Managing Business Crisis: The New “Normal”

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”!

Are you a Change Agent?

The business climate of today places extreme demands upon executive leadership to constantly adjust the business model to meet a rapidly changing business horizon. New technologies entering the market that obsolete current products and services, global competitors able to offer products with lower prices produced in less regulated and lower labor cost regions, changing preferences of the customer that reduce the product window of opportunity which increases the need for rapid returns on investment represent a few of the issues that keep executive awake at night.

Those that sleep easier are most likely recognized as change agents. Change agents are those who are equipped with extraordinary skills that allow them to anticipate and “lead” an organization through troubled and often chaotic business conditions. Many business organization experts will list the following as success characteristics of change agents:

Analytical
Change agents need to be able to quickly asses the data provided to them and to also recognize that additional data needs to be collected to understand trends and reveal unexpected events. This is someone who can read between the lines and determine if the analysis or numbers “smell right” or not.

Listener
An effective change manager is one who listens well. They cultivate listening opportunities and create an environment that invites information flow in their direction. They have the ability to hear critical comments about the company (even themselves) without shooting the messenger and process the input into timely action and change. Managers who listen and do nothing soon loose the interest of those best positioned to give valid feedback and help the company.

Mediator
Positive conflict resolution is the result of effective mediation where the parties involved are able to return to their respective responsibilities having reached a mutually acceptable agreement. Proactively seeking out and resolving conflict eases organization tension, significantly improves productivity and the adoption of new methods and practices.

Architect
The business model needs to be tailored to strategically meet various business conditions. Business models can quickly age and move from strategic to tactical and from offering differentiated high-value products and services to lower-value price-sensitive commodity products and services. An effective change agent will adjust the design of the business model to achieve and retain a high-value market position.

Teacher and Coach
Change is not adopted easily by most organizations. Change threatens people as it often represents moving into the unknown. An effective change agent will use good communication methods to explain the objectives of the change, teach key performers on what needs to be changed, how to do it and then coach them through the process. Using good feedback techniques the change agent manager will know where to look for problems and obstructions to change and work with individuals to resolve misunderstanding and encourage confidence to perform uncomfortable practices until they experience success.

How do you score as a change agent?
These are just a few of the characteristics and you may not be required to excel in all of them at the same time but you need to be ready to step up and apply the right ones when challenging business conditions occur. Seek others to help you determine where you score. Subordinates may not be the best source of feedback for this purpose. Uses business associates, an organized group of peer executives or an outside consultant to help give you perspective in this important part of your executive development and performance.

Goal Exercise

As the economic climate changes and as the business climate becomes uncertain it is imperative that you and your leadership team have a clear understanding of the mutual goals you are working toward. When business is going “good” this understanding is not regularly clarified and it can be very surprising to learn how your key managers interpret and prioritize their goals. Consequently they do not readily line up with the changing goal set necessary to weather a major shift in business climate.

Making quarterly numbers and meeting or exceeding forecast is not necessarily a sign that your managers are in tune with the goals of the company. Some times numbers can be made in spite of ourselves and yet we tend to believe that it is because everyone is operating as you want them to in every situation. However, success (just making numbers) can cover a multitude of sins.

A tight market, rapid arrival of a competitor, loss of a major customer can stress “reliable” business functions. Previously well-performing groups can begin to struggle or go into denial that a change is upon them. When you peel back the layers that distant us from the inner workings of these groups and take a closer look it becomes obvious that what we assumed were groups running on sound business rules and practices were running on auto-pilot driven by the market and not business discipline. Too often this is not discovered until it is discovered how it is impacting the bottom line.

We are less inclined to audit or challenge performing groups. There are always other more important issues that take up our time and why spend time “fixing something that is not broken”. However, you don’t just get up and run a marathon. You train for it. If you are going out for a run you stretch to make sure you don’t pull something. Do we do this to our businesses?

Take the time to “test” or “measure” your management team and business plan. Conduct a disaster drill that exercises practices and strategies that are rarely used to measure how well you are able to respond.

• What attitudes do you witness during the exercise?
• Was everyone on the same page?
• Did they all recognize the “urgency” of the situation and take appropriate measures?
• What groups already had early warning practices in place that helped them anticipate a change?
• Who were the leaders and who followed? Is this what you expected?
• Who recognized what tough decisions needed to be made and developed an implementation plan to make them?
• Did you discover a consistent understanding of the company goals or do you need to work on refining them, improving communication and execution?

This is a tough business practice to implement on top of everything else that you are asking your management team to do. However, when you regularly exercise under practice situations you will find that you can always respond faster, go farther and last longer when the real thing happens. The boundaries of your goals are sharper and better understood by the key people that are in key positions. Your company will be better prepared and have a good understanding of your strengths and weaknesses to develop a competitive response to unexpected circumstances.

Dealing with Employees Consistently

My experience in manufacturing began in a UAW union plant. I was part of a turnover of the management team designed to bring a fresh approach to dealing with a number of issues that the manufacturing team was struggling with. The most significant issue was the number of outstanding grievances that existed between the bargaining unit and management which consumed a great deal of “productive” time on a daily basis.

Why were there so many grievances? There were issues on both sides. Initial recruiting standards for employees and supervision were poorly defined and cronyism existed where friends and family were often employed without regard to qualifications, temperament or character. This was most evident in the supervision ranks which were the primary interface between management and union employees. Individual supervisors were given a wide birth in what they were allowed to do and how to do it with regard to how they used and directed people. Consequently many “inconsistencies” existed which led to a great deal on complaints as to how discipline issues were dealt with on a daily basis – both good and bad! The union stewards had a field day highlighting and comparing good examples with bad examples and the previous management team responded in a defensive way which further exacerbated the situation.

How was the situation brought under control? Our new management team took on the issue of dealing with employee issues in a proactive way with emphasis from the top down and that consistency was the new way to deal with complaints and discipline throughout the plant. Top and middle level management were constantly on the floor observing, coaching and available to assist front line supervisors as they applied the new supervision process. In some cases “hard” headed supervisors who resisted the new direction needed to move on. Recruiting standards for new supervisors were raised to measure the supervision attributes, temperament and desire to work in a manufacturing line environment. In a few cases, line employees stepped forward and moved into supervision and this also included the first female line supervisors (a rarity in the ‘70’s).

Changes were also made in the recruiting of line employees as well requiring minimal education accomplishments as a way to measure the interest of the prospective employee to advance themselves. This was most effective when a slow down and protracted strike resulted in a number or early employees hired when the plant was first staffed, who were poorly prepared for a work environment, did not have to be brought back and they were replaced with new, motivated employees.

Slowly the contentious work environment changed. Incidents of on-the-line disputes reduced to zero. The triple digit number of grievances dropped to double and then to single digit. The time spent disputing (negotiating) grievances dropped from hours per day to a couple of hours or less per week. The productive climate in the plant changed dramatically and the plant became a top performer reversing the reputation that it had when the new management team arrived.

While there were a number of changes throughout the plant to cause this change in performance the most significant was the change in dealing with people and it had a great impact on me. As I moved on to other management position with companies that were non-union it was obvious that many of the other managers did not appreciate the management environment of a non-union business. I would always address the “violations” that I noticed in my departments to be more employee focused and measuring how consistent our practices were in dealing with performance, discipline and behavior and ultimately the quality of the work environment. Again, this often required people to make major changes in the way they viewed there subordinates and in a few cases changes in personnel. However, the result of dealing with employees consistently was always rewarded with an increase in productivity, reduction in turn over and a positive work environment that attracted high achievers.

Betrayed by Work

Are you proud of the job, position or profession that you have developed over your working career? While you may have reached the prominent position in your company or industry that you have always desired do you find that you are not as comfortable or satisfied as you expected to be. Why is that?

Those who have worked hard at their careers, developing a strong reputation for performance and accomplishment and are often too preoccupied with their work to the exclusion of other people (non-work related), hobbies, volunteer experience and very often their own family. People that fit this profile are described as having a “life out of balance!”. A career focused life is a very self-serving existence which you may declare to be doing it for the company or your family or “??” but in reality it is a pre-occupation with your success. Unfortunately in many cases men and women find that what they were driving toward does not have the “rewards” they expected to receive and enjoy when they got “arrived”.

They are surrounded by people like themselves who are too often focused more on their own interests than yours. You don’t have the relationships (men primarily) that you would think your accomplishments would create or attract. Relationships that are needed when the tough life experiences arrive in your life when you ask “Who do I turn to?”. Is this due to your job or you?

Do not rely on work to be an end all! While you may achieve the desired image you are pursuing, you may not be the person you want to be. How do you answer the following questions?

1. Are you comfortable with people in non-work situations?
2. Are you able to give freely of your time to something other than work?
3. Are you recognized by those around you as a genuinely happy person?
4. Do you constantly seek the approval of others?
5. Is your life constantly too busy where even standing in line for tickets at a theater is agonizing?

If you found yourself answering yes to these questions then you need to re-examine “the life you always wanted”. More work-work is not going deal with these issues. You need to step back and take a look at where you are going and change the manner in which you approach your job. What am I talking about?

1. Consciously focus on other people. Those around you at work, the waiter that serves you, the neighbor down the street or your children at home that you may have never looked at in a different way in terms of what is going on in their lives. Spend time considering what they are dealing with in their lives and if possible and appropriate offering advice or support (i.e. helping them move on a weekend) to let them know they are not alone.
2. Commit to serving in a volunteer role – youth sport coach, non-profit position, ushering at church – where you give of yourself and serve outside of work.
3. Look for humor in your daily life. Engage with people who have the ability to find joy in what they do on a daily basis and have them help you see similar circumstances in your life and how to laugh at them or enjoy them with humor.
4. Do something anonymously to reduce your tendency to only do things that bring acknowledgement. Help someone without telling them who you are. Send money to an organization or person in need in a way that they will not be able to trace it to you.
5. Find a way to bring patience into your daily life. Let someone ahead of you in the check-out line. Find a way to bring solitude into your daily routine – get up 15 minutes earlier, schedule time in your calendar to not-be-busy. Use this time to bring order to your life.

By focusing on others, giving of ourselves in a volunteer role, seeing life through the lens of humor, helping others selflessly and doing so with an attitude of patience we bring a new bearing to who we are and a value to life and others that is not based on work. One day we will be “retired” and then what? Will that be the time to change and be a different person? Make the change now and expand your job satisfaction to be based on life beyond work so that when the rewards of working fall below what you expected and you feel betrayed you have something to fall back on that is far more rewarding.


For more information about “The Life You Always Wanted” click here.

Framing Job Value

Job satisfaction is often talked about in terms of what the company needs to do to make the job more rewarding and satisfying for the employee. The company has basic obligations to provide a reasonable and competitive work environment, effective tools and systems, training and compensation. Intangibles such as motivation programs, social opportunities to develop work relationships and teamwork add to a positive work environment.

Even if the company excels at all of these efforts, employees (owners included) can still struggle with job satisfaction. Why? Why does a company have a poor to mediocre attitude on the part of its employees when they appear to be doing all the right things. What are high performing companies doing to create a highly motivated work environment for their employees?
I recently heard a story about Bill Pollard, now the retired Chairman of ServiceMaster, who had to deal with a work performance issue at a hospital where the cleaning crew (janitors) had a morale problem toward their work duties resulting in a customer satisfaction problem. The crew seemed to be above average individuals and well qualified to do the work but they viewed themselves at the bottom of the pecking order in the hospital and this translated to the attitude and self image that they carried into their daily routine. They did not feel that what they did on a daily basis – clean floors, restrooms, hallways, etc. – had any value.

ServiceMaster took the novel approach of “framing” the job that the janitors were doing into an integral role in joining the healthcare professionals to improve the healthcare delivery and treatment of the patients. Turning their focus from cleaning floors to providing a “clean” facility where people could be treated better changed the value that the janitors placed on their jobs. Consequently the floors were cleaner, the restrooms regularly serviced and cleaned and job satisfaction improved significantly leading to a satisfied customer.

Are other companies helping their employees frame their jobs into one that has high value?

• Toro (lawn mowers) sent manufacturing employees to customer locations during slack production cycles – high quality golf courses such as Augusta – to work alongside the users of the equipment that they assembled and rarely had a chance to use or see in use. Result: These employees came back with recommendations on how to improve the product and produce a quality product.
• Disneyland has for years used the approach in training employees that they are actors providing entertainment for visitors – guests. They each have a role to play and are conditioned to be in character when in the presence of guests to create a high quality customer experience.
• Les Schwab sells tires but when you enter the parking lot and park your car you are often greeted at the car by an eager employee to respond to your needs. They don’t just shuffle over to the car since it is rare for them to not run over to you and present a professional appearance – clean uniform, recent haircut, and upbeat greeting.

There are many other examples but the common practice observed is the intentional effort to focus the employee on a role of value that they are satisfied with that will best serve the customer. Is this the practice at your company? Is this how you approach your job, how you interact with your employees and most importantly how this carries out to the customer.

Establishing a company signature culture such as Disneyland or Les Schwab can rarely be implemented without the full endorsement and “walk-the-talk” attitude from the owner or leadership team. This is something that is not someone else’s job and if you want to do it right, needs to permeate all that you and the rest of your company does on a daily basis. Inconsistencies will be quickly recognized and will erode all of the good efforts that others may do and you will come short of your objective.

Take a look at how your employees approach their jobs. Do they see value or drudgery? Come alongside them and redefine and “frame” what they see in their jobs into one that has value. You will be amazed at the impact this will have in their work life, personal life and the customers impression of your company.

Get the Facts!

Our new innovative product on the new 747-400 was experiencing a high failure rate during installation. Boeing engineering pointed the finger back to us as producing a failure prone product. However, due to our recent adoption of SPC tools and processes the failure modes were not indicative of a manufacturing related defect or failure.

Boeing was new to the SPC process and even though they were dictating that many of their suppliers adopt it they put aside our SPC evidence and remained firm in their belief with non-SPC data as their basis. We made repeated requests for Boeing engineering to go out onto the assembly line and talk to the installers to get a first hand understanding of we configuration in which the units were failing. These requests went nowhere and were denied. They were hesitant to do their own due diligence and have engineering talk the installers to get further details – a classic engineering/manufacturing silo effect.

Coincidentally British Aerospace was also putting our product, same design different package, on their new regional commuter jet the BAE 146. I made a courtesy visit to their factory and they greeted me with the news of our product “failing on the line”. I took the opportunity to ask if I could go into an aircraft where the product was installed and talk to the installation team. They immediately complied in an interest to get to the bottom of the problem.

While I did not have any detail failure analysis of these units I suspected that the failures they were having were of the same order as those at Boeing. I was escorted into a selected aircraft that was in the stage of assembly where our product was installed. I was introduced to the supervisor who quickly confirmed that the units were failing at a high rate. I asked to talk to the actual person who installed the units. He was nearby and said that yes, the units were failing but that was not the whole story. When the installed unit failed he would install a second unit and if it failed he then tested the wiring harness and almost in every instance he discovered a short in the wiring harness that was damaging our product. Our product was in fact testing their wiring harness to see if it was defective or not – an expensive proposition.

I asked if the wiring harnesses were high pot tested and they did not know. The engineering manager that I was with took me over to the wiring assembly area where the harnesses were assembled on large tables. The supervisor there said that at that time the harnesses were not high pot tested but they had a request into management to purchase the test adapters and equipment for the test but it had not been approved.

I returned to Seattle and immediately called for a meeting with Boeing where I presented my findings from my visit to British Aerospace. They were somewhat skeptical that what happened at BAE would occur at Boeing. I requested that they provide evidence that the 747-400 harnesses were high pot tested. A week late Boeing engineering reported that in fact the cause of the failures of our product was resolved. An immediate change had been made in their wiring harness process to high pot test them before they were put on the aircraft. Boeing accepted responsibility for all of the return units the “failed” and further failures dropped to a near zero level.

When failure modes don’t add up, trace the problem to its root cause and understand the failure environment. Go to the source and “get the facts” to make sure you are getting the real story. Too often organizational barriers filter information which is further distorted as it is passed through multiple people on its way to you and even within your company. It is amazing how quickly problems can be solved when you have the complete information.

Get the facts!