Over the past six weeks, I have written several blogs and appeared on quite a few radio programs to discuss effective ways of doing business, managing, and leading with excellence during these tough economic times. I also recently participated in a panel sponsored by California State University and the Chairmen’s Roundtable. Since this topic is so vital right now and everyone is still searching for solutions, I wanted to add some additional thoughts and tips to help support you in your business.
Before I dive in with action steps, it is important to remember there is a huge difference between “survival mode” (when we are trying to keep going because we have already lost a lot in revenue, customers, etc. and/or we cannot meet payroll next week) versus sustaining/maintaining your business (things are going to slow down, but we still have cash flow and the right foundation in place to get through tough times).
When your business is in “survival mode” you simply must protect cash flow. This is the time to access the capital you can and put it into the bank. The difference in what you will pay in interest is an investment to insure that you can access the capital when/if you should need it. If you are in this immediate survival mode and have to make cuts, take the time to truly evaluate what and when you can do without. Do not cut equally and do not look to employees as your first option. After all, would you sell a large piece of equipment if you knew a few months from now you will have to buy it back to operate and it will be double the cost? The most conservative estimates calculate the cost of replacing an employee at two times the annual salary. Instead you may be able to reassign current employees and focus on shorter term revenue opportunities. Take a look into what your company can do to alleviate some of the costs associated with running at full steam. Perhaps you can implement a four day workweek with reduced pay for a period of time or offer salary reductions to your managers. The options are there, they may not be ideal but they can temporarily stop the bleeding.
This is not the time to focus on longer term initiatives so you may have to cut them or put them on hold for the time being. Make your cuts according to the short term value of initiatives or activities – those initiatives with longer term value should get postponed or cut first. Give thorough thought to returns on investment for every area of activity in the company and cut those efforts that are less certain for now.You can always revive them once you are out of survival danger.
In addition to the above, all companies can begin to act on the following immediately:
Focus – I cannot overstress how important focus is right now. In tough times it becomes easy to pursue many options and lose focus on what is most critical for your business. Companies should always be defining and redefining excellence based on market changes, industry innovations, etc. Clearly define what winning looks like in your organization for the next 6-12 months.Focus on the following categories: key operating achievements (the really critical measures), the work processes and metrics used to measure progress, the tools and systems necessary to accomplish what needs to get done, how to implement (the behaviors, beliefs and operating practices to serve you well), the products that will deliver maximum value and growth in the short term, identify you customers and decide how to retain them and/or get more share of their wallet, and finally- determine the greatest threat you have and come up with a plan to mitigate any risks.
Examine & Evaluate – Go through your strategic initiatives (the projects or efforts taking most of the resources in your organization) and decide what you should stop doing and continue doing. Tough times are not generally a great time to begin new initiatives, but if there is something critical to your survival, start it and figure out what you will stop. Determine a scale to subjectively evaluate the value of your initiatives and use it. (You can find more specifics and examples on this in More Than a Minute, chapter 5).
Communicate – It is vital that you keep your employees informed about what is going on, what changes are being made and why. Keep the key initiatives in front of them because, in times of economic uncertainty or decline, when companies or managers don’t update key employees about the organization’s outlook and strategy for coping with changing market conditions – negative “bubbles” start to take over. (See my previous blogs for more on bubbles).Rumors about layoffs and other energy draining beliefs will keep employees angry, anxious and distracted so you must do what you can to minimize them.
Build deeper relationships – Retain your customers. It is a lot less expensive to retain your current customers than it is to acquire new ones. Talk to your current customers more. Assign a senior executive to all of your top customers and give them extra attention. Listen more. Reassign resources in the company to focus on this versus getting new business.
Retain your employees (unless you are in the final stages of survival mode). Your employees know your business so they know what can and/or should be changed to make it better. Tap into them as a resource and learn to do more of the right things versus a lot of things. Listen more and keep employees vested in success by communicating. Consider simple and no or low cost incentives like potluck lunches, lunch & learn sessions, stock grants (for private companies), changes in titles, opportunities to work on retaining customers or doing sales, etc.
I hope some of these tips help you to navigate though this turbulent terrain. It’s no secret that most organizations need great leaders and managers now more than ever!