Creating shareholder value is tough in any market and we have not yet seen the full impact of the recent recession. More businesses go into administration coming out of a recession than during a recession.
Like all those that went before, the latest recession has seen a radical cost cutting response by many management teams. It may be tough, but it is not a particularly sophisticated response (i.e. cut = consequence). The danger in a slash and burn approach is that businesses then avoid having to look in the mirror and address the underlying root causes of inefficiency and ineffectiveness that had built up previously. Employees can also “Hunker down” and wait it out, hoping things will go back to the way they were.
The “Cut, cut, cut” response means that coming out of recession, businesses may lack the necessary financial, technical and people resources needed to grow – skills have fallen behind the competition and assets have aged or deteriorated from lack of investment.
The “hunker down” and “ride it out” mentality also means that: energy levels are lower; employee enrolment and engagement weaker; and thinking is shorter term and more tactical than is required to support sustainable growth.
The lack of investment in strategy, assets, systems, processes and human capital means that Firms may be less competitive coming out of a recession than when they went into it.
The next 2 years are going to be critical for most businesses.
The term “Zombie” has recently been coined to refer to businesses that have continued trading but are making no money (just about covering their debt repayments). Historically low interest rates, however, cannot continue indefinitely and many of these businesses (and other drawn into this category by higher interest rates) will go to the wall as market conditions pick up and they start to overtrade (or their debt security increases in value and becomes more liquid for foreclosure).
Coming out of recession, the businesses that are best positioned to capitalise on new opportunities will be those who managed their costs and invested well during the recession.
However, it doesn’t have to be an exclusive club!
Jim Collins (author of “Good to Great”) identifies the key differentiator between GOOD companies and truly GREAT companies, as being their approach to people and talent.
With the right intent (nb. not strategy), hands-on leadership and employee engagement (seeded judiciously with a few capable people) it is possible for any business to play rapid catch up.
It is not “Rocket science” and experience tells me, that it is possible to achieve a 30-50% performance jump in 6-8 weeks, across sector, in different businesses, of different sizes and complexities, in situations where an opportunity is about to be lost, a key customer is threatening to walk away, a regulator is threatening enforcement action or an investor/banking covenant has been breached.
If this is possible in a distressed situation, the obvious question for all those companies out there who haven’t got to this situation yet is “Why wait, why not do today, what you would do then?”.
Get focussed! Make decisions! Drive success!
Why do we wait for failure, before doing what we know to be right?
Imagine how much more successful our businesses would be, if we could free up spare capacity from operating what we have today and reinvest it in future growth – getting off the back foot and onto the front, with a re-engaged and re-energised workforce.
Don’t be a Zombie – life is too short for us to leave things bumping along until someone else tells us to act!
… and remember what Sir Isaac Newton said “An object at rest tends to stay at rest and an object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by a greater force”. The same is true in business! USE AN INTERIM to help you make the difference!