Hunkering Down and Competing

There's lot's of soul searching going on right now as businesses hunker down to make it through the downturn. Most CEO's seem to be coming to grips with the notion that a turn-around isn't imminent and more, stronger action is likely necessary in order survive/thrive.

If survival is the priority then cash flow and cost containment are imperatives.

Cash flow starts with getting receivables in fast and payables out carefully. For many that surely seems like a no-brainer. However, experience suggests many CEO's would be well-advised to sit down with their CFO's and make sure everyone is on the same page - that there is a daily effort to collect - and a clear, formal strategy around who, what and how fast to pay.

Cost containment starts with strategy. What are the operating priorities in the downturn (marketing? sales? people?) and how will those priorities be protected? From there, managers can identify spending that isn't currently consistent with the operating priorities and cuts can be made.

My observation on cost containment is that it's seldom done well. Frequently, strategy is lacking and some cuts hurt more than they help. Cuts that could be made but aren't hurt the most. Obvious misses send the wrong message on priorities. Finding and implementing process efficiency gains can sometimes have big upfront costs. Careful analysis is required if this is the case to understand the financial benefits and cash flow implications.

Lots has been written about the extended downside of laying off people to save money. I get it. To a point. Lay-offs aren't free and it would seem the cultural, expertise and overall disruptions to the business could be both significant and lingering.

In actual fact, I've seen few companies suffer extensively from downsizing. Creating fat and straying into luxuries is wide-spread in good times. Being forced to refocus on core priorities, businesses, people and customers isn't necessarily a bad thing. Laying off the wrong people and cutting into muscle is a mistake so knee-jerking into a lay-off strategy is dangerous. But a thoughtful, proactive and strategic approach is a good thing for lots of businesses.

Lots of companies are struggling to maintain sales momentum through this downturn. Decision and spending paralysis is widespread right now. With fierce competition for every deal, CEO's are getting a great opportunity to understand the true competitiveness of their organizations. How's your organization batting on competitive deals? .100? .250? .500? When this is over, will your organization have lost or gained market share?

I worry that many organizations will see an upturn in the economy before they fix the lessons from this downturn. High tides float all boats and survival for many will feel like success. Short term it is. But CEO's who merely hang on risk jeopardizing their businesses longer term. Question: what have you learned about your organization's ability to compete in this downturn and what do you need to do about it? Changes that increase success now will have significantly more impact when things turn. Is your organization just hanging on or are you taking advantage of the current situation to implement good long term changes?

Check out this YouTube video for more thoughts on managing through a downturn and succeeding long term.

Hard Times Speech

You know, it's been really interesting.

Ever since I posted the Christmas Party speech here in December, a large percentage of referrals from Google to this blog have been looking for CEO speeches of various types. Amongst the speeches being searched for are 'bad times speech', 'hard times speech', 'difficult speech to give'.

I want to help. Here's my shot at the speech these CEO's might be looking for:

Hello everyone. Thanks for taking the time to get together today.

I'm not going to waste your time or mince words. The reason for getting together is to bring you up to speed on the company's status. Unfortunately, it's not as good as we all would have anticipated even 6 short months ago.

There are several issues.

First, our sales have slowed dramatically. As you know, we count on other businesses for approximately 60% of our sales. All of them sell to consumers. And consumers have dramatically limited their spending to the point where category demand in our space if off over 40%.

Although our consumer products are doing better than most thanks to our strong brand and innovative distribution, we're still seeing declines that we had never anticipated when we started the new plant 18 months ago.

Second, we are seeing a serious slow-down in payments from customers. In fact, our average days outstanding - the average amount of time its taking to receive customer payment has increased by 50% just in the last 30 days.

So what does this mean?

It means that we cannot be complacent.

As CEO my first priority is to ensure that this company remains strong. By remaining strong, the best interests of shareholders, customers and employees are looked after.

Effective today, we are announcing a series of actions that will make our company leaner, more efficient, more effective and ready to take advantage of the significant opportunities that we see opening as weaker, less well prepared competitors stumble.

All of us will feel the pain of these actions. However, we have not and will not stray from the core values of this organization - accountability, fairness and compassion. You have my word on that.

While it is very difficult to predict when these unique and difficult business conditions will pass, our vision remains intact. This is an incredibly talented and committed team that I am honored to lead. Working together, we will emerge stronger and more successful than ever before.

Thank you.