Strategy during stressful times.

Recently we had to stall our Business strategy workshops (DNA Development) in one of the reputed company which serves as vendor to an Automotive OEM. The strategy development process is stopped because the company is undergoing distress in terms of increased costs of production, cut in orders from the customers, lower productivity etc. The company was also preoccupied with negotiations with labor for a renewed contract.  All these put together may take toll on the long term strategy. ‘We need to survive first, to think for future’ that is the principle chosen by our client for the moment.  Logically this mantra seems right but has very limited value.

Impulsive reactions to problems, across the enterprise cost-cutting, failures of leadership, lack of clarity, misunderstanding of risk and ignorance of consequences, are all common strategic failings during stressful times.  Typical actions during such period as we have seen is that, all activities centre around cutting costs and raising cash (by loans, by brisk debt collection or delaying payments to creditors). Other ways are – reducing salaries, renegotiating contracts, selling assets, closing a plant, or even reorganizing the entire plant. Business owners or managers who make these decisions seem to be making a critical error. A majority of companies’ cost-cutting measures fail to deliver the savings expected. In fact, half of all cost-cutting schemes are aimed at delivering incremental savings of less than 10% of costs.

Most ‘reduce - cost’ decisions have limited effectiveness. There is genuine concern that more invasive cost-cutting decisions designed to deliver short-term benefits often harm the long-term competitiveness of the company. The key to effective cost cutting is to know the business and its outcome.  That outcome should be in line with the organizational actions we take. Even if a cost reduction attempt is considered essential to survival, simply looking for percentage cuts across the business is likely to lead to a reduction in a business’ competitiveness.   The Business owners / managers should have strategic outlook on cost savings and it should be available for dialogue.

Applying a cost-cutting mentality within existing strategies (if there is one) can deliver not only sustainable savings but also help advance strategic goals. For example, it’s often assumed that cost-cutting and customer satisfaction – a common strategic objective – are mutually exclusive. But if there is an existing supply chain strategy in place, it makes sense to identify which processes are not directly related to improved customer relationships – then look to cut costs or refocus those activities.

Though we supported our client who suspended the strategy discussions in passive way, our answer to this problem is to address strategy in simple, relevant ways that keep business owner / key players focused on the business of the company (strategy), while delivering clear courses of action to survive in turbulent times and grow at the same time.  This need for maintaining a strategic approach is critical, which means looking clearly at business in clear ways, then analyzing how long-term strategy can be maintained in a depressed situation. Business owners / key players who have a mindset to make reasoned decisions based on the solid strategy will do a better job of securing a winning future of their business, as well as their survival.

At times of economic upheaval and low availability of finance, there’s a real danger that

the strategy can take a back seat to survival. But organisations that abandon strategic thinking not only run the risk of undermining their chances of advancing their business when the economy improves, they also endanger their ability to weather the storm.

The key to ‘strategy under stresses is discipline – business discipline !

Contributed by Sasikanth prabhu

Outside support

Entrepeuners succeed with one set of skills and mindset. They are often tempted to think that success can be repeated in the future with the same set of game plan. What we have found is that many successful entrepreuners get stuck at some level of achievement and their business do not grow further. The reason could be when things slip, as it coud be, the temptation to do the same old things hardens aggressively and urgently.

But some companies, very rare ones, even though they are successful in their initial phases, they do differently in their second phase. One of the different things is that these long surviving companies infuse help from outside at an early stage itself by associating with resources such as external board of directors, advisory councils, industry experts, consultants, mentors, facilitators, learning forums etc.  

While the companies that are stuck and have a retarded growth appears to be more insular and are less eager to form partnerships with people outside the firm. Such company owners show so much confidence in themselves that they end up eulogising themselves about how they succeded in tackling challenging situations in the past and how they rely on their own internal abilities. At times, they also, redicule external sources of expertise.

"Help seeking" is a mindset, that need to be inculcated very early in an organisation. But the entrepreuners who start an enterprise tend to be great at figuring things out by themselves and are extremely confident in their ability to find the right answers. Initially this seems to be great , but as the business grows, the leaders must be willing to look for people (outside the four walls of the organisation) with relevant experience, connections and perspectives that are useful to the company.

The power of seeking outside wisdom is immence. The outsiders can play a number of relevant roles. Such as....

1. Usually leaders and managers who take extraordinary initiatives are alone at the top / edge. They can rely on or use outsiders as mentors / counsellors / sounding boards

2. Business is all about perspectives. Outsiders can bring in different perspectives. Many leaders, due to operational urgencies, get bankrupt on ideas. Facilitators can bring new ideas and help key people in the organisation to navigate to the growth path.

3. Sometimes the company may be trying out new ideas or innovation that were tried and perfected by others, elsewhere. If the organisation has a habit of looking for the best from the market, the chances are high that a useful resource be found.

4. Many business tools are developed and tested by varius institutions for the benefit of the business organisations. The outside network of people can get these new tools into the organisation quicker and with ease.

5. Closer contact with external people will enhance the competiveness of the people in the organisation including the top leaders of the organisation.

Getting connected with outside human resources is a channel to grow the company but Douglas Adams says " Human beings, who are almost unique in having the ability to learn from the experience of others are also remarkable for this apparent disinclination to do so"...... but do not hesitate to seek help!   

contributed by sasikanth prabhu

Organisational Commitment

At the moment the most common disappontment expressed by senior managers and business owners is that their employees / subordinates do not take ownership of the organisational processes.

As mentioned in earlier posts there are many reasons for repulsing the organisational decisions by the employees.

The business owner / senior manger must find ways to get commitment rather than compliance from the employees, if the managers want the employees to take ownership of the organisation.

Commitment is not compliance! It is not Loyalty! It is not involvement!

Compliance is seen when a manager orders the subordinate to do something and the latter carries it out.

Loyalty is a willingness to remain with the organisation.

Involvement is participation and intrest in the job minus dedication to something higher.

What is commitment then?

In Ken Matejka's words , Commitment is the act of being physically, psychologically, and emotionally impelled. It means the worker gladly gives up other options and makes the task the top priority in his life.

To get commitment from others in the organisation, the manager / business owner must turn into a leader. Commitment is a scarry term: people will be afraid of losing something or of getting harmed. Only a leader can remove that fear and show a reason to care for the organisation. Once an employee catches the big picture, the orientation towards the task changes dramatically and the ownership of the task is claimed. A clear, exciting organisational vision inspires people to commit their talents and energy to make it happen.

The maintenace of the ownership by the employees depends on the leading posture taken by the manger and the quality of rewards to the employees. This is yet another tool in making the employee own the task. I shall blog on it another time.

contributed by Sasikanth Prabhu