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Managing Smarter In A Recession


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Proactive management tips in a down economy

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Managing Smarter In A Recession

  1. 1. White Paper: Managing Smarter in a Recession See also Selling Smarter in a Recession An economic downturn hits every business to some degree. Often the biggest influence is loss of consumer confidence which diminishes their buying with a ripple effect throughout the economy. The current recession is exacerbated by the mortgage meltdown and Wall Street fiascos. But, whether you deal B2B or B2C, you don’t have to simply accept the consequences in your industry helplessly. By changing your focus from what you need to cut to what you can grow, you can make a difference in how well your company fares…and even come out of the recession in better shape than before. To do that requires looking at your operation from both the “30,000-ft” and “1,000-ft” levels. Some of what follows may be obvious, but some may be things right in front of you that you haven’t noticed. The most valuable step is thorough pre-planning: a Business Plan that defines systems (operational, marketing, sales, and financial) with contingency plans for changes in marketplace conditions with criteria and measurements for both ongoing and modified functions. Better decisions are made when not under the pressure of immediacy or financial necessity. But, it’s never too late to think through a plan, and it should be approached from the temporary distress on to the recovery when the economy strengthens. “Seat of the pants” decisions made in the haste of declining revenue may have longer negative impact than the temporary solutions they provide. This is often where an outside consultant can be of greatest value when that person lacks the “blinders” of “this is the way we’ve always done it in our industry.” If necessity breeds invention, recession should breed innovation. Credit/Financing But, how do you pay for innovation…or buy inventory or meet payroll or even keep the doors open? Credit has dried up, but it hasn’t blown away. If you’re like many other small business owners, that bank you’ve relied on for years is no longer your friend, and funding you may need may appear to be impossible to find. Enter the non-profit Los Angeles Economic Development Corporation and its nationally-recognized Chief Economist, Jack Kyser. His staff constantly keeps their fingers on the pulse of every aspect of Southern California (and State of California) business and finance, and they’ve launched a new website to provide resources to small businesses. In particular, Choose L.A. County has downloadable pdf files of various categories of lenders who are still working with small businesses through the credit crunch. There may be someone on that list that fits your needs precisely. Maybe you need to take a hard look at perks, particularly your own and those of other family members/owners in the company. While it’s nice to have a 100% car to write-off, if the execs started paying for their own gas, maintenance, and car washes for a while, could that add up to enough to prevent cuts in vital areas? And, what about those generous bo- nuses for the owners…would sacrificing them for a while help improve your cash flow? And, would cancelling the an- nual management retreat be preferable to cancelling the company picnic or Christmas party? Collaboration In tough times, it’s even more important to rely on communication and collaboration among your staff. You need to be open and frank with your employees about the impact of the economy on your marketplace and your company. Fear based on unfounded rumors or lack of information can seriously harm your operation, but the opportunity to discuss ideas to improve productivity, reduce costs, or boost sales can be invaluable. You’ll never know which employees might have great ideas to help you be more successful in a bad economy until and unless you give them the chance to bring them up and discuss them. A short, weekly meeting can also be a great morale booster. Function vs. Organization Many small companies have grown with an organization chart based on the people in place. Optimum productivity and efficiency is best achieved when the company is built on a function chart to which staff skills are hired to match identified needs rather than relying on what certain people happen to be able to do. And, often overlooked, is provision for backup for functions when necessitated by an unforeseen circumstance. The value of complete job descriptions (which include the specific factors on which the employee’s performance is evaluated) cannot be overstated, and performance reviews must be done regularly, even if that’s something you’re not personally comfortable in doing. Also, by working from a © 2009 Bob Hougland RGH MARKETING! Box 92166 Pasadena, CA 91109-2166 626-583-9000 (tel) 626-583-9111 (fax)
  2. 2. White Paper: Managing Smarter in a Recession See also Selling Smarter in a Recession function chart, it should be relatively easy to define duties which are not full-time and which can be outsourced on a part- time basis, often saving money year-round. That may well facilitate combining duties which require similar or compli- mentary skill sets for peak efficiency and selectively outsourcing part-time activities. Just in the financial area alone, I know of a high-tech service company with a rent-a-CFO half-time (during the rest of the week, she performs a similar function for a regional fast food chain). And I know of a company that laid off their bookkeeper (who then got a full-time job elsewhere), and now relies on him for three evenings a week by improving on the automated portions of invoicing, receivables, and payables. But, the reality exists: when revenue drops, some degree of cost-cutting must follow. That’s much easier done with a contingency plan already in place, but without that, it’s easy to make some fundamental mistakes. In most cases, the worst thing a business owner can do is drastically reduce…or even eliminate…marketing, promotion, and/or advertising programs. When volumes are down industry-wide, there’s still available business out there, so it’s not the time to become invisible. Even more important, if your competitors are making the same mistake and cutting back or eliminating their marketing efforts, you’re passing up an opportunity to actually gain market share which you will have turned into cus- tomer loyalty by the time the economy recovers. This is truly possible…I’ve seen it myself. Incentives Incentives for excellent performance are even more important in a down economy to maintain morale (if you can figure out how to afford them). Studies have shown that, rather than just money or an award, gift certificates have the greatest impact. Consider certificates for “dinner for two” at a nice area restaurant or, on a larger scale, tickets for the family to a nearby theme or amusement park. Why does this approach work well? Because it’s triple reinforcement: employee pride when it’s awarded, more pride when taken home and shown to spouse and family, and more pride when actually used at a restaurant, event, or place. During poor economic conditions, morale and productivity become even more important, and a few incentives can help keep both at high levels. Authority and Responsibility Have you properly balanced delegated authority with responsibility and accountability? Or, have you even adequately adopted delegation in your small company? I once knew a business owner with 60 employees who had to personally approve all purchases, even a box of paper clips. He was an entrepreneur who was afraid to let go. With proper accountability, you can improve your efficiency and free up some of your time for more important matters. But it all hinges on having business systems in place so that there is a defined manner in which operations are conducted. And, accompanying those systems is the need for benchmarks and measurements to assess how well the process is working. This doesn’t require creating reams of new reports, but rather deciding on the key measurements that truly reflect successful effort and monitoring them. Proactivity So, how do you gain when business is down? By working smarter rather than harder. Think about how you can help your customers/clients in a manner that will position you as a solutions company rather than a vendor and help them to con- tinue buying from you. In B2B, discuss with your clients (even at the executive level) the problems and issues they are facing to see if there are any kinds of help you can provide to benefit them and set you apart. If they’re resellers, offer ideas to help stimulate their sales to their customers. In B2C, insure all your public-contact staff are equipped to address economy-related objections and reach out to past customers with special offers for an additional purchase. Make sure your staff meets regularly to discuss and exchange ideas about objections they hear and how they handled them. Consider developing an “Objections and Responses” cheat sheet and/or “Benefits Summary” reminder. But, make sure you con- tinue two things: proactively maintain contact with your customers and regularly assemble your marketing and sales peo- ple to exchange ideas. Keep in touch with your customers. A CEO I know got a call from a customer who’d just learned his purchasing agent was planning on changing vendors, but he wanted to give his long-time vendor another chance. The two worked out some mutual concessions and the account was saved. Surveys have shown it’s more difficult to fire a vendor with whom the customer has an ongoing, first-name relationship. © 2009 Bob Hougland RGH MARKETING! Box 92166 Pasadena, CA 91109-2166 626-583-9000 (tel) 626-583-9111 (fax)
  3. 3. White Paper: Managing Smarter in a Recession See also Selling Smarter in a Recession Don’t try to take up the slack yourself. Your job is to look forward and steer the company ship, so don’t let yourself get bogged down in day-to-day operations. Many small business owners have difficulty delegating, but if proper authority accompanies defined responsibility and is backed up by a defined system, benchmarks, and budgets, you’ll be surprised what some of your people can do for you. And stop thinking in terms of rigid vertical department boundaries: many processes can be better run…and problems like quality control solved…by a multi-departmental committee paid incen- tives out of a fund you set aside based on improvements they effect. Clear from your mind the belief that only the boss can supervise something; often, the people down in the trenches have better perspective on issues than the boss. Keep yourself and key execs free to plot your course. In the long run, you’ll do better than if you get diverted to filling orders or performing office tasks. Trade Associations In B2B, trade associations can be an invaluable resource, but perhaps not in the manner you might expect. Membership in the association(s) of your industry may well have less value than those of the industries to which you sell. Get and keep at least an associate membership and make an effort to cultivate the Executive Director or other key staff. These people are usually old hands out of that industry and can give you valuable insight into what’s happening in their business…and with specific members…that you can’t get elsewhere. In B2C, participation in local business and community organizations keeps you in front of the public and you can glean insight from officers and members alike. If you can afford it, donation of door prizes, etc. will remind all attendees of who you are and what you sell. Remember that donated products or ser- vices cost you at wholesale while perceived at retail, and are therefore more cost-effective than cash donations. Forecasting The quality of your forecasting can play a big role in how you approach financial austerity when it becomes necessary. Most forecasts overlook the most important component: substantiation. A forecast that doesn’t document both how the numbers were derived and the assumptions/knowledge on which they were based offers little, if any, flexibility when con- ditions change. While you should never discard a forecast, neither should it remain a static document. It should be up- dated as often as quarterly, according to your industry, based on changes in your marketplace. But you can only do it ac- curately and realistically if you’ve substantiated how you got to the numbers you started with and what variables come into play over time. Actually, the substantiation is more important than the numbers, and I once had a client tell me his bank cut 3-4 weeks off the process of approving financing to buy out a competitor because they were able to skip the usual step of creating their own forecast because they understood the one he’d built and did their due diligence on it. Multi-tasking Myth Avoid the mistake of approaching your activities by multi-tasking…or encouraging your employees to do so. Once touted as the means to get more done, it has fallen out of favor as studies have shown that, at the end of the day, a person actually accomplishes less and is more tired more by multi-tasking than by finishing each activity, then moving on to the next. A while back, I conducted exhaustive online and library searches for articles on multi-tasking and could not find one in fa- vor of this supposed revelation since 1998; in fact, all since then were negative, either on the grounds of productivity or medical impact. Here are four significant points I found:  Medical authorities have identified multi-tasking as a contributant to depression, anxiety, forgetfulness, and attention deficit. It can have a more negative effect on IQ than marijuana.  MRI imagery shows that brainpower doesn't increase to match the workload of doing two things at once, and toggling one's attention between tasks creates additional stress as the brain tries to prioritize activities.  Peak performance on a task is hampered by taking on a second task, and completion actually takes longer. You'll get more done in a day by insisting on blocks of uninterrupted time for specified activities.  Multi-tasking and its costs have become a concern of insurance underwriters, management consultants, and efficiency engineers. © 2009 Bob Hougland RGH MARKETING! Box 92166 Pasadena, CA 91109-2166 626-583-9000 (tel) 626-583-9111 (fax)
  4. 4. White Paper: Managing Smarter in a Recession See also Selling Smarter in a Recession Just in time for the impact of the sluggish economy on most businesses come two new reports on the fallacy of multitask- ing. You and your staff are likely wearing more hats these days, all while being bombarded with a multitude of small in- terruptions and distractions. Don’t take the bait, say the experts. Finish what you’re doing. Set aside a block of time each day during which you’re not interruptible. Focus on one thing at a time. Check your e-mail or Blackberry at scheduled intervals rather than each time you think of it. At the end of the day, you will have been more productive. The panel discussion reported by points out that stopping one task to deal with another is an interrup- tion, not working simultaneously, and the impact of recovering from that interruption can be worse than the interruption itself. Basex estimates up to 2 hours of productive time is lost each day to interruptions. The panelists dis- cussed the real villain is information overload, citing the common addiction to constantly checking one’s e- mail or Blackberry. A Newsweek article presents an apartment-hunting scenario to illustrate the point that multitasking exhausts the body’s resources and reduces the quality of decision-making. In the study, test subjects were mentally exhausted by the constant need to refocus their attention. Then, half were given lemonade to boost their glucose level and they demonstrated better decisions on the apartment problem than did those whose glucose levels remained low after multitasking. While your dealing with all the stresses of the impact of the sagging economy, rising gasoline and food prices, sinking real estate values, the devaluing dollar, and everything else that’s temporarily out-of-whack now, set some time management rules for yourself, stick to them, and encourage your employees to do the same. Optimum productivity in these trying times can be crucial to your bottom line. See references: Information Overload-Is There A Cure?,, March 31, 2008 and Overload: The Physiological Toll of Multitasking, Newsweek, April 8, 2008 [For a free zipped file of pdf copies of articles on multi-tasking, e-mail me at] Competitive Cooperation There’s never a need to make your competitors your enemies or vice-versa. Friendly competition helps everybody. I was told by the CEO of a cardboard box manufacturing company that he’d had a long-standing arrangement with a nearby competitor for when a printing press broke down. Either company could run their jobs at the other’s site during an off period at agreed-upon rates. As their volume shrunk some as the recession developed, they carried the principle further by eliminating their full-time third shifts by combining batch runs, alternated between the two locations, that minimized their layoffs. Whatever the area of your operation, there is often a different/improved way of accomplishing it, so be creative as you look for ways to do old things in a new manner. Small Business Marketplace While the Small and Disadvantaged Business Program administered by the Small Business Administration under a Presi- dential Order is often criticized as ineffective, I’ve found that those who gripe the most about it are the same ones who don’t work the system properly. It’s not a matter of signing up and waiting for orders; rather, it’s a door-opener to give you an advantage in marketing your company to all Federal agencies, Federal contractors (companies who do at least $1- mil annually in business with the Government), and entities which rely primarily on Federal funding. Right now, the Feds are an excellent business target because most agencies are hiring and buying, and even with all the budget woes, the Feds are still paying their bills in a timely manner. Once set up as an approved vendor with electronic invoicing, payment is generally made by electronic funds transfer in about 10 days. And, many more Federal employees have Visa cards with up to $10,000 or even $25,000 limits now. If you have something the Government or major contractors would buy, that may be the means to make up for lost revenue from your existing customer base. And just because you sell B2C doesn’t eliminate you; there are many consumer products bought by Government entities, and many prime contractors are multi- faceted corporations. Your Attitude Look at the economic crunch as an opportunity rather than a problem. A glass-half-full approach will get you farther than a glass-half-empty start. Focus on the business you’ve got and that’s out there, not on what you may have lost or stand to lose. Let your competitors be the ones to suffer the most. You be the one that fares better than most in your industry. © 2009 Bob Hougland RGH MARKETING! Box 92166 Pasadena, CA 91109-2166 626-583-9000 (tel) 626-583-9111 (fax)
  5. 5. White Paper: Managing Smarter in a Recession See also Selling Smarter in a Recession Back to my original premise, the key to winning in good times as well as bad is a documented plan. I think it was best said decades ago by General Dwight D. Eisenhower when he said, after the D-Day Invasion, that “our plan itself was ir- relevant---it was obsolete as soon as we hit the beach, but the planning itself was everything.” In other words, he attrib- uted the success of the invasion to having forced his staff to think through alternatives and contingencies so that, even if the plan wasn’t followed exactly, there weren’t any surprises because everything important had been addressed and documented in advance. The thought process is the most valuable component of any plan, and I suggest it’s worth the nosebleed of going through the process for both short- and long-term benefit. And if a fresh, unbiased point-of-view would help, that’s where a business or marketing consultant can be worth every dime you invest. Overall While you can’t control the recession, you can control your company and your attitude as well as the attitudes of your people. Don’t let the recession put you into reactive mode; focus on making your business better and growing it and not on how to just get by. Think proactively. Act proactively. In other words, take control and manage your situation. 07/09 © 2009 Bob Hougland RGH MARKETING! Box 92166 Pasadena, CA 91109-2166 626-583-9000 (tel) 626-583-9111 (fax)