(from Issues for Growth Vol. 18, No.14)
Lessons Learned in the Downturn
ACG Denver Corporate Executive Series Breakfast - September 22, 2009
Panel participants included Anthony Carroll, CAO, Vicorp Restaurants (Village Inn and Bakers Square restaurants); J.D. Johnson, President, Norgren Americas; John Zimmerman, CFO, Tomkins plc.; The panel was moderated by David Mead, President of The Mead Consulting Group.
The panelists shared a great deal of information on specific initiatives to improve financial results during the recession, but there were several overriding strategies that each company employed:
1.) Move quickly and decisively
Identify issues in your business and markets and initiate changes quickly. Don’t get caught up in gathering and analyzing data, but rather make changes once trends start to appear. Those companies that react quickly in difficult situations (economy-driven or self-inflicted situations) are those that will have the best chance of emerging quickly and healthy.
Moving quickly means there may be mistakes made, but most can be recovered from as long they are not catastrophic mistakes. A business that is not making mistakes is one that is not moving quickly enough and will most likely be left behind.
2.) Communicate the situation to your employees
Provide your employees a real understanding of the situation and what the goal of the company needs to be in the recovery. Your employees are the most knowledgeable about the detail workings of your business, and they are your best resource in resolving problems.
One company solicited input from the employees on how to reduce payroll costs. The employees were briefed on the situation and asked for their recommendation on headcount reductions, reduced work weeks, or reduction in salary. The company ultimately had to use a couple of the options, but the employee base was appraised of the decision and appreciated the opportunity to be a part of the decision process.
3.) Short interval management
During difficult times it is necessary to have as transparent an organization as possible. The reporting of key metrics becomes critical and each had reporting stepped up drastically. Once company described the increase in their business as “reporting that was done yearly was now monthly, monthly reporting was now weekly, weekly reporting was daily, and daily reporting was many times each day.”
Focus your efforts on the important metrics of your business. It may not be possible to increase all reporting, but those that are drivers for your company need to be reviewed more frequently and by all management that can impact the results.
4.) Communicate to your key customers
Your key customers need to be a part of your communication strategy. The communication needs to be more than just a letter from the president. Your key customers deserve face to face meetings to learn of your progress and in times of economic difficulty how you can partner with them to create a stronger relationship.
5.) Initiate revenue enhancement programs
Even in a recession there are ways to increase revenue. Cost containment is a given, but not a cure-all in a poor economy. Companies that focus solely on cost reductions will lag their competitors and emerge from a recession a weaker company. The companies shared ways that they adopted to quickly shift resources away from divisions or departments serving lagging industries and markets to those that offered current opportunities or great potential.
All the companies on the panel discussed price increases and promotions. Each had their own way of increasing sales, based on their specific industry. Norgren Americas had a strategy of discussing price increases well in advance to condition their customers prior to the increase. Tomkins took advantage of the downturn to exit unprofitable businesses and focus their marketing and sales efforts on industries and businesses with growth potential. Tomkins also used commodity price increases to explain the rationale for pricing moves. Vicorp Restaurants refused to play in their industry’s love of discount coupons, citing the long-term negative effect of conditioning customers to shop based on coupons.
30 Ways to Increase Prices. J.D. Johnson of Norgren cited that he solicited from all corners of the company all of the ways that the company could employ to effect an increase in realized price. These included the traditional price increase, but also the nontraditional such as eliminating free freight, bundling, etc. The company then developed a mechanism for employees across the company to exchange and share that information.
6. Never waste the opportunity of a good downturn
Each of the companies took steps to trim unnecessary expenses, exit unprofitable product lines or markets, close problem manufacturing plants or stores, jettison underperforming employees, etc. In many cases, these were actions that were difficult to take during prosperous times, but the necessity of the downturn made these actions, if not more palatable, certainly more possible. The actions improved productivity, profitability, and health of the businesses and have positioned each of these companies for the future.
What is working for you? What is not working? Let us know your thoughts. Share your experiences.