Just about every business person I talk to will say that 2009 is the worst year they year have faced in their business life. While results for some weren’t as bad as they thought, there was a lot of apprehension about the future. How bad will it get? Am I doing everything I need to do to make sure that we survive? What are the long term implications of the decisions that I am making now. These are just some of the comments and questions that I have heard.
I am sensing more optimism, although it is somewhat guarded about 2010. Most people are glad to get this past year behind them and move forward into the future. While no one likes going through difficult times, there may be some beneficial consequences. Nature has a way of doing this. For example, there are beneficial consequences of natural forest fires. Rather than harm the ecosystem, fires actually create a healthier ecosystem. Fires provide heat that is required for some species of trees to germinate. Fires create organic material that replenishes food for plants and animals. Fires remove harmful undergrowth which chokes out beneficial plants and provides fuel for more serious fires.
Difficult times can benefit businesses as well. Over time businesses develop “undergrowth” just as forests do. Businesses lose sight of their fundamental business, and start to add a lot of extraneous activities and programs. This can take the form of new staff departments and accompanying initiatives, more bureaucracy and paperwork, unprofitable products or services, and accepting less than outstanding performance from employees. Tough times force companies to evaluate everything that they do and eliminate that which does not contribute directly to the bottom line. Business is really pretty simple. You develop a product or service that someone wants, you sell it, you produce it, and you deliver it. This is the core of any business enterprise.
As the economy recovers, businesses should be very careful in adding back those things which they eliminated during the down turn. I am a big advocate of considering outsourcing or contracting everything that is not associated with the core process of a business—design, sell, produce, and deliver. Outsourcing, or at least exploring outsourcing, gives a business a much more realistic view of costs associated with support processes and activities. They are much better able to make objective decisions about the ROI on such activities. More and more companies are outsourcing or contracting support services that have been traditionally done in house. These include such functions as accounting, human resources, information technology, purchasing, and distribution.
Another benefit of difficult times is the ability to upgrade the human resource capability of the organization. As organizations downsized, it was an opportunity to let marginal performers go. This sometimes entailed keeping a new person with significant potential at the expense of a long term marginal performer. While these decisions were never easy, the need to reduce work forces made it less difficult. Companies that just used seniority as a basis, unless they were bound by a union contract, missed an great opportunity to upgrade the quality of their human assets.
On the flip side of this, as companies begin adding people, they should have very high standards and expectations. There is no reason that businesses should have to accept mediocrity as they rebuild.
The downturn and reduction in work force has been an opportunity to broaden and develop the skills of the organization. People have been asked to step up and take on additional responsibilities. One downside of this, is that some may feel overwhelmed or even abused because of the additional work. Companies need to provide the necessary training and development to help these people cope with the expanded responsibilities.
As part of its restructuring activities, General Motors has decided to eliminate about half the brands or models of car that they produce. Tough times force companies to reevaluate profitability of its products and services. Most organizations continually add to their portfolio of products and services without critically looking at individual product or service economics.
Sometimes they justify an unprofitable product as necessary to keep profitable business with another product. This is commonly referred to as the “loss leader” strategy. The loss leader strategy is not a bad strategy if designed and executed properly. It is part of the marketing expense of a business. However, just like any other marketing program, it should be evaluated on its economic merits.
Tough times also get us individually and as businesses to take a different view of credit and debt. The company that I worked for until 1999 went bankrupt last year and put over 1000 people out of work. The problem was not technology or product profitability, but rather debt. The company simply could not generate enough cash to pay off huge debts associated with ill advised acquisitions and expansions. The CEO had delusions of becoming a company become bigger than the current business could support and financed it with debt. It was like buying a $1 million dollar home with a $100K per year salary.
As you look forward to 2010, have you seen benefits in your company as a result of the downturn? Have you cleaned out the underbrush that may be choking off productivity and growth? Are your human assets stronger? Do you have a system is place that you hire the “best and the brightest” when there is a need to expand your work force? Has your organization comes to grips with the reality and consequences of too much debt?
Wishing you a peaceful and joyful holiday season and much success for the coming year. Let’s all be thankful for what we have and celebrate our many blessings. Despite all the difficulties, we still live in the best country on earth.
Author Resource:
Ryan Scholz works with leaders whose success is dependent on getting commitment and high performance from others. He is author of Turning Potential into Action: Eight Principles for Creating a Highly Engaged Work Place. For more information, visit his web site at http://www.lead-strat-assoc.com .
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