At the Helm
The hard truth is that CEOs, business unit managers, and country managers who have managed success fully during the prolonged period of good times may not be up to the challenges confronting them today.
The immensity of the challenge confronting CEOs in this era of extraordinary uncertainty and volatility is that everyone is looking to them not only for reassurance but also for specific direction.
The CEO has to provide reassurance as well as guidance to everyone in the company.
Recognizing reality is the single most important task confronting a CEO, and it is extremely difficult to do in this environment. Facing wrenching uncertainty and lost hopes, many people go into denial. In this environment, especially, fear is deadly. An equally dangerous form of denial is wishful thinking. There is simply no question that you and your company will be different two years from now.
On one side, you will have to convince the employees that the company is up against a serious crisis that requires urgent actions. Yet while you are laying out the unvarnished truth about the economic environment, you also need to present a compelling argument and a credible plan to show that the problems the company faces can be solved and that the company can emerge from the troubled times in even better shape.
Reallocate Your Time
You must become a much more hands-on executive. You will need an unprecedented grasp of reality not only on the global level but also at the ground level.
Become more operational. Of course, you cannot do everything and make every decision in this tumultuous period. But you must interact with subordinates much more frequently, so that there are no slipups in execution.
The increased management intensity will require more time in the office and less time spent outside the company.
Protect the Core
In every business there is a central set of invaluable assets, including certain customers. You need to identify the constituents and things that are at the core of your company and protect them from loss or damage during the crisis. Look for ways to sharpen or strengthen the core and drop the rest.
Now more than ever, your top people are crucial to the success of the company. Your job is to evaluate your top people with a new lens and under a different light.
You cannot afford to keep those who are indecisive, those who tend to be loners and those who are frozen in analysis paralysis.
You have two major responsibilities that must be met through communication: information flow and motivation.
You need information, unfiltered and in real time, to govern the company in rapidly changing and stressful conditions. The most important sources of information will be sales and marketing and your supply chain leaders.
Pulling people together in tough times is, in itself, energizing as long as you keep the discussion upbeat and focused on how to solve problems.
Motivating the entire organization is a different kind of communications challenge. You need to align everyone with the company’s goal of preparing for the worst and looking toward long-term success. You can inspire them by doing something as simple as being visible to the troops. You need to be listening to your people at every level to discover what is on their minds, what they are worried about and what new ideas they have for doing something better.
It is critical that you have a firm picture of the company’s financial position on a real-time basis. Cash flow should be tracked daily; inventory, margins and receivables should be updated weekly, with their interrelationship with one another analyzed to reveal evolving patterns of change.
Manage for Cash
Managing for cash is different from managing for accounting profits or revenues. It means that you almost certainly will be required to give up some customers or products. Be careful, though, when you think about ways to conserve cash.
In determining the actions you must take, think about whether you may be creating potential obstacles to refinancing or reducing your debt rating. Then decide what
the cash breakeven point is. Rethink what needs to be centralized, outsourced or decentralized.
You will have to determine your lowest breakeven point. This will be your biggest challenge at the outset. A downturn is the time to clean out the attic and pare the company down to its fighting weight. A key part of your comprehensive plan is the determination of which customers to keep. Even in a downturn, not every customer is worth having.
Although keeping a close eye on weak customers is important, you cannot afford to ignore your best ones. More than ever before, you have to take the initiative and be proactive toward your best customers.
Make sure your existing strategy is viable in the face of a shifting landscape. Conditions are changing so quickly that an annual target can be hopelessly unattainable only a week or two after it is set.
You’re going to have to work within a much shorter time horizon, demonstrating flexibility and agility by setting targets on a quarterly, monthly or even weekly basis.