Wednesday, May 27, 2009

Succeeding in an Economic Downturn

By: Sean Malady

“Bridging the Gap to Tomorrow’s Recovery”

An economic downturn is as inevitable as the upturn that follows. The economy rarely stays still. It is always moving in one direction or another. And just as the sun cannot shine all the time, the rain will not last forever either.

Having a good long‐term plan needs to take this cycle into account. Human Resource Professionals as well as Hiring Managers have the task of supplying qualified human assets no matter what cycle the economy is in. Project Engineers that were plentiful last year may be hard to come by this year. Compensation ranges can change quickly. Available talent can ebb and flow like the tide. Is your company prepared?

Another consideration is the industry you find yourself in. After decades of hearing one industry after another being touted as recession proof, one fact remains clear; no industry is safe from the economic cycle. Industries may be affected in different ways and at different times but we are all vulnerable.

If we know economic challenges are coming, how can we prepare?

The two most basic factors that help company’s weather difficult economic times are;

1. You need to have a plan.
2. You need to create and maintain a level of flexibility.

Having a plan is one of the best ways to communicate to your staff that you recognize where the economy is and that you are taking steps to deal with it. As the owner or manager of a company, your team looks to you for guidance. They rely on you to keep their jobs and their futures safe. By creating and implementing a plan of action you reassure your team and help them deal with the constant barrage of bad economic news they see in the News Media.

Outlined below is a basic plan that can be customized for almost any business.

1. Lock in your customers.
Go overboard to solidify relationships with your valuable clients that will help you ride out the storm.

2. Focus on receivables.
You are not the only company feeling the difficult economic times. Reduce the time you give clients before following up on a past due invoice. Catch a slow paying customer before they become a bad debt.

3. Reduce physical inventory.
Conserve your cash for resources you need now.

4. Evaluate staff.
Identify the 5% to 10% of your staff that are your bottom performers. Can you refocus their skills or can you work without them.

5. Lock in your key performers.
Make sure those people that get things done and affect the bottom line are happy and secure.

6. Focus your sales and marketing.
Energize your sales effort. Look at your Sales and Marketing and focus on your most profitable products or services. Now is not the time to roll out a new product that will require a capital investment to get moving.

7. Plan for the recovery.
How will you handle that next big order you were not expecting.

The best byproduct of creating and implementing this plan may not be how it helps you weather the current economic storm but how it teaches you to stay sharp in good times as well. The same attention to receivables that helps you in tough economic times can help you free up your line of credit in explosive economic times so you can afford to expand more quickly.

Embrace Flexibility

Now that you have a plan you need to make flexibility a part of your daily decision making process. Flexibility in business is not something you embrace today and use tomorrow. It takes time and effort. Each time you make a key decision you need to back it up with the words we all hate, “What if?”. Although we have all known people who could “What if?” something to death, we are talking about having a sensible backup plan if the factors that led you to make a key decision suddenly change.

Tough economic times force you to run your business closer to the edge. Bad news that you would simply shrug off in good times can quickly drown your company in tough times. You need to be creative and resourceful.

Staffing is my business so evaluating and managing your human assets is what I do every day. If you have followed the seven step plan above you have already evaluated your staff and solidified your relationships with your top performers. This may not be enough. If you have staff you can’t do without but they are not busy due to a fall off in business, get them involved in another aspect of your work. Have them help with your sales effort. Have them make customer touchdown calls to stay current in your client’s minds. Have them stuff sales mailers. Have them do anything that can drive money to your bottom line. Now, some of you may think it a stretch to have your HR Manager or your IT staff stuffing sales mailers, but if you have designed and implemented the plan above, your staff will be aware of the company wide effort to succeed and may just surprise you with their willingness to pitch in and be part of the solution.

Another people management recommendation is to have a relationship with a local staffing company. Some years ago I was working with a senior recruiter who had spent many years in the aerospace industry. He told me that every good manager has a good recruiter in their back pocket. Having a recruiter that knows your company and your culture who can find you people fast, either contract or permanent, can help you sleep at night when you are running your company at minimum staff levels. I tell the companies I consult with to think of us as an insurance policy; you may never have to make the call but knowing you can sometimes makes all the difference.

The same approach can work in almost every facet of your business. Find sources for fast, flexible warehouse or office space. Find sources for fast ways to supplement your telecommunications or customer service departments. Identify those areas key to your business success and create a quick, short‐term plan that you can call upon when required.

The final recommendation I have is seeking out experience. When you find yourself facing tough economic times, maybe for the first time, seek out people who you respect who have weathered the storm before. For me, I knock on the door of the 75 year old founder and president of my company. He helps me to put things into perspective. Together we drill down the challenges we are facing and identify the 2 or 3 areas where we need to focus our efforts.

Remind yourself always that the only constant in business is change. These tough economic times will not last forever. Push those clouds away by designing and implementing your own plan to make the sun shine on your business.

"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." Charles Darwin

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