose a threat to the adequate supply of food staples with its concomitant effect on food prices. One implication of that is the impact on industrial relations-workers will be forced to make demands on their employers for upward reviews of conditions of service.
- Corporate Appraisal
The average Nigerian company is ill-equipped to tap the numerous opportunities presenting themselves or to minimise the unfavourable impact of the changing business environment. Almost overnight, the seller’s market situation has disappeared, giving way to an emerging buyer’s market. Businesses now have to go out to influence customers and consumers to buy their products. As the government’s monetary policies continue to mop up excess liquidity in the banking system, bank’s credit criteria become more stringent and the squeeze also affects businesses’ ability to grant credit to their customers who are already cash-strapped.
A great number of businesses depend on imported technology and do not have Research & Development (R&D) departments. Consequently, when machines break down or expatriate staff leaves and no repairs/replacements are possible because of foreign exchange shortage, the business can be crippled. Allied to that problem is the heavy reliance on imported production inputs.
The manpower situation has not fared any better, especially in skill and quality distribution. At the board level, for example, the main consideration until recently was political clout, that is, somebody who knew high-up people in government. The new system, however, calls for technocrats with strong managerial minds. The expectation in the near future is that companies will increasingly rely more on professionals than on political protégés and family members.
In response to the changing circumstances, Nigerian businesses have started to adopt strategies for survival, the most popular of which are as follows:-
- Divestiture: Many companies have cut off unviable divisions or departments or products so as to concentrate on one or few areas where they are strongest
- Retrenchment: Virtually every company has reduced its staff strength either through redundancies or by attrition. In addition, companies have introduced a regime of cost control through waste management.
- Market Penetration: In order to move products, companies have resorted to sales promotions. For example, many breweries and soft drinks bottlers have successfully organised contests, raffle draws and other games to induce consumers to drink more.
- Market development: In pursuit of foreign exchange, domestic producers have started to look for markets in the ECOWAS region and beyond.
- Product development: with the restriction to accessing FX for some imported raw materials, new locally-sourced products are being introduced.
- Acquisitions, Joint Ventures, etc
From the foregoing, there is clear evidence that Nigerian businesses have responded to the recent environmental (economic) changes. Therefore, a shift in corporate policy emphasis is to be expected.
- Corporate Policy during Recession/Recovery Period
As earlier mentioned, policy is a guide to action. We have indentified some of the strategies which companies have adopted. We expect those strategies to have been backed up with appropriate policies in the four core areas usually referred to as the basic business function, viz, production, marketing, finance and personnel. On the basis of our analysis above, we are in a position to speculate on corporate policies that are likely to be emphasized:
Production and Development Policies
- Local Raw material development: rules and standards will be necessary to guide what to look for, where to look for it (them), what constitutes an acceptable result, research budget disbursements, etc
- Plant and Equipment: Repairs and maintenance- what to do within the premises and what to take out. Fabrication of parts and spares, equipment leasing, etc
- Material Management: rules on usage and waste minimisation
- Mechanisation: a deliberate policy to minimise escalating labour costs
- Purchasing standards and practices will be more closely watched because of increase in local sourcing and higher costs of imports
- Make-or-buy decisions
- New product development
- New market development
- Sales terms (incentives for cash sales)
- Customer relations
- Distribution channels
- Sales promotion
- Product Mix
- Staff loans (especially salary advances, personal loans and vehicle loans).
- Capita sources and allocation (especially debt and credit control).
- Investment mix
- Current assets management
- Valuation of assets
- Profit disbursements, including Dividend Policy
- Manpower Planning and Development with emphasis on the changing character of skill needs
- Selection and Training (especially with the prohibitive cost of off-shore recruitment or training).
- Compensation package
- Staff Discipline (especially with increase in fraudulent practices)
- Employee Welfare (especially Terminal Benefits)
- Industrial Relations (especially grievance resolution).
Attempt has been made to demonstrate that the current economic crunch has significantly affected the Nigerian business environment to the extent that businesses will have to adjust their strategies in order to survive. Some areas of operations where specific policies will be required to give bite to the adopted strategies have also been highlighted.
The message that comes out clearly is that the age of professional manager has arrived in Nigeria. The days of quick profits for doing nothing are going, if not gone. Therefore, business organisations which hope to survive after the present economic doldrums must embrace the principles and practice of effective management. Knowledge of policy formulation and implementation is a step in the right direction.
The Speed Limiter: What’s in it for Corporate Enterprises
The Federal Road Safety Corps commenced the enforcement of the speed limiter device policy nationwide on 1st February, 2017. There has been a flurry of enquiries from members on the legality of the enforcement or otherwise. To be sure, a speed limiter is a device used to limit the top speed of a vehicle by not allowing the vehicle to accelerate beyond the pre-set speed limit.
The speed limiter device initiative is not new. In fact, the directive on compulsory use of speed limiting device on vehicles in Nigeria has been in the FRSC Establishment Act and the National Road Traffic Regulation since 2004. In other words, it has been the mandate of the commission to enforce and ensure that motorists install the device to ply Nigerians roads.
Instructively, Part V11 of the FRSC Establishment Act and the National Road Traffic Regulation provides that “All motor vehicles plying the highway shall be in possession of good electric or air horn, jack, wheel spanner, tools, fire extinguisher, inflated spare tyre, first aid box, emergency warning triangles or cones, laminated windscreen and mirror, speed governor, wipers, insurance certificate and road worthiness certificate.”
Part V111 provides that “A person driving or in control of a motor vehicle on any highway shall not drive at a speed exceeding 50km/hr in any town, village, residential or industrial area, as illustrated in Schedule 8 or may be shown on speed sign along the road”.
Part XI provides that “The minimum speed of any motor vehicle shall be 45km/hr and maximum speed 100km/hr, except where otherwise indicted by a sign as prescribed in Section 9 of these Regulations”, and the Commission is to “Determine and enforce speed limits for all categories of roads and vehicles and controlling the use of Speed limiting device.”
Benefits of the use of speed limiters
There is no doubt that compliance with speed limits will certainly reduce the frequency of crashes and severity of bodily injuries. Apart from this, the socio-economic benefits of the use of speed limiters cannot be over-emphasised. Some of these benefits, according to available information from FRSC are that lower speed results in less vehicle fuel consumption, cuts down on the maintenance cost of the vehicle and slows down its depreciation value. It also impacts positively in changing the individual driving behaviour which may have been hard to do over the years.
Other benefits include engendering good monitoring mechanism for vehicle owners’ /fleet operators, engendering compliance with the ECOWAS mandate, fulfilment of the Corps statutory functions through good practice. It will also assist to eliminate losses associated with speed related crashes. It will assist to preserve the young virile members of the society from deaths and maiming associated with speed induced crashes, enables more relaxed driving and lower insurance premium as consequence of fewer crashes.
These are reasons why we believe that enforcing the use of speed limiter has become imperative, considering that this is in line with international best practices and Nigeria must key into that especially to keep lives safe from avoidable and incessant road crashes. Moreover and to be fair, the FRSC had engaged in an aggressive sensitisation campaigns to highlight the benefits of this initiative to motorists and Nigeria as a whole ahead of its enforcement. The low compliance rate could, however, be due to the combination of non-availability and affordability factors. If motorists are finding it difficult to process and access the speed limiter device, then there would be no significant success in the implementation of this initiative no matter how aggressive the sensitisation campaign could have been.
However, as much as we applaud the implementation of the speed limiter initiative across the country considering its inherent benefits, the FRSC and other relevant authorities must ensure that there is a corresponding ease with which motorist can acquire the device.
LABOUR & EMPLOYMENT LAW: Jurisdiction of the National Industrial Court (Mr. Slawomir Panta vs. Dal Trade Nigeria Limited) (2014) 50 N.L.L.R. Pt 166, P. 417 NIC
The claimant (Mr. Slawomir Panta) filed his complaint against the defendant, claiming the following:
The sum of N81,101,367.00 being amount due to the claimant as terminal benefits and gratuities on the contract of employment between the parties
An Order that all the monies/dividend already declared on the 3,795 share owned by the claimant by the defendant be paid
An Order that subsequent monies/dividend on the claimant’s shares (3,795) for year 2010 and subsequent years be paid to him
Interest on the total amount of money claimed at the prevailing bank rate
In response, the defendant filed a notice of preliminary objection, praying for the striking out of some paragraphs of the claimant’s Statement of Fact and the Claims for payment of Dividend for not being within the competence and jurisdiction of the National Industrial Court
Whether the National Industrial Court has jurisdiction to entertain the suit.
On Relationship between Jurisdiction and Competence of Court:-
It is trite law that jurisdiction is inextricable from the competence of a court. This is against the backdrop of the fundamentality of jurisdiction to the adjudicatory powers of a Court. (See also: Madukolu vs. Nkemdilim (1962) 2 SCNLR 341; (1962) 1 All NLR Pt.4, Page 587)
On Meaning, Nature and Limit of the Jurisdiction of a Court:-
Jurisdiction is said to be the authority a Court has to decide on any issue brought before it for its decision. It is the foundation or bedrock of adjudication. The limits of this authority are imposed by the Constitution, Statute, Charter or Commission under which the court is constituted and may be extended or restricted by similar means. (See also: Obasanjo vs. Yusuf (2004) 9 NWLR Pt.877, Page 437).
On relevant determinants of jurisdiction of court where objection is raised thereto:-
When considering the relevant determinants of the jurisdiction of court to hear a matter when objection is raised as to the exercise of such jurisdiction, the jurisdiction of the court will be determined by the subject-matter of the claim and not the claim relating to the injunction which was an ancillary relief and depends on the primary claim. In the instant case, in deciding whether or not the court has jurisdiction to entertain the suit as regards the payment of dividends of the claimant, recourse should be made to the claim of the claimant’s Statement of Fact.
On whether National Industrial Court has jurisdiction over Director’s fees and claims for dividends/debt:-
Issues bordering on non-payment of Directors’ fees are outside the jurisdiction of the National Industrial Court. The Court also has no jurisdiction over claims for dividends/debt.
On whether National Industrial Court has exclusive jurisdiction over all matters arising from the workplace:-
The National Industrial Court does not have exclusive jurisdiction over all matters arising from the workplace. To follow this instance means that even a case of libel which is an independent tort should be handled by the court. When the court is faced with issued of this nature, what should be considered is whether the law/rules needed to resolve the matter at hand are employment law rules. If the answer is Yes, it then means that the court can safely assume jurisdiction, but if it is in the negative, that means that the court would not exercise jurisdiction over the matter.
The Court upheld the preliminary objection of the defendant and struck out some paragraphs of the claimant’s Statement of Fact and the Claims for payment of Dividend for not being within the competence and jurisdiction of the National Industrial Court, as it had to do with payment of dividends and was within the operation of the Company and Allied Matters Act.
Where the exercise of a power of court is statutory, such power can only be exercised within the limits prescribed by the statute.
Finally, there is no right of appeal against the final decision of the National Industrial Court of Nigeria except on issues of Fundamental Human Rights. In an application for enlargement of time to file a Notice of Appeal against a decision of the NICN, the Court of Appeal, sitting in Lagos in the case of Darnley Anifowoshe vs. Wema Bank Plc (2015) reaffirmed the position of the law that by the combined effect of section 9 of the NICN Act, Section 5 (2) (3) and (4) of the Constitution (Third Alteration), and section 243 of the 1999 Constitution (as amended) there is, as at yet, no right of appeal against the final decision of the NICN except on issues of Fundamental Human Rights. Another exception is criminal cases as they relate to matters upon which the NICN has jurisdiction. As to other causes or matters not so specified, appeal shall only lie from decisions of the NICN to the Court of Appeal as may be prescribed by an Act of the National Assembly and such appeal shall be with leave of the Court of Appeal.
HR HUMOR: GET RID OF ALL SLACKERS
A big steel company was feeling it was time for a shakeup so they hired a new head of human resources. Well, the new boss was determined to rid the company of all slackers.
On a tour of the facilities, this HR supremo noticed a guy leaning against a wall. The room was full of workers and he wanted to let them know that he meant business; so he asked the guy, “How much money do you make a week?”
A little surprised, the young man looked at him and said, “I make N 5,000 a week. Why?”
The Human Resources boss said, “Wait right here.” He walked back to his office, came back in two minutes, and handed the guy N20,000 in cash and said, “Here’s four weeks’ pay. Now GET OUT and don’t come back.”
Feeling pretty good about himself, the new boss looked around the room and asked, “Can someone tell me the job function of that slacker I just fired?”
From across the room a voice said, “Pizza delivery guy from Domino’s.”
Management Skills Development for New Managers
Date: 16 – 17 March 2017
Duration: 2 Days
Venue: NECA Learning Centre
Course Fee: Members: N82,500; Non- Members: N87,500
For further details please contact Adewale (08069720364) email@example.com