Lessons Learned In a Downturn

In 2009, the recession was technically over due to some modest growth. As the economy continues to become healthy, it is an excellent time to examine the companies that did more than survive during this recession.

During a recent Rocky Mountain Association for Corporate Growth (ACG) Corporate Executive Series breakfast meeting the subject was discussed by three senior executives that were able to improve their business results during this period, including one company managing through a Chapter 11. Panel participants included Anthony Carroll, CAO, Vicorp Restaurants (Village Inn and Bakers Square restaurants); J.D. Johnson, President, Nogren Americas; John Zimmerman, CFO, Tomkins plc. The panelists shared a great deal of information on specific initiatives to improve financial results during the recession, but there were five overriding strategies that each company employed:

Move quickly

Identify issues in your business and initiate changes quickly. Don’t get caught up in gathering and analyzing data, but rather make changes once trends start to appear. Those companies that react quickly in difficult situations (economy driven or self inflicted situations) are those that will have the best chance of emerging quickly and healthy. Moving quickly means there may be mistakes made, but most can be recovered from as long they are not catastrophic mistakes. A business that is not making mistakes is one that is not moving quickly enough and will most likely be left behind.

Communicate the situation to your employees

Provide your employees a real understanding of the situation and what the goal of the company needs to be in the recovery. Your employees are the most knowledgeable about the detail workings of your business, and they are your best resource in resolving problems.

One company that presented at the ACG meeting solicited input from the employees on how to reduce payroll costs. The employees were briefed on the situation and asked for their recommendation on headcount reductions, reduced work weeks, or reduction in salary. The company ultimately had to use a couple of the options, but the employee base was appraised of the decision and appreciated the opportunity to be a part of the decision process.

Increase frequency of reporting

During difficult times it is necessary to have as transparent an organization as possible. The reporting of key metrics becomes critical and each had reporting stepped up drastically. Once company described the increase in their business as “reporting that was done yearly was now monthly, monthly reporting was now weekly, weekly reporting was daily, and daily reporting was many times each day.” Focus your efforts on the important metrics of your business. It may not be possible to increase all reporting, but those that are drivers for your company need to be reviewed more frequently and by all management that can impact the results.

Communicate to your key customers

Your key customers need to be a part of your communication strategy. The communication needs to be more than just a letter from the president. Your key customers deserve face to face meetings to learn of your progress and in times of economic difficulty how you can partner with them to create a stronger relationship.

Initiate revenue enhancement programs

Even in a recession there are ways to increase revenue. Cost containment is a given, but not a cure-all in a poor economy. Companies that focus solely on cost reductions will lag their competitors and emerge from a recession a weaker company.

All the companies on the panel discussed price increases and promotions. Each had their own way of increasing sales, based on their specific industry. Norgren Americas had a strategy of telegraphing price increases well in advance to condition their customers prior to the increase. Tomkins took advantage of the downturn to exit unprofitable businesses and focus their marketing and sales efforts on industries and businesses with growth potential. Vicorp Restaurants refused to play in their industry’s love of coupons.

Summary

These five strategic actions are not new, and I find that they are reoccurring in many of my articles. It was interesting to hear these three senior executives from very diverse industries talk about the same things that I have experienced firsthand in companies I have run over the past 15 years.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com