Faster Profits in Slowing Economies

By Don Schmincke

You cut, slashed, and hammered costs till your knuckles bled. Now what? Is there another, perhaps faster, way to grow profits?

Research of successful companies find profits grow faster in challenging times with approaches contrarian to typical slash and burn methods. Some of these approaches have ancient roots. It’s not the first time organizations have encountered threats to their survival. And it won’t be the last. But managing through this current episode may require to you to reconsider the typical approaches we so often use.

Analyzing 5,000 years of management history reveals a few insights that prove valuable in helping us thrive. These contrarian methods prove profitable by companies using them even today. Adding them to your arsenal may be the best decision you make. What can you do to learn from these leaders?

Stop retrenching. Strike instead. Historically, economic downturns show winners don’t retrench out of fear, but strike early. They accelerate their business by taking advantage of the fact that now their competition weaker than ever. But striking takes two things: strategy and passion. Do you have a strategy? Are you sure? Studies find that most strategic plans end up being mere tactics. Avoid this mistake by:

• Calling a meeting with your staff.

• Laying out your strategic plan.

• Probing and challenging the assumptions. Does the plan show how you shall outmaneuver the competition? Does it show what position you seek in the competitive landscape? Or how you will exploit competitor weaknesses?

Getting strategy is only half the battle. What about passion? Our brains light up when we see something inspiring. Touchy-feeling mission statements are out. Sagas that inspire perseverance, unselfishness and sacrifice for the strategic win are in. It’s not a new idea. It’s been used for centuries. But we don’t teach the crafting of stories anymore.

• Have you captured your strategy into a compelling saga?

• If not, condense your winning strategy into language that inspires passion for the strategic result.

• Then edit and re-edit. Remember, it’s about crafting not analysis.

Hire the brave, not the desperate. Samurai training found that cowardice stops leaders from challenging the status quo, holding others accountable, and exposing weaknesses. Cowardice hinders decisive action by stopping the essential act necessary to accelerate profits and survive a recession - tell the truth.

Cowardice eats truth. Lack of truth eats profits.  Telling the truth can upset people, and desperate people don’t dare risk it. But organizational cultures that promote bravery, and the speed of execution that comes from it, love it. It drives accountability to new levels. The alternative of keeping the truth at unspeakable levels only produces collateral damage like:

• Accumulating dead-weight of marginally performing employees

• Avoiding the real issues thwarting meaningful change and profitability

• Sticking with doomed projects far too long

Strengthen your organization and enhance competitive advantage by enrolling and inspiring bravery.

Group think is good. We’ve been trained to feel that if everyone thought like us it would be a bad thing. In some cases that’s true. But fast companies train their employees to think alike; they train them to think like a CEO.

Do your employees know how every decision affects the balance sheet? Field experience finds that employees placed in simulations where they have to run a company achieve new levels of understanding. With a balance sheet and a P&L statement in front of them, employees realize how every decision requires movements of cash. New perspectives forge as they have to decide how to go to market. What price? How much volume? Where do we advertise? Choices for growth and expansion become visceral AND real.

Not surprisingly, these employees go back to their jobs with fresh insights on how their actions affect cash flow. They find money. They detect waste and inefficiencies. Opportunities for improvement surface which help companies needing to accelerate profitability.

Say “no” to customers. Ancient battles were often won by knowing where to strike, and where not to. There was an interesting story about Southwest Airlines. Co-founder of Southwest Airlines, Herb Kelleher received a scathing letter from a passenger criticizing how they made jokes during the safety instructions required by the FAA. Fun is a key value at Southwest, and humor helps us pay attention versus falling asleep during these standard reviews. This particular passenger was not amused. Kelleher wrote back a one-sentence letter: “We’re going to miss you.”

How many times do you try to do too much for too many? Such mistakes stretch resources, distract strategic focus and decimate morale. Instead:

• Assess what the Return-on-Energy (ROE) is for your customer segments (how much profit customers bring for the total cost of selling and servicing them).

• Identify those clients whose ROE is minimum or, gasp, negative.

• Start writing “We’re going to miss you” letters.

Eventually, and hopefully soon, we’ll all emerge from the recession. Until then, don’t hesitate to act now to accelerate your business. Remember, retrenching and waiting for it all to pass only gives your competition an opportunity to outrun you. Take the lead. Just because times are slow, doesn’t mean you have to be.

Read other articles and learn more about Don Schmincke.

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