Frequently as CEOs we are forced to respond quickly to an external threat. No doubt, the biggest threat, at the moment, is the effect of the recession on your company. Maybe we could take our time in the past to make measured decisions. Not anymore. The board, shareholders, clients and especially employees are all clamoring for duck and cover action. Protect their jobs. Protect the profits. Keep company value as high as possible. Under this pressure many of us, as CEOs, could easily make a few common mistakes. Let’s avoid the pain and gain the advantage to act quickly by avoiding these three mistakes.
1. “We are not affected.” Or the opposite: “It is a complete rout.”
First, look to see how you really are affected by the recession. Not all companies, industries or areas are affected the same. It is common to have a few business sections actually flourish in recession when so many are in decline.
Your preparation will make a huge difference in the severity of the effect you will suffer. One of the harder hit business sections is hedge funds. Most suffered tremendously for the risks they invested in. One fund, Soros, predicted the recession and prepared its portfolio. Their portfolio is still profitable just smaller.
You could do likewise. It’s not too late. Look objectively at the general economy trends and specifics in your profit chain for effects that could still disrupt your business. Then make appropriate plans. Start acting on your plan though or it may be too late.
2. Not looking for opportunity.
Opportunity abounds now. Current valuations and owners’ willingness to sell for lower cash are the hallmarks of a recession. Some competitors will have abandoned markets which are now available for your taking. Sometimes it’s not even a just market share; you can pick up some of the best staff ever available because of shrinkage within your competitor’s operations.
You should play to your strengths. When considering opportunities, stretch into areas where you are already strong. You will grow faster than trying to assimilate functions and markets which you don’t understand well. Frequently, an opportunity is found in hedging and buying during sale periods by your major suppliers.
3. Not addressing fear among your staff.
Let’s look at that fear. The employees during a recession are full of fear about their future coming from several sources. First they will be subject to external fear, which you have no control over. For example, their spouse’s job may be in jeopardy. Or worse, they already need to manage with less income from a job lose. Maybe their students are losing their college money. Certainly they have lost value in their retirement funds and many must rethink the future.
Internally, employees are worried about their jobs and the company’s survival. If you don’t understand this, you need to spend more time at the water cooler. The world is full of chaos. Whoever thought that GM, AIG, Merrill Lynch, Mervyns, or big banks would disappear so fast. Your employees talk about it every day and wonder about your business.
You may have reduced staff recently. Since your budgets are impacted, your staff is working harder, but not earning more. The employees are aware of many issues facing the company and will be fearful if the recession continues that they will be laid-off . Staffs know reductions come with recession and fear the company may just fail entirely. Once you’ve done a reduction in force, most employees are just waiting for the next shoe to drop.
There are two steps to address the fear in staff.
First, do your best effort to build a predictive, all-encompassing plan for the company during a time of recession. Look at all of the issues and predict what steps you need to do to survive as a company.
Next, communicate your plan. Communicate clearly. Communicate frequently. Employees make poor choices when they are faced with little information. People naturally assume the worse in the absence of truthful information.
Again many companies are affected severely, but, there is no rule which says your business must crash. The only rule is that the companies which adapt to their environment with smart strategies and tactics just might thrive in recession.
Steve Scott is a CEO-for-Hire and CEO Confidential Advisor based in California. After 25 years improving bottom line performance as senior management (several times CEO), six acquisitions, several turnarounds and raising a few hundred million he knows what he speaks about. Get Steve’s insight on critical issues for CEOs and board members at blog.ceocomplete.com. Connect to Steve at linkedin.com/in/stvscott or twitter.com/SteveScott