Stash something aside for a rainy day? Good advice for people and businesses both. How about stocking up in case there’s a warm and sunny one? That can work, too. It’s exactly what the outerwear maker Weatherproof Garment Co. just did when it bought $10 million of coverage to insure against unseasonably warm weather in December. On Nov. 9, the thermometer climbed to 62 in Grand Rapids, Mich. It’s the first time an apparel maker has hedged its financial exposure to the weather with a policy. Contingency planning can pay off. And companies are diving for rocky-time shelters undreamed of a decade ago.
Hope for the best and prepare for the worst ... and prepare early. That’s something the barons of finance didn’t do in the face of the recent credit crunch. Roadkill is littering Wall Street. In less than a month, Stan O’Neal was ousted as CEO of Merrill Lynch, and Chuck Prince left Citigroup’s helm. To show there’s a glass basement that goes along with the glass ceiling, Morgan Stanley’s Zoe Cruz, the top-ranking woman on Wall Street, joined them out the door days later.
The sweet can sour fast these days. In November, it was a kiss-off for six Hershey’s board members. At Motorola, Ed Zander’s watch as CEO of Motorola ended after months of pressure for the sharp decline of the company’s cell-phone business. CEOs have never been paid better and are never more in peril of tumbling off the perch. If CEOs are hitting the pavement, you don’t have to be an Einstein to figure out what’s happening a level or two down.
Thinking about how you might pare back if you have to? Forget about the ax. Even a scalpel could be too clumsy. Better work with a laser instead. Want your business to live to a riper old age? Here are some New Age tips that could help:
• A decade ago, trimming R&D and technology expenses was a “gimme” in a downturn. Now it may be a fatal error. Information is the plasma of modern business. You could be hawking Bluetooth communications gear or corporate bonds. It doesn’t matter. The former director of a defunct investment-banking outfit noted in Inc. magazine: “We were a successful sales organization, but our credibility with customers was based on the underlying research we brought to problems. ... Unfortunately, the president didn’t understand that, so when he needed to cut costs, he cut back on research. Almost instantly, our sales melted away.”
• Considering cutting back your sales force? Dangerous step. Again, are you taking care of “I” ... and “I” means information? Are you giving your salespeople the right leadership and the right leads? Expert James M. Rubenstein writing for Crain’s says: “A telemarketer can give 10,000 four-minute quality sales presentations per year.” I’ll guarantee you not a one will be worth the dial tone unless you are qualifying your prospects properly in the first place.
• Stay close to your best people. In tough times, you’ll need them the most. When business is booming, who can spare a day for a seminar? Some wisdom from FastCompany on training in downturns: “Now people have more time. And it’s the time to develop them.” If you never stop the clock to groom your stars, someone else will.
• Some customers have the jitters. Does your marketing make a strong value statement? Anticipate customer pressure. If a downturn happens, they’ll want price concessions. Know which ones you’ll give beforehand, and it will help you identify how to cut costs today.
• Track your competitors. Watch their Web sites. Monitor press coverage on them daily on the Web. Maybe they’re more pessimistic than you are. Maybe they’re already panicking on pricing. No matter why they’re doing it, one thing is sure: The marketplace is changing, and the customer is paying attention.
Times have been good for a long stretch, and here’s hoping they will be again soon. The best way to dodge a downturn is to run a tight ship 24/7. Investing in your valued competitive edges and your best people can do better magic than simply making expenses and people disappear. •
Mackay’s Moral: Rough water is no place to check to see whether you packed your life preserver.
Harvey Mackay is the author of The New York Times No. 1 bestseller “Swim With the Sharks Without Being Eaten Alive.” He can be reached through his Web site www.harveymackay.com, or at MackayMitchell Envelope Co., 2100 Elm St. SE, Minneapolis, MN 55414.
