Winning in an Economic Recession
In the middle of an economic recession, it's easy to focus on moment-to-moment survival, but it's not enough to just stay alive. You must still plan ahead for the when the good times return. That way, you'll be first in line when the economy turns around. Now that we've seen the bottom of the decline, building this plan is even more critical. Tim Whitmore, Vice President and General Manager of Simpler-North America, LP, tells you how.
Tim Whitmore, Special Contributor -- Supply Chain Management Review, 10/29/2009
To survive the current economic recession you've likely reduced your headcount and frozen all hiring, set budget reduction goals by department, reduced inventories and eliminated long-term purchase agreements, aggressively whacked your marketing budget, increased requirements for justification of capital expenditures and de-emphasized commodities in anticipation of diminished margins. So what should you do next?
The key to winning in an economic recession is not simply about concentrating on cash and your balance sheet to survive, but rather to re-tool your business system to gain a competitive advantage in this contracting marketplace. Winning is positioning your organization for recovery, in advance of your competition, to gain market share as the market begins its inevitable recovery. This strategy requires a great deal of courage and a healthy dose of counter-intuitive leadership behavior.
To position yourself to win there are three dimensions of your business on which you must focus-the Three P's-Purpose, Process and People.
Purpose
Make sure you and the rest of your management team is not in denial. Your people will be worried, so you should lead with optimism and a winning attitude. You need to be able to paint a picture of how you intend to win.
At Simpler Consulting, we coach our clients to build a recession plan. This thinking enables leaders to do the following:
1. Define your reason for action.
Why have you decided to change your way of doing business?
2. What is the current condition?
What do your metrics look like? Has revenue fallen dramatically in recent months, have inventory levels risen enormously or are your overhead expenses increasing? Each leader needs to have a solid idea of where their company is currently at in order to know where it needs to go.
3. Describe what results you are looking to achieve, in numbers.
Be bold. Think in terms of double digit levels of improvement in quality and customer satisfaction, lead times/delivery performance, cost/productivity and human development.
Now your reason for action, current conditions and target state are clearly defined. Share these messages with your workers, again, again and again. As a manager it is your job to define and explain what the goals are, share a path to achieving them, motivate people to take the journey with you, and assist them in removing obstacles.
Process
To achieve double-digit improvements in quality, delivery, cost and human development you must transform your business processes. The old way of performing work, fraught with non-value added activity, will not allow you to deliver on your bold target state goals. To capture market share you must be better, faster and cheaper in responding to customer needs than your competition. Some specifics you should consider are:
- Establish tactical goals which lead to strategic achievement (i.e. Policy Deployment).
- Develop a system for measurement and accountability (see #1).
- Align compensation plans with #1 and #2.
- Be keenly aware of the "break-even" point and check it regularly.
- Judiciously expand credit.
- Invest in customer market research (VOC).
- Check capacity for readiness to accommodate increased buying activity.
- Make acquisitions-use pessimism to your advantage.
While your completion is hunkered down trying to protect its cash, you will be investing in rapid process improvement. Customers will recognize your responsiveness and reward you with new orders.
People
Your people are the enablers who will improve your processes and deliver on your bold targets. Management has no more important role than to motivate and engage large numbers of people to work together toward achieving your bold goals. To win their heads, hands and hearts, you must create a culture of continuous learning and an environment that not only accepts, but actually embraces, change. For example, at Toyota they say "we build people before building cars." Consider doing the following:
1. Positive leadership modeling (values, habits, and behavior define culture).
2. Implement human development programs and cross train key people.
3. Hire "top" talent.
4. Renegotiate union contracts for more flexibility.
5. Drive creativity before making capital expenditures.
6. Align resources along value streams.
7. Aggressively enforce safety, attendance and drug policies-rid yourself of the "antibodies."
8. Deliver on meaningful challenges-energizing the team will be the source of motivation to achieve breakthrough results.
To win in this economic recession you must sufficiently focus on sharpening your big 3 P's.
· Purpose-Question and redefine your purpose to attain progress.
· Process-Shortening lead time by eliminating waste in each step of a process leads to best quality and lowest cost, while improving safety and morale.
· People-Your success is ultimately based on the ability to cultivate leadership, teams, and culture, to devise strategy, and to maintain a learning organization
Act now
Start with a candid assessment of where you are today. Reflect deeply on how you must position your organization to win new, profitable business. Then begin your transformation to develop fast, flexible processes that give the customers what they want, when they want it, at the highest quality and affordable cost.
Even though there are plenty of challenges and uncertainty, make a commitment to continuously invest in your people and promote a culture of continuous learning and improvement. My experience in studying successful companies like Toyota, Danaher, HNI, and others, through cycles of market contraction and expansion, has shown the rewards and results will far outweigh the effort required.
Tim Whitmore is Vice President and General Manager, Simpler-North America, LP
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