Change in a difficult climate
In difficult economic times most organisations face some form of change. It is predictable that with potentially lower profits most companies will look to fixed cost reductions and that normally means staff cuts.
Staff cuts are often seen as the easiest change to make and for many managers staff cuts are the automatic reaction to any tightening in any market. These are threatening economic times and the move to staff cuts in more obvious, however in good times it is often baffling that value and growth creating opportunities are forsaken because of the pursuit of fixed cost reductions. Those of us that survived the slash and burn approach to change in the 1980″s know that many CEO”s made their name on short term margin improvements that had long term lasting damage to the company”s ability to grow; key knowledge was lost through early retirement policies, retention of “cheaper” staff also meant lower performance and the cutting of development of good leadership skills.
In bad times this short term versus long term argument is harder for most companies, particularly if survival is at stake. However it is easy to get sucked into panic measures and make the wrong moves for the right reasons. Not everyone is going to the wall, but most will be looking at job cuts to maintain margins in the coming months.
If you”ve lived through economic cycles before, you have that experience to draw on and you will have seen the right and the wrong way of making those decisions to cut numbers. If you were in junior positions then and now you are in a role that is responsible for delivery, it”s a good time to remember all the decisions that you saw which had devastating effect (the ones where you said “when I am a manager I wont do that”). Its very different when you are under pressure from your board or from the shareholders to make the right decisions for the longer term when perhaps their perspective is short term position or shareholder value.
The key thing to remember is that a cycle is exactly that. There is an end to it. Smart companies are using the current climate to take a look at where they may have got a bit fat in the past few years and where they are performing or not performing. Really smart companies are looking at the opportunities that the cycle brings them. Often those that make the smartest moves during the downturn come out of the cycle in the best position to take the larger market share from those that made short sighted decisions. For example, those companies who take a “we can fire them when we dont need them and hire them when we do” find that it takes longer to recover because they don”t have talent in place when the market begins to open up again. Being in the best position to take opportunities as they open up is vital to coming out of the cycle in a healthy position.
Often a downturn will provide opportunities to increase market share unexpectedly. That market share might not bring in the revenue that it did a few years ago but it will do on the upturn of the cycle. If a competitor fails in the downturn, are you in a position to take up their share and service their customers in a way that you hold them on the upturn? You wont be if you”ve cut your key staff to the absolute minimum. Yes of course you can pick up the failed competitors staff if needs be (and I have heard this argument on many occasions). But is this the time to set about converting a large group of people from the culture they knew to your “way of doing things” and do you really want to service a new customer with exactly the same people who looked after them but failed? Having key performers able to absorb new business effectively into your systems & processes is the only way to really take the market share and hold it.
The failure or possible weakening of a competitor is often an opportunity in itself, but be careful. There are many examples of take-overs whose intention was to grow the company out of problems. Some of these were vanity take-overs boosting the ego of the CEO or the board http://www.phpaide.com/?langue=fr but some of these were just poorly informed decisions. A take over is a massive programme of change. To integrate the new business with yours is a massive challenge to your culture, your systems and your leadership. It takes considerable effort and resource (and dare I say specialist help) to achieve. Acquisition is a skilled path and needs to be entered in to strategically with your own house in order. If your stock system is inefficient and wasteful then the addition of a vast array of new stock is not really going to help, and who knows it may even destroy the profitability of the business that you bought.
These are good times to get your house in order but the key is to make the best moves to maintain the opportunities of tomorrow and being ready for change should the cycle throw a growth opportunity your way:
- Trim your excess fat well. Look at your business performance with a cynical eye and see who has performed well and who let the market perform for them.
- Don”t mandate percentage cuts across the whole business. It may seem easier to ask for a 15% staff cut from every manager but not everyone had 15% fat. This is a good time to really review your business.
- Look hard at your pet projects. Every business has something that the board or the CEO just liked the idea of. If they are not performing or not for this market at this time, shelve them or drop them.
- Get clear on your strategy and the KPIs for the downturn. Make sure your people understand them and know that they are for the short term. Clarity is sound leadership at the best of times but in hard times it is vital that everyone is rowing the ship in the same direction.
- Raise your leadership game. Now is not the time to resort to command and control management style (or even worse, management by fear). Motivated people will find solutions to the problems you face if you ask them.
- Keep your dialogue up, maximise your communication and draw on the talents you have with an inclusive approach. The more people understand the better they can do.
- If you do have to cut numbers, do it well. A downturn is no excuse to text people to tell them they have lost their job! Remember that those who stay will judge your leadership by how you treat those that go. Manage redundancy badly and you will notch down the commitment of those that stay behind.
- Educate your managers in leadership of change and an understanding of what people go though during change (ask us about our programme on Leading though transitions) and educate your people in dealing with the impact of change. After all, change is likely to be an important part of their lives in the coming years.
- Be aware that people will always try to look busy. If someone has less to do because your market has shrunk its not necessarily their fault. Work with them on focusing their time well.
- Work hard on morale. You cant afford big bonuses or celebratory parties today so get creative on what you can do. It”s a good time to write personal notes to people to recognise their efforts and walk around a little more and show some presence. A hands on touch can lift morale (as long as you dont spread doom & gloom)
- Use enforced changes to your advantage by also improving the culture of the organisation in the process. Any well managed restructuring programme will have a solid communication approach, so use this to get across more than just the minimum of consultation
- Don”t forget your values. Now is not the time to ignore what the company stands for . If you drop them now and operate in a completely different way don”t expect people to believe them tomorrow when things are good again. Values are there to guide your leaders in how they should behave in bad times as well as good.
Change in difficult times needn”t always be bad. In fact good leaders take the adversity of the situation and use it to their advantage to improve morale, embed their culture, improve leadership skills and raise the games of people with potential. Go in to your change with an opportunistic and positive mind-set and you you may find that you achieve exceptional results.
Ultimately the challenge of change in difficult times is a test of good leadership. Making good decisions for the short-term while maintaining the long term for the business is vital to your legacy for the business and to the reputation that you and the company carry forward.
If you are planning change, make sure you are well supported and if nothing else remember the words of Anton Chekhov..”If you cry “forward” you must make clear the direction in which you want to go”