The ’09 recession economy has rippled change through almost every commercial market. Customer confidence is shattered, consumption habits have radically changed, credit is tight or non-existent and anxiety on the job or at home is at an all time high. Owners and managers are in the thick of this melee trying to find firm ground to operate from. Business conditions are not like they normally were in good times and the question is where is the new “Normal”?
Many of today’s managers have not experienced a strong contraction in the economy or were not in mid-level management to experience the last major contraction, which, depending upon your industry, may have been the early 90’ or mid 80’s or back into the 70’s. Consequently many of the norms that were developed during growth or stable times do not necessarily apply in a contraction economy.
Growth and business success often allow companies to perpetuate and survive despite major weaknesses in their business model which become significant obstacles in a contraction economy. I have observed in many companies the following business “sins” that become critical in a contracting economy:
- Stable or growing business volume creates slack that covers up or absorb inefficiencies.
- Consistent business volume disguises lost opportunities or disgruntled customers experiencing poor customer service.
- Processing cycles (quotes, orders, change notices, project reviews, financial and operating performance reviews, etc.) were not monitored or optimized due to busyness.
- Granular accounting of product and Line of Business (LOB) profit performance was not developed as there was adequate profit to meet shareholder expectations.
- ROI of investments are not analyzed or tracked to understand the impact on the company’s ability to invest wisely.
- Cash flow and line of credit (LOC) were not taken seriously as there was always a way out of a tight cash situation.
Consequently what worked in a good or stable economy becomes very chaotic in an economy with a continuously contracting economy. What worked before fails to provide the confidence and corrective action that was effective in the past. Ultimately owners and managers turn from denial to the reality of “How do I manage this business crisis?” and find the new “Normal” that will allow their business to survive?
The answer lies in facing and dealing with reality and getting familiar with how their businesses are operating on a detail level. You cannot take for granted what worked before in good times will also work in to today’s economy. Everything method or practice should be questioned.
The business needs to have a sharp focus that is inline with the current needs of the business. Top management is responsible for setting and maintaining this focus. The effectiveness of a sharp focus is dependant upon accurate and timely information on how the business is operating. Reporting cycles, for example, need to be improved:
- For Executive management from weeks (or monthly) every week or daily.
- Middle management from weekly to daily.
- For line people from weekly and daily to daily and hourly.
Faster and shorter cycles looking at critical business metrics bring the good and bad to your desk keeping you in close contact with successes and short comings. Taking action sooner rather than later to a short coming will allow the business to avoid an incident of some type that reaching the bottom line or affecting the experience of the customer.
Metrics designed to report and measure the effectiveness of the business model will provide early warning indicators on where the next problem will occur. Instituting a conscious process of monitoring the business at this level will make people at all levels aware of the areas that need to be watched and attended to at their level for the business to operate effectively.
As the senior leader you are responsible for the attitude toward adopting this level of granularity in monitoring the business. You will need to be visible and available to provide encouragement and where necessary instruction on why this level of attention to detail is important.
Employees who are going above the mark in responding and solving issues that ultimately serve customer needs should be publicly recognized and complimented for their action, initiative and meeting or exceeding their goals. The new organizational climate will create tension and interpersonal friction will occur where you (or your lower level managers) will need to intervene in a constructive manner before team work performance is affected.
This new management climate is like putting on a new pair of new shoes. They are initially uncomfortable! But this is where your need to be to make sure your organization is positioned to succeed on any given day. Is it where you were – most likely not. You are now more accessible to your organization. Your presence will allow you to check performance on a much tighter loop than before and where necessary be able to provide corrective action in a timely manner.
You are now operating in your new “Normal”!
