Although it is likely that the majority of my regular readers — who strive to improve their knowledge, capabilities, and skill-sets by the day — work for above average companies who are reasonably intelligent at their core, it’s a recession out there, and your average company is getting dumber by the day. Moreover, many companies don’t even seem to realize how dumb they’re getting or the bad precedents they’re setting for good companies who will be pressured by investors and Wall Street to follow their lead. Thus, in my quest to keep your company on the straight and narrow, I bring you CIRCUIT: the “Corporate Intelligence Rating Calibration Under Inflationary Times”. I hope you don’t need it, but if you do, I hope it persuades your managers, and investors, from doing dumb things.
In recessionary times, companies have a tendency to execute one or more of the following 10 dumb mistakes. To determine your corporate intelligence, start with a score of 10 and subtract 1 for each act of corporate omission.
|Doing Away With the Perks
Usually the first thing to go when money gets tight are the employee perks. If perks at your company happen to be box seats at the game, and a box costs your company 100K a year, then it’s a justifiable call. However, at most companies, “perks” are usually limited to refreshments in the break room, the odd meal out, and the odd office party which, when combined, account for a total cost that is a negligible rounding error on the balance sheet. The pennies you save is not worth the loss of morale, and productivity, that will result from taking away your employee’s 25 cent coffee or soda.
|Delaying that Technology Purchase
Companies that win do more with less. They do that by deploying technology that increases the productivity, and capability, of their staff. Look at the Hackett numbers. Leaders spend more — way more — on technology.
I’m not saying that you should go out and spend millions on a new ERP, since some traditional enterprise solutions on the marketplace are way overpriced, but if you’ve identified a need for a system, do your homework, find a low-cost (SaaS) solution that meets your needs, and license it on a pay-as-you-go basis.
|Postponing New Product Development
Recessions do two things. They break (and sometimes bankrupt) losers and they make leaders. In strong markets, the leading companies are always — ALWAYS — those companies that emerge, lean (which means cost-conscious and not cost-focussed) and mean, from a recession with new products and services to meet the needs of the market. This also means that leading companies continue to innovate new products during a recession (as well as new ways to produce or deliver them more cost effectively).
|Freezing the Marketing Budget
Companies that succeed in recessionary times are companies that conduct business-as-usual. Although this doesn’t mean spending millions on a Super Bowl ad, it does mean a continued advertising presence on the web and at intelligently selected trade shows. Companies that conduct business-as-usual show their (potential) customers that they run their business responsibly, in good times and bad, and are more than capable of riding out some rough waters here and there. (And there’s a difference between responsibly getting a booth at a trade-show and irresponsibly hiring expensive magicians, professional athletes, and bikini-clad super-models to staff it when you have real-world budgets.)
|Strangling the Travel Budget
Global business requires global travel — plain and simple. It’s true that you can do a lot by tele-conference and video-conference, and also true that you should be doing as much as you can with these new technologies, but this will never replace the connection formed by being there in-person, as any good sales person will tell you. Sometimes you need to visit customers, sometimes your remote teams need to come together to form a bond, and sometimes you need to go to trade shows. If you were managing your travel budget responsibly, and only traveling when you needed to, you can’t cut a single penny without negatively impacting your business.
|Cutting 10% Across the Board
A responsible business doesn’t have more employees than it needs to get its work done, and doesn’t retain employees who are not capable of adequately performing the job they were hired to do. This means that every single employee is needed and productively contributing to the business and that, logically, cutting employees must seriously cut into productivity and threaten a business’ ability to continue business-as-usual.
Furthermore, in reality, cutting 10% of your employees is equivalent to cutting 30% to 50% of your operating capability. The first thing that happens is that morale and drive, which greatly impacts an employee’s productivity, tanks across the board. Then your employees get scared and start looking for new jobs — but since most companies aren’t hiring, only your best employees get new jobs. End result: cutting 10% across the board ensures that your top 10% take their leave as well, and the 80% who are left are operating at maybe 2/3rds capacity as they spend a lot of their time worrying about what they’ll do if they lose their job and looking for a new job. Net effect, you lose up to 50% productivity for what you thought was a 10% cost savings.
|Killing the Training Budget
Not only do top companies spend more on technology than their peers, they spend more on training. Why? This allows them to do more work with fewer employees. This allows them to keep their salary expense lean-and-mean relative to their peers, and to earn more per employee, for a total cost that is usually a small fraction of the lean-and-mean salary expense.
|Shifting Focus from Growth-Planning to Cost-Cutting
The leaders, innovative to the core, always find a way to grow slowly in a recession. Always. Always. Always. Maybe it’s only a few percentage points compared to the tens of percentage points they grow when the recession ends, but they grow. The losers switch to cost-cutting and, more often than not, cut themselves out of existence.
|Stifling Innovation to Reduce Risk
Three words: INNOVATE OR DIE! Your choice.
|Retreating into your Moated Castle
This has become my new personal favorite! Often the first thing to go these days after the employee perks is the consulting budget — and it’s often by far the dumbest thing your average company can do. Often the only way of introducing significant, meaningful, cost-saving revenue-generating improvements into your average company is to bring in an outside consultant who specializes in one or more types of business innovation. A consultant who can tell you what technology is right for you. A consultant who can help you define the right new product development roadmap that will result in products customers want to buy, even during a recession. A consultant who can help you maximize your marketing budget. A consultant who can help you save money and avoid unnecessary costs in an intelligent, non-destructive, fashion. And a consultant who can keep you on the innovation path and out of the cost-cutting abyss that ultimately spells a cruel demise to what could have been a very successful business model with just a few tweaks.
What’s your Corporate Intelligence Rating? If your score is:
|Congratulations! You are a true market leader.
|Quite Good! You’re best-in-class.
|Not Bad. You’re above average and on the road to stardom.
|You’ve got some work to do, but if you set your mind to it, a bright future awaits.
|You’ve got your work cut out for you.
|You’re handicapped, but if you’re handi-capable, with hard-work, perseverance, and a devout focus on change, you can be average in no-time!
|You’re seriously lacking in corporate know-how, but if you open your heart to innovation, and bring in some expert consultants, you can get back on the right track.
|You’re going to need a corporate make-over to survive.
|Find a Leprechaun! You’re betting on Lady Luck at this point!
|Start writing your corporate obituary. It’s just a matter of time.
|Congratulations! The Sourcing Maniacs lay their bells at your feet. It should be impossible to be this idiotic and still be alive, but you’ve proven that nothing’s imposible. Have some bubbly before the money runs out.