A few years ago, Sebastian Junger wrote the best selling novel, "The Perfect Storm," which became so popular, the title is now synonymous with any incredibly harsh occurrence.
I believe our current financial/economic situation qualifies. So does Jack Welch. Referring to "Seizing the Storm," he recently wrote an article on what strategies we, as executives, need to now consider.
I believe that some of our best opportunities occur when times are toughest. You can add these ideas to your arsenal of management tools for tough times:
Increase spending in critical areas.
Reducing costs is not only recommended, it is almost always mandatory. However, so many of us get caught up in cutting costs that opportunities are lost. For example, marketing budgets, new equipment acquisition and customer service are almost always reduced in slower times, along with everything else. These are examples of areas that can add revenue, in both the long and short run, while everyone else is hitting the brakes. Here, we spend money to save it.
Set targets and then allow your managers to hit them.
Leaders will be much more effective if they will simply state what is needed instead of mandating specifics. Examples might be, "take $150,000 out of your budget," rather than "lay off five FTE's," or "that line has to generate $50,000 more gross profit over the next six months," rather than "cancel the scheduled upgrades for the equipment." You tell them the what and why; they tell you the how. They are so much closer to it than you, and they almost always will surprise you with their creativity.
Cut costs, not good people.
I once had a CEO that at the first sign of a downturn would call an executive committee meeting and mandate staff cuts. Not only did we lose good people on occasion, we also found ourselves short-staffed when business picked up. The business was hurt instead of helped. Fortunately, we often were able to talk to him in terms of efficiency savings, training or better equipment, rather than just staff reductions.
Aggressively recruit the best people in your marketplace.
Since your competitors may make the mistake of laying off competent and motivated employees, you may find hires available only in poorer economic times. We only need to remember back three years, right here in southeastern Wisconsin, when we had an acute shortage of even marginally competent persons. Accordingly, go get them now when they are most available. Your money will be well spent and serve you especially well when demand rebounds.
Talk to prospective customers who have never listened to you before.
Customers are most receptive during challenging periods. They are more apt to respond to e-mails, phone calls, sales calls and proposals, than ever. It's in precisely these times that contracts change, efficiencies are welcomed, and relationships are cultivated. Spend time, money, and people to reach prospects.
As Jack Welch says, we must, in these periods, take our classic defensive posture, but we need to go on the offense as well. Do this and you'll weather the perfect storm.
Jeff Hengsbach is president of Hengsbach and Associates in Mukwonago and has years experience in company management, with a focus in the printing industry. For additional information, visit www.hengsbachandassociates.com.
9 Comments
An accurate summary of relevant actions. Too often we focus on the easy things to do and miss the right things to do, as listed in the article. I especially agree with the statement "tell them the what and the why; they tell you the how" Great summary of items to consider!
Some great insights and reminders for leaders as we lead our companies through the current market. I agree that this is also a time to seize opportunities.
Our organization has been anticipating these difficult times for over a year. We have aggressively attacked cutting costs and increasing efficiencies which has positioned us to now heavily invest in hiring the best people in the market and invest in critical areas. Mr Hengsbach's blog reinforces for us that we are on the right track. Good stuff.
Sometimes it is difficult to see the opportunities in the midst of problems. Jeff's article provides some insightful and strategic suggestions. In our CPA firm, we are hoping to find those elusive, talented professionals that may be victims of the tough economy and a reactionary employer.
It is difficult to be optomistic and aggressive when times are difficult but it is exactly the approach that is needed if an individual or company is going to seperate itself from the rest and achieve success. Great insight.
A long term, perhaps eternal, perspective is useful in many areas of life. In business,a long term perspective means acknowledging the inevitable up and down cycles. Jeff reminds us that maintaining good people and maintaining spending in critical areas are two components of an effectice long term outlook. Long term business planning also includes minimizing debt in the up cycles which enables healthy companies to continue to invest in their businesses during the down cycles.... a practice which has been violated by so many in today's unhealthy econnmic environment.
Some really good suggestions. Love the goal/target setting versus mandating specific cuts (usually people). The results can be amazing - far exceeding initial estimates - when people have their fate in their own hands. They are far smarter and capable than CEO's with a slashing mentality believe. Thanks Jeff.
Thanks for sharing some perspective on key topics that many corporations are struggling with as we attempt to navigate through this economic maze. I look forward to future articles from Mr. Hengsbach.
An ailing or despairing company might not realize that many options are always on the table. It is good to realize that options exist and to illustrate some of them. In times of difficulty, a company should consider brainstorming to come up with as many options as possible. Then they should be Pareto ordered (maybe assign a number from 1 to 10, or vote to get a ranking). In this article Mr. Hengsbach points out many viable options, which many people probably would not be aware of. I think an excellent point that he makes is to be on the lookout for good people and to be ready to snap them up. A downturn may be the best time to bring in good people, even from the competition.