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Keeping Your Cool
May 06, 2008
How to make the right calls when times are tough
By Jim Nightingale
Making good decisions is tough enough when things are going well, so adding a recession to the mix can make a job that was previously difficult truly excruciating.
To start with, time suddenly becomes critical. Every second is another chance for revenue to further erode, every decision becomes a crisis and every action becomes a race. Unfortunately, the best time to make a critical decision is not when you have other huge problems floating around in the back of your mind.
The character of the decisions required of a manager also changes in difficult times. What initiative should I cut? Who should be laid off? If you have not had to make those calls before, they can be so painful that you avoid making a decision at all.
Finally, a recession can restrict both the potential strategies available to you and the resources that can be devoted to the decision-making process. You don't have the people to assign to finding answers, and potential solutions are restricted to low-cost options.
Given all these issues, it isn't surprising that managers are prone to certain errors as the economy shifts into reverse. The first of these is the issue of evaluating risk.
When things are not going well, we are working in a higher-risk environment. Is it riskier to move resources out of a profitable but fading product to fund the next big thing, or to starve a small but growing business to maintain a business line that is performing well today?
Closely related to the risk issue is the "what to cut" issue. Consider this cautionary tale about a consulting firm that was extremely dependent on a single large client. Upon entering a recession, management refused to consider attempting to expand its client base in order to maintain focus on the mother client. Eventually, everything that was not generating immediate revenue from that client was eliminated, leaving the firm unable to recover when business picked up again.
The answer to these problems is to avoid letting the difficult environment force you into making desperate decisions. Create and use a good decision process.
When the dot-com bubble burst, some firms refused to make the necessary cuts that were just good business because the people and assets were associated with particular executives or programs. But while waiting to make these reductions until the brink of bankruptcy may have made some executives feel absolved of blame, it only drained resources from a desperate business.
Most organizations have a certain number of decision processes that have been engineered through experience to give good results. Budgeting, hiring and determining what work to pursue are examples of structured decision processes. Difficult times can induce managers to abandon these well-thought-out processes and the people they involve, instead opting to make decisions themselves.
Often, the most difficult thing a manager needs to do in a recession is manage the decision environment. People know when the company is having difficulty. They become pessimistic, lose their faith in management, and spend less time being productive.
Fortunately, the solutions to all these problems are more a matter of discipline than genius. First, even when you don't have the time or the resources, do a good, quantitative analysis of your problems. Involve the right people and then listen to them.
Second, stick with your processes. Adjustments may be needed, but a drop in revenue isn't cause to start making decisions by the seat of your pants.
Finally, have no doubt: Your staff is watching you. If you challenge them and demonstrate faith that any problem can be solved, they will have faith, too.
Jim Nightingale is a consultant with 20 years of experience and the author of Think Smart-Act Smart: Avoiding the Business Mistakes that Even Intelligent People Make.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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