Winning in business is not easy – customers demand more and more value for less cost while competitors try every trick in the book to steal them from under your nose.
Add to this one of the worst economic downturns in over a decade and signs that things will worsen before they improve and you realise that now is the time for the fastest, smartest strategy you and your team have ever had to plan and execute.The two “How-To” components of this feature are designed to give you the very best tools to strengthen your business’s prospects of not only surviving the downturn but, more importantly, being positioned for the upswing that will inevitably come.
You need to Set the Tone
Goal Lower The Anxiety Level In The Office By Being Candid About The Challenges – And Opportunities – Ahead
It’s easy to blame the economy for all the reasons a company is suffering: Customers are cutting back on their expenses, advertisers are trimming their budgets and stock prices are sliding. These problems may, in fact, be attributable in part to the downturn, but going with the “It’s the economy” defence sends a subtle but potentially dangerous message to employees: It implies that the situation is totally out of the company’s hands and left in large part to fate. This is exactly the kind of attitude that raises anxiety levels in the office and disrupts employees’ focus on the problem at hand: turning a business around.
- Don’t just rely on a message
An email from the top explaining why the company is in the red can’t tell employees all they need to know. Speak to them in small groups and be as candid as possible about where the company stands. This is also a good time to suss out any rumours.
- Open the books
Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. But be warned: “If you’re going to be transparent, take the necessary time to teach employees about how the business works,” says Rich Armstrong, general manager of the Great Game of Business, a coaching firm that teaches open-book management. He advises managers to start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow. Above all, keep finance jargon to a minimum.
- Focus on the future
There’s no need to sugar coat it. Pulling the company through the downturn isn’t going to be easy, but emphasising the challenge can have its benefits. “It’s a great time for your employees to realise that they can play a role in discovering opportunities for the company,” says Vince Thompson, a former manager at AOL and author of the book Ignited.
2. Enlist the Team to Fix What’s Broken
Goal Motivate Employees And Find Out How And Where The Business Needs To Change
Traditionally, the top execs decide the strategy and let it trickle down. The problem with this tactic is that it rarely makes the emotional case needed to mobilise employees around a common goal, says Paul Bromfield, a principal at Katzenbach Partners, which has advised companies like Aetna, Credit Suisse, and Pfizer. “This is about problem-solving and discipline, and that’s where employees come in,” he says. “Companies should be harnessing employees in the effort to identify where to cut costs and how.”
Not only will utilising workers’ expertise make them more invested in the company’s success, it also gives management a more honest look at what’s not working. Senior leadership tends to focus on just one area of cost-cutting, Bromfield says, like products, headcount, or moving operations offshore. Employees, on the other hand, can use their collective wisdom to eliminate clumsy (and costly) procedures across divisions. Here are four guidelines for involving staff in the process:
- Identify key influencers
“If you’re really going to mobilise people, you can’t do it from the top,” Bromfield says. Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.
- Let teams do the problem solving
Form groups around the influencers and motivate (rather than mandate) employees to identify what’s slowing down business. Often the best place to start is to look for processes and bureaucracies that annoy the team. Set a basic timeframe to achieve cost savings, but let each group work at its own pace.
- Make it a conversation
Schedule brown-bag lunches or other informal occasions to talk to employees about their findings and where they might be hitting roadblocks. In the early 1990s, Bromfield’s former client Texas Commerce Bank held focus groups with thousands of its employees to find out what procedures most frustrated bankers and customers. Using the feedback, the company nearly doubled its $50 million cost-savings goal.
- Follow through
Many cost-saving programmes fail because management implements the initiative halfway or lets inefficiencies creep back after meeting short-term goals, which doesn’t sit well with employees. Adopt the changes wholesale or not at all.
3. Get Back to Work That Matters
Goal Make Sure Your Team Is Tuned In To Growth Opportunities
The problem with a downturn is that while cost cutting is absolutely necessary, it can make everyone gun-shy about pursuing new initiatives and opportunities for investment. However, if your department, and in turn the company, is going to emerge from the slump in a competitive position, there are a few key investments you can’t afford not to fight for now.
Learn about the customers of your weakest competitors, writes Michael Roberto, a blogger for Harvard Business Publishing and management professor at Bryant University. While competitors are busy shoring up their relationships with large, established clients, it could be the perfect time to swoop in and court their smaller customers.
- Research and Development
Take a cue from Apple’s Steve Jobs. When asked by Fortune magazine recently about Apple’s strategy for the downturn, Jobs pointed to how the company survived the 2001 tech bust by upping its R&D budget. “It worked, and that’s exactly what we’ll do this time,” he told the magazine.
Separate the value-added activities from the wheel-spinning exercises, Thompson suggests in Ignited. Instead of giving up on new projects in a downturn, shift focus so that the team is investing time in identifying and prioritising the projects that will generate the most benefit for the company. Even if the final product will have to wait until more resources are available, doing the legwork now means the product will go to market faster when the time is right – and employees will stay engaged in the meantime.
4. Acknowledge and Reward Deserving Employees
Goal Recognise Achievement, Even If Resources Are Scarce
Employee bonuses and raises are among some of the first expenses that upper management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managers from rewarding employees. “We have always had a policy of rewarding our top sales executives and managers,’ says Ivor Jones, CEO of KreditInform, a highly profitable South African company.
Lack of recognition, both financially and verbally, is one of the things that does the most damage,” says David Sirota, founder of the management-consulting firm Sirota Survey Intelligence.
One easy, no-cost way of recognising valuable employees is to improve their quality of life. “The best reward you can give people is autonomy over how they spend their time,” says Jody Thompson, a former Best Buy human resources manager who, along with Cali Ressler, helped create the company’s Results-Only Work Environment programme. That means giving employees your trust and the flexibility to work at home (or wherever suits them) whenever they want to – without any judgements. This gives workers more control over their time, and sometimes even a little extra cash. Sun Microsystems has found that employees who worked an average of 2,5 days at home each week saved $1 700 (approximately R13 000) a year in fuel and vehicle wear-and-tear.
Danger, danger, danger
Save Rewards For The Worthy
Keeping your employees engaged doesn’t mean rewarding them just for doing their jobs. The most effective rewards are significant but well deserved. Libby Sartain became head of Yahoo’s human resources department in 2001, just as the company received a hard knock from the dot-com bust. She decided that instead of quietly giving large bonuses to over-achievers, which wasn’t providing much bang for the buck, Yahoo needed to regularly single out the top 15 to 20 stellar individuals and teams – not only to reward them, but to help the rest of the company understand what made these employees outstanding.
The following year, the company gave its first Superstar Awards. Candidates were nominated by their peers for significant achievements and awarded cash prizes ranging from $5 000 (R39 000) to $50 000 (R390 000). The Yahoo Superstar Awards programme is now in its seventh year and has honoured employees for contributions like creating the Panama advertising system, inventing a way to advertise on instant messages and fixing a troublesome accounting problem. “This isn’t egalitarian, this is a meritocracy,” Sartain says, acknowledging that some managers resisted the idea at first. “When people saw the winners, they understood why they won, and it took hold and became part of the culture.”
As a result of the positive response to the online worksheets that accompanied the May 2008 Entrepreneur magazine article entitled Benefit or Bust: Managing Your Business in an Economic Downturn, as well as their relevance to this article, they are included as tools to assist owners and managers in their quest to ensure success during the tough months that lie ahead. In order to get maximum benefit from them it is recommended that you carefully work though the questions and exercises. Write down your answers and follow up on what you write. Just reading without ever doing will never deliver the results that drive success and wealth creation.
1. Focus On Value
Identify the value that your product or service creates:
- What customer problem does your product or service solve? Describe the problem.
- How does your product or service solve this problem effectively? Describe the solution.
- How is it different from products or services designed by competitors to solve the same problem?
Identify the target market for your product or service:
- Who are the people, or the businesses, with the problem that your product or service is trying to solve?
- What drives their buying decisions?
- Will the driver of their buying decisions change under tighter economic conditions? If so, how?
Recognise the link between your target market and your value offering:
- Why do the people in the target market (described in task 2) want what you offer (as described in task 1)? Identify specific reasons why your target market should buy from you.
Craft a marketing message that highlights the match between your target market’s needs and the product or service you offer.
- Assume that you are sending a short email – only a few lines long – to all your customers and prospects telling them how you can solve a specific problem that they have. Write the email down.
- Integrate the message into all your communication over the next 90 days.
2. Look To Solve Alternative Problems
Identify new customer needs:
- Take some time to brainstorm – alone or with others in your business – new customer needs that have arisen as a result of the changing economic environment
- Create a mind map of ‘new’ customer needs that relate to the product or service offering of your business:
Questions to prompt your thought process:
- What has changed in my line of work?
- What are people or businesses struggling with?
- Where are the needs of people or businesses not met?
- Where have we seen the majority of customer complaints of late?
- Discuss each of the needs on the mind map; circle those that could be turned into viable new business opportunities.
- Do some high level research into each of the needs identified and write up a mini business plan (no more than three pages) for at least three of the needs identified in this analysis. If you brainstormed in a group allocate each member of the group one need to research and write a mini business plan. Agree to meet in two weeks to review and discuss the business plans and decide which ones to take forward.
- Identify three geographic markets in which you currently don’t operate that you think may offer attractive expansion options.
- Identify people you know in each of these locations who will be able to give you insight into the market including the opportunities and risks.
- Make contacts with each of the people identified in task 2 and get their opinion on advantages and disadvantages of the new market for your product or service. Write down your key findings.
- Look for additional information on the Internet about advantages and disadvantages of the new markets you are looking at. Write down your key findings.
- Based on this evaluation, identify the most promising new market and plan a business trip to investigate this market. Evaluate which product or service offering would work in such markets, and whether trading in or servicing such markets would be viable.
- If things still look promising, plan a business experiment in the new market – take your product or service into the new market for a limited period with a limited pre-determined investment cap. This will allow you to assess whether there is potential for long-term growth in the new market, without risking too much up-front.
4. Focus On Efficiency
- Review all processes and activities in your business
- Identify core processes in the business for developing and delivering products or services to customers
- Within each process identify the key steps related to that process, the costs that are being incurred, and question whether each cost can be eliminated or perhaps reduced.
- Review a monthly profit and loss statement (income statement) for your business and identify unnecessary costs that could be eliminated or scaled down.
- Make a list of monthly costs to be eliminated or reduced.
- From the monthly income statement, identify large fixed costs. Discuss with others in the business whether it would be viable to translate any of the fixed costs into variable costs.
- Create a competition for employees encouraging them to identify unnecessary expenditure and inefficiencies in the business. Reward people who uncover significant savings for the business.