How to Manage Through an Economic Downturn
For the past year or so, the housing industry has been suffering through a sizable downturn. The reasons are many: from an overstock of inventory to the sub-prime lending and credit crisis, those involved with this sector of the U.S. economy have seen some rough times. For an excellent description of the sub-prime lending crisis hitting the U.S. economy today, read Phil Town’s blog post here.
This isn’t the first time the housing sector has seen a downturn and it won’t be the last. The problem is that many companies are led by individuals who have never experienced anything like this before and are running scared. The bulk of their management experience has occurred when the sun was shining and the wind was at their back. A chimp could manage a company during the good times, but true managers showcase their skill by leading and managing a company through the rough times.
Frank Blake, the CEO of Home Depot, recently gave an interview to Home Channel News. In a conference call, he addressed the housing downturn as an “opportunity” that would be terrible to waste. When questioned about this attitude, Blake responded by saying:
“Well, a downturn is a painful thing and all things being equal, you’d just as soon not go through it, but it also tends to concentrate the mind. So you get to take a look at your business, and it forces you to be much sharper about what makes a difference to your customer and what doesn’t make a difference to your customer.”
You can read the article at Home Channel News. Registration is required but it is free. A pod cast is also available at the same web site.
Here are some management tips for bringing a company through the storm:
- Never panic. This too, shall pass. Others have been through rough times and have made it to the other side and you’re perfectly capable of doing the same thing. Never, ever panic. In the event you are panicked, never, ever reveal it to your staff. You must be the epitome of calm. Never make any decisions when you’re in a panicked or worried state of mind.
- Take an inventory of your company’s or your department’s strengths and weaknesses. Be honest. What do you do well? Where do you falter? Concentrate on your strengths and market those to your customer base . . . and to your boss. Shore up your weaknesses by training, or by altering your product mix to better fit your customer’s tastes and preferences.
- Taking a lesson from Mr. Blake, what is important to your customer? What is not important to your customer? How will you find the answers to those questions? By asking many, many customers what they consider important, you may find that there are products or processes that can be altered to improve your business. The core process in this one point will be to get yourself or those on your management team onto the sales floor and ask questions in person.
- Customer service means different things to different people. For some, customer service is defined as having someone nearby to cheerfully explain a product’s features and benefits. For others, customer service is handling returns and refunds professionally and cheerfully. For others, it may be that the shelves are fronted and fully stocked. Others may place high importance on accuracy of billing. Others may want to get quotes or estimates within a certain time frame. Others want their phone calls returned within 4 hours. How will you know what’s important if you never ask?
- Practice MBWA, management by walking around. The first time I heard of this phrase was in Tom Peter’s classic, In Search of Excellence. MBWA is most effective when a leader is information focused (asks probing and positive questions), authentic (unhurried and willing to spend time with people), and collaborative (seeks to include front line employees and solicit information from them about the business). In Search of Excellence: Lessons from America’s Best-Run Companies (Collins Business Essentials)
- Be ruthless with unnecessary expenses. Do you have equipment that is rarely used and could be sold? Do you have staff members that are not pulling their weight (and never will)? Are you experiencing overtime? Are you using temporary labor at a higher than market rate? Have you looked at your company’s health plan to see if there is excess baggage? Are any other departments saddling your business unit or department with their expenses? Are you holding on to certain assets, hoping to utilize them “someday?” Have the management courage to make the tough choices for the good of the company as a whole.
- Look at your true cash flow. Chances are, there are some items from your profit and loss statement that could be added back to your net income to give you a better picture of your cash flow. How much depreciation did you take? Are there any assessments that you take against a business unit? These items should be added to your net income before you make a decision about closing a business unit. Of course, you should check with a qualified accountant before making any decisions along these lines.
- What opportunities are available to make your business better? What training is offered by vendors or other companies to upgrade your staff? What marketing practices have you never used in the past? Why have you never used them? Are those reasons still valid?
- Finally, have a bias for action. Make a decision to be a person known for acting on pertinent information. Don’t become a management failure because you were too scared to act once you had all pertinent information. See trait number 16 in this post.
The old phrase “if you always do what you’ve always done, you’ll always get what you’ve always gotten” holds true during an economic downturn (it also holds true when things are going well). We must have the courage to look outside of our comfort zones and take the calculated risks to make our business better. What is riskier, taking action to improve your business, or standing by the wayside, hoping things turn around soon?
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