Daily Archives: November 15, 2009

Time to Start Preparing for the Next Recession

Wow! This recession isn’t over yet and CNN Money is already telling us to prepare for the next recession! Considering that boom-and-bust cycles have been happening faster and faster, it’s good advice, but it’s still a bit of a downer. I agree with Moore (in the contained video interview) that a new economic order is likely needed, but it’s not going to happen any time soon, so we have to optimize against what we have.

So how do you prepare for the next recession? The article offers three primary pieces of advice:

  • Make friends now with people you’ll need later.
    For example, if the government gives you a chance to sit on task forces, send executives, not functionaries. It doesn’t look good when the CEO only shows up to lobby officials on a potential tax or regulatory change that would benefit his or her company.
  • Listen to unconventional wisdom.
    No one wanted to listen to Jeremy Grantham when he said that real estate and asset prices had become insane. He’s still working when many fund managers aren’t.
  • Don’t go soft on evaluations.
    The best companies, like P&G, are as rigorous in evaluations in good times and bad. That’s why they never find themselves with a roster of C players when the downturn hits.

It’s all great advice, and I’d heed it because you’ll do even better than your peers during the recovery if you do.

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How to Insure Your Employees (Re)Connect with the Business

A recent article in Industry Week presented ten tips from Watson Wyatt that were designed to help you help your employees reconnect with the business in these troubled times. They weren’t bad, and are definitely worth a review (if you add a little flair). In the doctor‘s words, they are:

  1. Ditch the Dotted Lines
    The organizational structure should be crystal clear. Every employee should understand their role and how they contribute to organizational success.
  2. Cut the Crap
    Be honest about the situation. You might think otherwise, but an average employee can smell B.S. a mile away.
  3. Lead-line the Golden Parachutes
    Make sure executive compensation is in alignment and dependent upon the executives driving value to the business. Remember, while few people will have a problem with a 2M bonus to a CEO who increases profits by 20M (as long as all the contributors are justly rewarded as well), you can bet no one will agree with a 2M bonus to a CEO that led the business to a 20M loss.
  4. Sink Signature-based Sales Commissions
    A salesperson shouldn’t get a 1M cheque for signing a 10M contract. They should get the 1M cheque for delivering 10M of profitable revenue to the business. This means that they should be selling software and services aligned with the business and making sure that the customer stays happy and actually pays the business the 10M. Considered structured plans that give, say, 25% each time a revenue target is realized (such as first payment, second payment, etc. or every quarter the customer remains).
  5. Pitch Performance Penalties
    Review performance management and make sure you’re focussing on measures that contribute to success. For example, number of calls per day and number of bugs fixed are NOT good measures. The first entices customer service reps to get the customer off the phone as soon as possible, which leads to repeat calls when the problem doesn’t get resolved, and the second entices programmers to put easily fixable bugs in their code.
  6. Weed out the Weak
    Make sure you focus on the key talent that contributes to your organizational success and that the Wallys are the first to go when cuts are made.
  7. Trash the Touchy-Feely Awards
    You should only be rewarding exceptional performance, not the norm. Otherwise, what incentive does anyone have to truly excel? (Personally, I hate this “everyone should get a reward” crap that has infiltrated our society in recent years. It’s inspiring a culture of lazy lolly-gaggers. While it would be nice if everyone was capable, you should have to work for it!)
  8. Pitch the Proctologist
    The reports he finds with his flashlight are rubbish. Get a real data analysis system and base decisions on facts and analysis, not on gut-feel and emotion.
  9. Discard the Dunce-Hat
    If anyone needs it, they shouldn’t be working for you. Instead, make sure you understand where the critical roles and skills are and do what you can to support them.
  10. Abdicate the “Me-Too” Attitude
    A business needs leaders, not followers. Who cares what your golf-buddies are doing. You need to figure out where you business needs to go, how you’re going to get it there, and lead your employees out of the dark and into the light.

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