From tariffs to quiet quitting: pressures on modern business

Host – Grace Jennings-Edquist: [00:00:05] From big global policies to quiet workplace trends, we’ve got both covered in this episode. Today, we’re diving into how this year’s global shake up of US tariffs has been impacting Australian businesses. Then we’re shifting gears to uncover the hidden signals that your employees are disengaged from sound cartel. I’m Grace Jennings and this is Business Essentials. Welcome to season two. After a short break, we’re back with a fresh new format. Each episode now features two interviews released every Monday. Consider this your business inspiration to start the working week. We’ve also had a rebrand. Say goodbye to Business Essentials Daily and hello to Business Essentials. And don’t worry, season one hosts Nicole Goodman is still with us now, working behind the scenes as senior producer.

Tariffs, Trump and trade: the SME squeeze

Our first guest is CEO and founder at Grow Capital, Gus Gilkeson. Donald Trump’s sweeping tariffs on imports to the US have created significant uncertainty for Australian businesses this year. As a result, many businesses already operating on tight margins face real threats to profitability. Gus warns that volatility created by these US tariffs may also drive inflation and force businesses to consider costly restructuring. But he has some advice for small to medium businesses navigating these uncertain times. And he says long term planning is one essential tool to survive the shifting global trade landscape. Gus starts by telling Jeff Waters exactly how this tariff situation is affecting Australian SMEs.

Gus Gilkeson: [00:01:45] I think the overarching thought there is uncertainty and I think that’s quite deliberate in terms of the strategy. So it’s to get people to the table. Obviously, there’s been a lot of changes going on in the US, but what those tariffs are meaning is that it’s changing supplier terms for Australian businesses. So I’ll give you an example. One of the businesses that we work with is in fast moving consumer goods. They import them. They have the manufactured in China. They import them to Australia. A couple of the areas where they are being affected are the manufacturing. So the cost of the actual goods that they import is now more expensive.

Jeff Waters: [00:02:22] Because of US tariffs.

Gus Gilkeson: [00:02:24] Yeah. So it affects the manufacturing costs. Therefore they pass those costs onto Australians. So okay there’s a lot of change in a lot of different markets at the moment. So what that affects is the manufacturing costs which are you know, are direct costs in their business in terms of getting their product to market. It’s also disruption. So the time it takes to get that product because you’ve got these changes, you know, it’s not business as usual. So to get those products to Australia the shipping might be delayed. It might cost more. So you’ve got additional freight costs. And then do you need to then that business? Do they need to go and seek other markets for supply? And so this business also, you know works with Thailand and it’s got indirect cost challenges with the China and US as well. So I think the answer to your question is it affected both directly in terms of, you know, the cost of the goods, but also then the actual whole supply chain, the transport of the goods, the construction, the bolting together of the goods, the, you know, all of those flow on costs and then it affects your markets as well. So if you’re then selling those goods you’re importing from China, you’re selling somewhere other than Australia. You’ve got additional costs getting those out to market as well. So it’s challenging. So you’ve got timelines pushed out which affect your cash flow. And you’ve got inputs increasing in terms of costs in your business. And a lot of these businesses run at Lowish margins. So, you know, you might be running at 1,015% margin. It doesn’t take a lot to reduce that margin to very little and make the business unprofitable Profitable.

Jeff Waters: [00:04:02] Back when we had an inflation spike over the last couple of years and we’ve had spiking inflation, a lot of the excuses that we heard were that, uh, it was all caused by supply issues or largely caused by supply issues. Are you suggesting that we may see an inflationary effect as a result of this as well?

Gus Gilkeson: [00:04:24] Potentially. Yeah. Yeah. Potentially. So. I couldn’t answer that definitively. Obviously.

Jeff Waters: [00:04:30] Um, sorry. It’s a big economic macroeconomic question, and I may have been unfair in asking it of you.

Gus Gilkeson: [00:04:35] Yeah, I think depending on what happens with markets. So you’re going to have challenges with currency. Uh, so you know, you’ve got movement with, uh, between the Australian US dollar and other currencies in the world all the time. So that affects your supply chain as well. And then you’ve got, you know, if you take out the US market out of, you know, a global market or if there’s a huge reduction there because it’s not feasible, then you’ve got other, you know, lots of competitors vying for other similar market. So do you have enough product to supply all of those markets? If not, no supply chain issues, inflation. So the answer to your question is potentially, although it’ll be interesting to see what happens in the US. I think over the coming months we’ll see that come back online. I think a lot of it was shock tactic, and I think you’ll find that feasibly and economically, I don’t think that the levels of tariffs that are being proposed are going to be maintained long term.

Jeff Waters: [00:05:33] No. And we’ve seen evidence of that already. Are there any other sort of effects that this is having on Australian businesses?

Gus Gilkeson: [00:05:42] I think predominantly, you know, it’s the time piece in terms of getting product to market. The money piece, we talked about the cost of inputs, etc., and then then the team is where are you focusing your business? Is it going to stay buying from and selling to the same markets, or do you need to completely restructure that? And as a result, where do you put your team. And so, you know, if you’ve got a team that are focused now on, you know, importing from China, exporting to the US or importing from China and Thailand and exporting to Europe or to Australia, does that need to change? You know, are you going to different countries? Do you need different geographic domicile. So, you know, we’ve we’ve got another a company that’s a manufacturer in Australia. They also are expanding into the US and they’re questioning now do they move to the US now. That’s a huge financial impost to do that. But there’s also a potential huge financial benefit for them to do that. You know the cost there is sort of north of 30 million for them to set up. And then what happens to that business in Australia, and how long does it take them to do that? And what happens if things change? So I think the the uncertainty thing is a real challenge, Jeff. It’s the US are trying to get people manufacturing in the US if you want to deal with them. It’s a big market. There’s a huge economic cost of doing that. Potentially there’s a significant benefit there if you want to keep accessing that market long term. But there’s a lot of risk for business owners to do that.

Jeff Waters: [00:07:15] It is a big economy and a big market and a traditionally lucrative one. But is it really worth your while anymore? And should we all be looking at other markets?

Gus Gilkeson: [00:07:25] Yeah. And we do have you know, we’ve got other markets vying for our business. You know, we’ve got all of the BRICs economies that are really actively trying.

Jeff Waters: [00:07:32] Exactly growing economies.

Gus Gilkeson: [00:07:34] Yep. And they’re a lot more, I guess, user friendly in terms of things like tariffs. So and huge from a population perspective as well. So and economically. So I think they’re some of the things that Australian businesses in particularly in overseas markets, they’re thinking about at the moment.

Jeff Waters: [00:07:49] Donald Trump seems to be having an effect everywhere, by the sounds of it, at every level in our own economy.

Gus Gilkeson: [00:07:55] Yeah, absolutely. Yeah. So look, we are, you know, slightly outside of the, um, the hot zone, I guess. But as they say, if the US sneezes, we catch a cold, so we certainly will feel something as a result of it. We’re just I think we’re we’re lucky that we have so many opportunities in terms of alternative trading markets, and we have a lot of resources here that the rest of the world wants.

Jeff Waters: [00:08:18] As somebody who observes this and who deals with a large number of SMEs, do you have any advice for people at this stage given the current geopolitical situation?

Gus Gilkeson: [00:08:31] Yeah, I my advice would be look at your options and do some scenario analysis so you can put together a cash flow scenario. With the new proposed tariffs. You can put through a sensitivity analysis with your advisors with a portion of those. You could also say, well, what does it look like if I go to another market and I don’t have to deal with those tariffs, but maybe I’ve got some other costs in setting that up. And what does that look like? Not just this year, but what does that look like Over 4 or 5 years. And more importantly, what’s the risk associated with each of those? So there’s a lot of uncertainty with the US, you know, is it possible to get less risky long term contracts with with another country or another supplier or another manufacturer somewhere else? And perhaps there’s an opportunity to look at your trading terms and see if they’re what you want, what you need in your business, and just review all of that, that piece of your business.

Host – Grace Jennings-Edquist: [00:09:29] That was Gus Gilkerson, CEO and founder at Grow Capital.

Quiet quitting and leadership

Now to the topic of quiet quitting. If you’ve ever wondered what that phrase means, workplace leadership expert Michelle Gibbings says it’s really just a fresh label for employee disengagement. Whatever you call it, quiet quitting is a real problem, but it can be tackled if leaders just recognize the subtle warning signs from staff. Michelle shares her advice for addressing the root causes of employee disengagement, and creating a culture where staff feel valued and safe to speak up. But first, let’s hear in Michelle’s own words what quiet quitting actually means. Here she is describing the term to Jeff Waters.

Michelle Gibbings: [00:10:12] Quiet quitting was one of those terms. It was a bit of a buzzword a couple of years ago. Now, during Covid, you know, all these people were quiet, quitting. And I remember when I first heard the term, I did have a bit of a chuckle to myself because I thought, oh, well, I think this has actually been around for eons. It’s just a rebrand of what we would call disengagement. And so if you look at any of the work of Gallup and Gallup has tracked employee engagement for many, many years, and they continue to see fairly low levels of engagement across geographic areas and industries. And what it is, is that sense of emotional detachment from work, or the unwillingness to put in additional discretionary effort. So when someone quietly quits, they’re not saying to their boss, hey, I’m bored. I’m sitting here doing the bare minimum. They act as though they’re doing stuff, but in fact they’re not really doing as much as they could be.

Jeff Waters: [00:11:09] And how does this relate to leadership accountability?

Michelle Gibbings: [00:11:13] It’s really important for leaders to understand is this happening in their team and if it’s happening, why. And this is not about being punitive and then going, you know, I’m going to hunt down all those quiet quitters and then not be very nice to them. There’s a reason why they’re doing it. If someone is quietly quitting, that is a massive signal to you as a leader that either your leadership is not working, there’s something that is ineffective, or there is something in the culture that isn’t working for the employee, or the employee has checked out of the building because they are mentally burnt out. So there are a number of things that as a leader, you really want to dig in and understand, because if someone is quietly quitting, that then means they’re not turning up and being themselves. They’re not being productive and fulfilled in their role. And it means that something is missing.

Jeff Waters: [00:12:04] If we’re talking about not wanting to go that extra mile though. How is this measurable? How can I, as the employer, say, well, assess whether a person is quietly quitting or not?

Michelle Gibbings: [00:12:16] Often you can get a sense. And that’s why it’s really important for leaders to be in tune with what’s going on across their team and to spend time with their team. And that’s often one of the biggest challenges. You know, I spend most of my, my days talking to leaders, and I see this all the time. And when you talk about their day, they’ve spent their day in back to back meetings or running from one client event to another, or one customer function to another, or one sales meeting or whatever it is that they’re focusing on. And then when I say to them, how much time do you spend with your team today? And they sort of do a bit of a gulp, and some of them will say, I haven’t seen my team at all. And then if you look at it through the week, they haven’t spent much time at all with their team. And so if you’re not spending time with your team, it is incredibly hard to assess what’s going on. You are Relying on your team to come and tell you what’s going on. And if they’re quietly quitting, they’re not going to be telling you that. So you want to be able to observe those subtle signals.

Michelle Gibbings: [00:13:17] And some of those subtle signals can be things like increased absenteeism. Are you starting to notice that the quality of work is decreasing? Are you noticing that you know, when you’re turning up to a zoom or a teams meeting, they’ve got their camera turned off? Is it that when you email, it takes them days to respond to an email or to a text message? Is it when you’re looking for someone to volunteer for something? They were the person who used to volunteer and now they never volunteer. Or you know, in your one on ones ask people, you know, how are you going? What’s working? What’s not working? What do you need from me? I still remember one of the best questions I ever got from one of the best leaders I’ve ever worked with, and we’d only started working together for a very short period at this time. And she said to me at the end of one of my one on ones, she said, what can I do for you? And I think I almost fell off my chair. I said so sorry. And she goes, what can I do for you? I said, but I work.

Jeff Waters: [00:14:10] For you guys. Please.

Michelle Gibbings: [00:14:11] Yeah, I said, but I work for you. And she said, yes, I know, how can I help you? And I said, but it isn’t my job to help you. And she said, no, Michelle, my job is to help you get to where you need to get to. And it just floored me. And it fundamentally shifted how I thought about leadership. And she was the best leader because you knew that she had your back. And so if you were feeling disengaged or stressed or, you know, all of those emotions that we all feel on occasions, you could go and have a conversation with her and saying, hey, I’m not feeling quite so good right now. And you knew that she would be okay and she would support you through that. And that’s the type of environment that leaders want. You know, I often say to people, don’t quietly quit. Quit loudly, because if you’re in the wrong environment, you want to leave. And that doesn’t mean you burn bridges as you go. But make that demonstration pick up and go somewhere else where you can be yourself and you can thrive, because that’s good for you in terms of your self-esteem and self-confidence as well.

Jeff Waters: [00:15:14] All right. So I think that one of my employees or several of my employees are quietly quitting. What do I do next? How do I address the issue?

Michelle Gibbings: [00:15:25] The first thing is I’d be checking in with them. I’d have a conversation and go, hey, I want to just check in. I’m sensing that, you know, things aren’t quite so okay right now. And then stop talking.

Jeff Waters: [00:15:37] And let them fill the void.

Michelle Gibbings: [00:15:38] Oh, absolutely.

Jeff Waters: [00:15:39] Humans like I just did.

Michelle Gibbings: [00:15:40] Exactly. Humans hate silence.

Jeff Waters: [00:15:44] Mhm. Particularly on podcasts.

Michelle Gibbings: [00:15:48] Well done. Jeff. If you can create.That space and then you can say what’s missing. How can I help you? What do you need from me? What do you need from your colleagues? But they’re only going to do that if they trust you. Stu. And so the groundwork that you are creating every single time that you turn up and interact with your team is so important, so that there is that safe space for them to say, hey, I’m not okay. This workload’s too much. Or actually, I don’t think workload allocation is fair. Or actually, I’m just kind of bored. I’ve done this for the last four years and nailed it. I’m ready for what’s next.

Jeff Waters: [00:16:32] So what can you do then?

Michelle Gibbings: [00:16:34] So once you have had the conversation, then you can build the plan with them and go, okay, so how do we address that? What is it that the person needs to bring to the table? What do you need to bring to the table? Because it’s never one sided. It’s not all about you and all about them. It’s about the environment that the person is in and what is it that they need to contribute? What is it that you need to contribute? There might be some other team members that are involved as well. And all of this is also about you going, you know, demonstrating to the person that they’re a valued member of the team, but also be open about the conversation. Is this the right environment for them? And this is not done in any way that is nasty. But if they are in an environment where they’re really not enjoying the work, the culture doesn’t bring out the best in them. Is it time to have that really hard conversation about are you in the wrong environment? Is there somewhere else that you need to be either in this organization or elsewhere? To me, that’s a sign that there’s a maturity in that as well. You know, I think, you know, many years ago it was almost seen as disloyal when you left an organization. You know, you scratched someone out of your your address book because they had abandoned you and they’d gone to another organization. Whereas these days there’s a maturity to go. You know, if part of my role as a leader is to develop the people that work for me, that means at some stage they outgrow their role and so wish them well on that next step because they can come back to the organization. And I see that happen all the time. That sense they go, they get new skills at another organization and they can come back. So how you manage that process, one that’s really important for your leadership, brand and reputation. But also it does build loyalty because people can go away, do something else and then come back with even more skills.

Host – Grace Jennings-Edquist: [00:18:22] That was workplace expert Michelle Gibbings. Thanks for joining us on the first episode of our rebranded Business Essentials podcast. Follow Business Essentials podcast across social media and head to Business Essentials for more. Business essentials is a sound cartel podcast producers are Nick Schildberger, Nicole Goodman and myself. Technical production is by Pete Letts. I’m Grace Jennings, Edquist thanks for listening. We’ll bring you more business essentials next week.