A record number of U.S. companies are beating earnings expectations but a big portion of their profits come from cost-cutting, disappointing investors who are hoping for boosts in revenue. The worry is that without a meaningful upturn in U.S. sales, cost-cutting can only boost profits so long.
Barring acquisitions, your company will likely be smaller two years from now, according to Ram Charan. In his new book, Ram Charan: Leadership in the Era of Economic Uncertainty: Managing in a Downturn, the bestselling author identifies the key rules to follow if you want to get the right things done in difficult times.
As bitter and painful as it may be, survival depends on cutting costs and raising cash. This is the time to narrow your focus and concentrate on your business’ core: the invaluable assets you can’t afford to lose.
Choose the market segments and customers you will continue to serve, the products you will continue to make and the suppliers from whom you will continue to buy. Eliminate the rest.
Seize opportunities to simplify your processes and reduce layers of management. You’ll have fewer customers, products, facilities, people and suppliers, but you’ll set the stage for a stronger company.
Management Intensity
Day-to-day management practices may have to change. Now’s the time to use management intensity: a deep immersion in your business’ operational details, as well as the outside world. More hands-on involvement and follow-through are required.
Ground-Level Intelligence
Get out in the field and observe. Salespeople are often closer to customers than other company representatives. Find out what they know or suspect trends will be.
The need for unfiltered information extends to suppliers and partners. Probe carefully to learn what’s going on throughout the value chain.
All of this information needs to be shared and examined to extract key facts and patterns as they begin to emerge. Conversations must cut across silos so you know what management, peers and subordinates are picking up on, as well as what’s happening in your area.
Controlling in Real Time
Increase your frequency of control, setting targets on a quarterly, monthly or even weekly basis. Revisit goals and key performance indicators, track progress toward them, and take corrective actions more often. Your company may have to change its approach more than once before things return to normal.
Staying in close touch with your people and digging into the numbers more often will help you pick up early warning signals that your strategy, business model, tactics and/or execution aren’t working.
Build Confidence
Aggressive measures and decisive actions build optimism and confidence. Spotting opportunities and pursuing them aggressively will inspire people and change their psychology from fear to realistic optimism. Your actions and words will align people’s minds, physical energy, hearts and souls.
Authenticity Is Critical
Your presence on the front line is important to energizing people and transforming their fear into confidence—but it must be authentic. Instill courage and optimism by putting reality on the table and addressing it decisively. Show people a credible, concrete path, and enroll other change agents who have the courage to make tough calls, without sacrificing values.
