How would you navigate through this crisis?
Here is a discussion topic on strategy.
Assuming you are the CEO, and leader, of a well-known corporation of your choice, what strategy would you use to lead your company through the current economic crisis?
Explain, using examples and references, and relate your comments to the Four Principles for Purposeful Action.
This post was written by Margaux Ellis-Hall, who will lead the discussion for the week starting on March 10.
Though it is not a huge well known corporation, the first struggling business that comes to my mind that really needs a good strategy in these tough economic times is my neighbor’s business, Golden Pond Resort. It’s a summer vacation “resort” with vacation homes, a pool, tennis courts, etc.
Naturally with a lot of people holding on to their money right now there are not as many reservations for the coming summer as there has been in the past. My suggestion for a strategy is to add value and advertise strongly.
Some additional ways I can think of to advertise would be to focus on business through the internet….eBay and goLSN.com are two choices. To add value, I suppose it wouldn’t hurt to reimburse clients for gas receipts or add a free night to stays over 3 nights. Since business is lacking and gas prices may stay lower this summer, these value added activities would keep costs low.
In the context of Purposeful action, I think advertising falls under the 4th Principle, Navigate with others. Perhaps you might say that trying to add value for the customer falls under principle of positive core values.
Good ideas. People are thinking about getting the most out of their dollar and will still take a family vacation. I think they will spend the money on the best perceive value.
Name of the company GM:
Communication Is Essential to Lead Workers Through Current Economic Crisis.
Be a leader. Leaders don’t have to have all the answers. Tell employees what you know and what you don’t.
Show your strengths. Reinforce the core competencies and values that make your organization successful.
Be visible. Credibility, conviction and passion are important messages that only actual presence can convey.
Use your team. Make sure the management team knows how and what to communicate, and that no one is a bystander.
Be coordinated. Coordinate your internal and external messages.
Share responsibility. Be clear about what you want your managers and your workforce to do.
Give up the myth of message control. Find ways to listen to what is on employees’ minds.
Lastly, be humane.
http://ehstoday.com/safety/management/CommunicationIsEssentialtoLeadWorkers/
Roy,
I was just reading an article from Nov. 2008 on GM. Perhaps one of the wisest strategies they chose NOT to pursue was that of acquiring Chrysler.
http://www.msnbc.msn.com/id/27593678/
When in a buisness like GM, communication with the employees has the added level of having to go thru the union. This extra level causes the communication to be filtered before it gets to the employees
Your right, if leader doesn’t show control, everything and everyone around them will fall. Communication is critical, without communication corporations can fail especially in the current economic crisis. Leaders must communicate with everyone throughout the levels of a corporation.
Nice points Roy. It would invariably make a great deal of sense in a company the size of GM to focus on communication and coordination, both of which are embodied in the fourth principle.
My company’s date is GM. They are suffering pretty bad.
Communication Is Essential to Lead Workers Through Current Economic Crisis.
Be a leader. Leaders don’t have to have all the answers. Tell employees what you know and what you don’t.
Show your strengths. Reinforce the core competencies and values that make your organization successful.
Be visible. Credibility, conviction and passion are important messages that only actual presence can convey.
Use your team. Make sure the management team knows how and what to communicate, and that no one is a bystander.
Be coordinated. Coordinate your internal and external messages.
Share responsibility. Be clear about what you want your managers and your workforce to do.
Give up the myth of message control. Find ways to listen to what is on employees’ minds.
Lastly, be humane.
http://ehstoday.com/safety/management/CommunicationIsEssentialtoLeadWorkers/
Roy M
I agree that the leader/CEO must keep the employees informed about what is going on. If the employee is “wondering” about the path the company is on, they will not be able to concentrate on the job at hand.
http://www.bizjournals.com/denver/stories/2002/03/18/smallb4.html
Because of the current economic crisis, many of the employees are suffering. They have experienced sudden, unexpected, unprecedented losses. Many have lost their hopes for the future, their expectations of living “the good life” in their retirement years. Many have lost faith in their leaders along with the trust they once had in large institutions.
They are grieving. Such grief affects productivity in the workplace, as employees have trouble focusing on their jobs, they experience mental confusion, and have problems with memory retention. Others may become short tempered and irritable. A study by the Grief Recovery Institute (2003) estimated that grief symptoms affecting employee productivity cost employers billions of dollars annually. While the death of a family member, friend or colleague naturally impacted productivity the most, grief symptoms related to financial losses experienced by employees cost employers $4.5 billion per year, and grief related to other major employee lifestyle alterations cost companies $2.4 billion per year.
Clearly, crisis-related grief is a factor in the workplace and must be dealt with. How can managers help their employees? How can they balance empathy and understanding with the need to get employees back on task?
Many people find “The Four Tasks of Mourning,” outlined by William Worden in his 2002 book, Grief Counseling and Grief Therapy, to be helpful. As managers, focusing on the tasks in Worden’s book and combining them with the following tips will help your employees navigate their grief.
http://www.myarticlearchive.com/articles/8/270.htm
Nsreesh
Because most individuals and families live “pay check to pay check”, when the economy does have a downturn (and it always happens)it causes alot of stress and like you stated “grief”
But, if these people would plan, save and know that situations always change, they would be better prepared for lifes changing situation.
Negative values and desires is part of the reason that many live pay check to pay check. They lust for the finer things in life and try to keep up with others. Instead of living comfortably, they live beyond their means. One thing about an economic crisis, it makes people re-think what is important and re-evaluate what they really need to survive.
Excellent point. I believe that despite the hardship that this downturn will inevitably bring it will also make us aware of what is really important and assist us with getting back to a focus on values and ethics. Preparation is also important, as you point out Nikki. Last semester I was laid off as a result of the ailing economy, but luckily my wife and I did not live above our means and had invested and saved wisely, which allowed to remain relatively comfortable until I found work again (which took about 3 months).
I agree with you Sreesh, Roy E., and Nikki. Also, there are more Americans using credit cards to stay afloat. Credit bureau analyses of consumer payment data show that financially squeezed borrowers have begun paying their credit card and car bills before their mortgages.
Rising living costs, along with cheap and plentiful credit, have led consumers to rely more on plastic to pay for necessities they can’t live without — and luxuries they don’t want to do without. But as the economy weakens, consumers are starting to spend less on discretionary items, such as furniture and electronics, and more on such necessities as groceries and gas, according to government data. Such items increasingly are showing up on credit card bills.
As the economy has worsened, card issuers have become more selective about offering credit to new customers, and in a growing number of cases, are shrinking card holders’ credit limits. Yet they’re still sending more solicitations to existing credit card customers. In 2007, issuers increased their solicitations to existing customers by 15.6%, advertising rewards and other perks to promote spending, according to Mintel, a firm that tracks such mailings.
http://www.usatoday.com/money/perfi/credit/2008-02-28-credit-cards_N.htm
Sreesh,what you have mentioned is very ture.There is lots of insecurity amongst the employees.Crisis really can make you strong or weak.Its how one looks at it.But mostly,it creates feear and insecurity amongst people.Your points a very valid and nicely explained.
VSoft Corporation, a global information and technology provider of process improvement solutions for financial institutions. It has been
named to the “Top 10 Fastest Growing Companies in Atlanta” by Atlanta Business Magazine for positive revenue growth of more than 105 percent over the last three years. VSoft Corporation is a global provider of financial technology solutions that improve service, reduce cost and maximize efficiency. Its broad image-based solutions include distributed deposit and payment capture across all points of presentment, back office check processing, image exchange, document management, remittance and lockbox operations. Customers include banks, credit unions, savings institutions, transaction processors, governments, utilities, telecommunications and retail organizations. VSoft`s proven products and services ensure versatile and rapid delivery of solutions to mission-critical needs.
The company’s strong revenue growth can be attributed to its significant expansion of its global delivery capacity. Assuming as a CEO of this company I formulate the below strategic steps.
As a CEO of an organization, I recall the five important questions that we need to continuously assessing these questions to keep informed.
I. What business are we in
II. What are we really trying to do
III. Who are our customers? What do they need and want?
IV. What is the competitive structure?
V. What resources do we need in order to sustain in the market?
I believe that Successful strategy implementation requires an understanding of the “big picture,” as well as all the sequential steps that lead to it. Even a great strategic plan can be destroyed by poor implementation Implementing Strategy gives us a broad view of implementation and a thorough understanding of each piece of the implementation process so I believe that we can make more informed decisions on efficiency and effectiveness. The following steps would help the organization to sustain under this economic crisis.
1. Equip their organization to adapt to change by developing a model of appropriate structures, objectives, controls, integration mechanisms, and incentives for implementing the strategy.
2. Understand the stages of implementation, forces for and against change, and ways to overcome resistance to change; and develop structures and tactics to implement change.
3. In any organization delegation of authority is more important. My point is, there has to be a logical flow of strategic information between the upper and lower levels in terms of strategy and tasks, and there has to be accountability along the way. If we come up with a good goal - but don’t identify the who, what, when and why up and down the organization — accountability varies along the way.
4. Business strategy is important to the execution of the corporate strategy
5. Integrate long term and short term objectives.
6. Executive strategy requires ownership at all levels, from corporate level managers on down. Strategic success really demands a simultaneous view of planning and doing. The greater the overlap of doers and planners, the greater probability of success. It’s so important for managers to be thinking about execution as they are formulating the plans.
7. Stay focused on good customers. Businesses should work to understand and aggressively address their customers issues. They will also be cutting unnecessary, non-essential expenditures. In this poor economy, competition will increasingly be based on price, so businesses must articulate their value proposition in order to justify holding current prices above the competitions, or to just hold on to the business altogether.
8.It is important for companies to communicate with their bankers and let them in on key strategies. Companies should work to convince their bankers they will do whatever it takes to make sure loans are repaid.
9. Keep relationships strong with shareholders. It is much easier to attain additional capital from people who know a business than from people who do not know the capabilities of a given company. Keep shareholders informed and anticipate any capital requirements in advance of when funds are actually needed.
10. Support key employees. Although unemployment will increase, there will continue to be demand for key people; high-level skills are always in short supply.
11. Cash is king. Businesses should keep cutting costs ahead of any potential blips in top-line revenue.
12. Watch customers’ credit rating and payment history. Customers may attempt to use suppliers and vendors as a form of financing, and it is likely that several will fail. Don’t continue working with a customer who cannot or refuse to stay current.
13. Review payables policies. Take full advantage of the time vendors allow for payment, without endangering critical relationships.
14. Consider and line up alternative sources of financing. Obtaining more expensive financing sometimes is better than no financing at all.
15. Look for opportunities. Companies do have opportunities in a downturn and should evaluate how they can serve distressed companies. Diversifying and identifying a new set of customers during a down economic cycle can continue to support viability and buffer businesses against a downturn in its traditional lines of business.
One caution during this crisis is the biggest mistake companies make with bankers is not staying in Constant communication with them and, then, springing last minute surprises. Commercial banks have all tightened their lending standards during the last six months. Loans and credit lines should be kept in good repair; it’s important not to bust covenants and go into default. Bankers will be far less forgiving in the current economic environment.
The above steps are clearly relate to the frame work for purposeful action.By implementing the above strategic steps, businesses can maximize their chances of survival and position themselves to take full advantage of the next upturn.
http://www.reuters.com/article/pressRelease/idUS146648+21-Jan-2009+BW20090121
http://knowledge.wharton.upenn.edu/category.cfm?cid=7
Excellent research work venkat.Its very though povoking and informative.
Very good analysis Phani! I agree, first and foremost, any company should be familiar with the 5 basic questions as you described and know the answers. They are essential while creating the strategy for a successful business of any kind.
Venkat
A very informative list of how to get thru this downturn. I really like the “cash is king” statement.
The company I work for , Barge Waggoner Sumner and Cannon (BWSC), has not short or long term debt. And have cash in the bank. This is VERY un common for an engineering design firm. But because of this we are weathering the storm during this very slow time.
Ah yes! I know those five questions very well. It would seem that long term, looking past the current economic situation, a focus on questions 2 and 3 would be most relevant to any efforts to act with purpose.
“What are we really trying to do” helps the CEO and other executives to review their organization’s vision, a very necessary step if an organization’s leaders are to remain committed. A trying time like now will definitely reveal one’s true level of commitment.
Asking “Who are our customers and what do they want” gets to the heart of service. In essence, it reminds the CEO or manager that in the end they exist to serve.
Venkat, The five big questions which you have explained is nessessary in every business conditions. The way you explained the economic crises is interesting.