A downturn can come from any number of different factors and have companies scrambling to keep their heads above the rising flood-waters. Many will sink and disappear from view. The latest statistics, for example, tell us that 91 percent of all new businesses fail. In fact, the number of failed businesses now exceeds the number of new start ups each year.
Even those who weather the storm may fall victim to another malady that I have observed all too often. The scenario is this: when an economic downturn hits, some companies suspend their normal way of operating and initiate a number of emergency measures, such as:
- Modifying standard operating procedures to do more with less
- Assigning associates to work on special task forces or project teams to accelerate improvements
- Creating new roles to improve coordination between business units or functions
- Upgrading associates’ skills in areas critical to the company’s survival
Then, as time passes and the downturn goes away, these now high performing companies return to operating “normally,” just as they did before the emergency situation arose.
What if the organizational innovations during the downturn could become, in reality, a new organizational template that would increase results in good times or bad? The following sections will describe some practical ways to use emergency measures as an opening to shaping a higher performing organization for the long term.
Deeper Connection with Stakeholders
First of all, consider that a downturn doesn’t just affect your business. It also affects every stakeholder connected to you. They are also experiencing their own versions of panic, emergency measures, and redeployment. You could connect with each of these key stakeholder groups and determine what their most critical needs are in the downturn. Out of your interactions you could gain a new appreciation for:
- What are their most critical needs in this downturn?
- Why would they stay with us? (What do we need to deliver in the crisis to retain their loyal partnership?)
- If they could wave a magic wand, what changes would they like to see from us tomorrow?
The answers to such questions could give you the framework for a new competitive strategy to actually gain ground while others are losing it.
For instance, a foundry was caught in a dilemma. Though its customers liked the quality of the foundry’s work (converting clay statues into bronze ones) and commented on the friendly customer service, fewer and fewer were bringing additional new work to the foundry. This problem grew larger as an economic recession hit.
Managers reached out and spoke with different customers to see the situation through their eyes. They learned that customers wanted an eight week cycle to receive their finished products. Presently, the foundry had a production cycle of 10-12 weeks. Customers complained that the longer cycle time really hurt their personal financial stability.
The foundry owner took the feedback to heart and examined his company’s work process from beginning to end and found several ways to save time without sacrificing quality or customer service. “We now deliver the artwork back to the artists within eight weeks,” the owner said proudly.
Just recently I learned the industry average for artwork turnaround is still 10-12 weeks, while this foundry has maintained its competitive average at eight weeks. And the business has grown significantly in the interim!
A new competitive strategy should grow into a larger re-purposing effort. What should be our new sense of purpose as we go forward? In tough times, it’s important to differentiate matters of principle from matters of expediency. Integrity in business must be maintained especially in tough times. Failure to do so, as we have learned from too many examples in recent times, erodes a company’s cultural foundation and destroys any goodwill you might have had before the downturn. Decision One in re-purposing is being clear about the core principles of the company that will NOT change in the downturn.
Procter & Gamble’s old City Road manufacturing plant in Newcastle, UK, was facing a shutdown because it simply wasn’t economically competitive any more. Product distribution lines were being reconfigured throughout Europe as the impending European Union laws would create a single marketplace across countries. With old equipment and its location at the northern tip of the UK, City Road was being closed.
But this economic, logical solution weighed heavily on the minds of the plant leadership team because Procter & Gamble had a long history of no layoffs. “How can we face our colleagues and tell them they don’t have a job?” protested the managers. Plant manager Tony Turnbull said, “We have all held the no layoff policy as a principle for doing business. We may not be able to deliver this policy any more, but what’s the principle behind the policy?”
A lively discussion followed when finally someone said, “There is that statement from our former CEO R.R. Deupree, ‘The interests of the company and its employees are inseparable.’” The team reasoned that if they couldn’t enforce the policy in this situation, they had better be sure they upheld the principle.
The employees’ interest in this situation was to have a job and to be able to provide for their families. The City Road leaders made it their business to help their associates do this. They personally visited many other companies in the area, informing them of the closing of the plant and hundreds of good associates being available on the job market. Interview rooms in the P&G plant were made available to these other companies to interview P&G associates. With the permission of each associate, personnel files were opened up to the prospective employers to validate that these were indeed good workers.
In the end, virtually all of the 200 plus City Road associates had a new job. One start-up employer even revised its job descriptions and pay scale upward to reflect the higher skill levels its new incoming associates possessed.
R.R. Deupree’s statement of principle rang true even in the most difficult hour.
After principles, the next strategic task becomes the definition of what I call a “Triage Strategy:” the urgent measures you must take to keep your business above the storm waters. Many of these points may be found from the stakeholder needs you identified earlier. What must you do immediately to earn the stakeholders’ loyalty in tough times?
A third and perhaps the most important step in re-purposing is the “what’s in it for me” factor for your associates. If we are in tough times, with special stakeholder needs to fulfill, and facing a critical need to re-purpose much of what we do, why should you expect associates to change what they do, sacrifice their personal comfort zone to meet your needs, or contribute innovations in tough, debilitating times?
I found some profound wisdom on this subject in (of all places!) a fortune cookie. Its message read, “No one will work for your interests unless they are his.” How true!
A formula first developed by consultant David Gleicher many years ago outlines what might need to be addressed to make “your interests” also the interests of all associates. Here is Gleicher’s formula that explains why people do or do not change:
Change is a function of (ABD) > X where:
A = a dissatisfaction with the status quo
B = A clear vision of the desired future state
D = Practical first steps to make in the change
X = Cost of making the change (financial, comfort, power, ego, etc.)
If ABD is greater than X, people will change. If ABD is less than X, you can expect constant challenges to the change.
Simply put, this formula invites you to be clear with your associates about:
- How much an unacceptable response to the downturn will cost both the company and associates their standard of living (A)
- The re-purposing framework (B) based on stakeholder needs and critical changes to meet those needs in the days ahead
- A flexible redeployment of many (D) [to be discussed in the next section] to enable the company to stay in business.
You can also invite associates to privately examine which of their X factors are more important to them than today’s standard of living.
The German proverb says, “The devil is in the details.” And indeed the details in a downturn are the redeployment of resources. Flexible redeployment means changing task assignments, processes, structures, and decision-making points to meet your stakeholders’ needs better than competitors in the downturn. A key paradigm for flexible redeployment is to eradicate the mind set “that’s not my job.” Here is one good example of redeployment:
Ariel Liquid was a new laundry detergent that was trying to break into a very crowded European marketplace in tight economic times. Other detergents were already well established; customers had their “favorite” one and would be a hard sell to consider a new alternative in a period of economic uncertainty.
Company management formed a multifunctional team made up of representatives from all the functions associated with the new detergent. The team also included market representatives from the major markets in Europe. This team was given the mission to expand Ariel Liquid across Europe as quickly as possible.
The team considered marketing campaigns, formula options, costs, and sales environments in the different markets. Team members interacted with all local markets to find out what the opportunities and problems might be in each. The output of these many discussions was a reference book that clearly outlined what a winning strategy could be in each market. When this book was reviewed in each country, several of them volunteered to launch the new detergent.
Because the team had launched a Europe-wide test market plan, the true potential of Ariel Liquid was tested in all countries simultaneously, not country by country as had been the previous practice. Opportunities were seized, problems were overcome, and the new product rolled out successfully in record time.
One shouldn’t wait to utilize such methods until a downturn occurs. A crisis is a poor time to move people from their areas of proficiency to those requiring them to learn a lot of new things. The ideal is that these practices are being developed and are part of an organization’s daily culture before a downturn hits. The collective skill sets and flexibility to move many people to address emerging priorities are part of the magic of blunting the force of a downturn.
The Bottom Line: Changing What You Do
Aligning stakeholders’ emerging needs, shaping a clear re-purpose, and redeploying resources in a downturn enhances the company’s survival rate. This requires individuals to sacrifice much to accomplish much. But these individuals need not feel manipulated to do the unreasonable. On the contrary, the dynamic is like winning a grueling sports contest, or developing a breakthrough medicine for cancer or diabetes. There is pride and a sense of deep satisfaction from delivering success in the midst of great obstacles.
If these so-called “emergency measures” deliver superior results in a downturn, why not institutionalize them as the new standard operating procedures?
That’s exactly what Procter & Gamble, the maker of Ariel Liquid, did. The multifunctional team approach has been institutionalized and is a key element in the management of Procter & Gamble’s world brands. The combined sales of Ariel Liquid and its U.S. cousin, Tide Liquid, make it number one in the world.
Just as important as the product success in the Ariel story is the development of P&G managers who gain experience in these multifunctional teams. Those who contribute leadership and prowess t0 multifunctional team successes continue to rise to the most senior positions in line and staff roles.
As traumatic as economic downturns are, they also offer an invisible silver lining to organizations who have the vision to see it. If leaders revisit their relationships with their key stakeholders, if they skillfully re-purpose their enterprise, and flexibly redeploy their people, they can actually raise their performance at a time when others are just hanging on to survive.
To those who experience the dynamics of reversing a downturn, I offer my congratulations… and a word of caution. Once the storm has passed, don’t relax and merely enjoy your success. Work hard now to institutionalize the new breakthrough practices, teamwork, and innovations so that they become your new way of life.