Leading your company through tough times

[Editor’s note: This is part one of a two-part column on navigating the difficult economic climate. Part II, “Plan for the better times that follow downturns,” appeared in the Sept. 9, 2008, edition of Providence Business News.]
“These are the times that try men’s souls.”
That was Thomas Paine writing in 1776 about the early dark days of the American Revolution. But it also aptly describes the thoughts of businesspeople today trying to cope with our ailing economy.
Leading your company through tough times is something we all have to learn to do. Economic downturns happen fairly often. Since 1948, we have had 10 recessions, lasting an average of 11 months, followed by an average of three years of prosperity. The successful business leader must develop the skills to navigate his or her company through the stormy seas they will inevitably face numerous times.
As a senior executive, CPA and business coach for more than 25 years, I have found that there are three fundamental requirements for successfully leading a company through a slumping economy: proactive leadership, timely and accurate information, and a long-range strategy. In fact, if you get these right, tough times can be a good thing for your company. The Chinese offer a shrewd observation for business leaders to keep in mind. The characters in their language that mean “crisis” also stand for “opportunity.” Tough times can be the opportunity to strengthen your business by increasing market share, hiring good people, trimming unnecessary costs and getting the jump on the competition as the economy turns upwards.
Here are the leadership skills and practices that I found have worked for businesses of all kinds to get them through rough economic times – often emerging the better for it.
• Be an aggressive and positive leader.
When the economic seas turn choppy, our reflex is to go into survival mode. We focus myopically on the day-to-day and become reactive. While a tough business climate calls for a degree of caution, proactive leadership is even more important than when business conditions are good.
Notice I use the word “leadership,” not “management.” When the economy is positive, companies can often get by with a manager (think “caretaker”) at the helm. These days, most companies need a strong leader to stay healthy.
A leader by definition is someone everyone looks to for direction. Therefore, to be effective, a leader must be positive, project confidence, demonstrate strength under pressure and, as much as possible, keep things upbeat. Grim isn’t good for company morale.
It’s also important to be particularly supportive of employees under 30. This may be the first time they have experienced a trough in the business cycle, and they are likely to be apprehensive and show reduced enthusiasm. While most of us grow more from adversity than from easy times, the first-timers in your company need your support to stay on course.
• Focus on what you can control. Don’t waste time on what you can’t.
Keep building your company. This may be a great time to recruit good people from struggling companies and to scout for advantageously priced acquisition opportunities. It may also be an opportune time to acquire new equipment. The Economic Stimulus Act of 2008 offers special tax breaks for certain assets purchased this year.
Another key component of effective leadership is vigorous communications. This includes communicating with every constituency that is important to your organization: employees certainly, but also customers or clients, lenders, suppliers and shareholders. Keep in mind that communication means listening too. Many business experts contend that listening is just as important a leadership skill as is public speaking – maybe more so.
• Protect your competitive advantage.
Why do your customers or clients buy your products and/or services? No matter where we are in the business cycle, it is essential for a business leader to know the answer to that question – know it specifically and honestly. I’ve been amazed over the years how few senior executives can fully answer this question. If you don’t know the answer, it is difficult to effectively grow the business. The answer goes by different names: value proposition, unique selling proposition (USP), competitive advantage. Whatever you call it, find out the reasons people do business with you rather than with your competitors, then improve and capitalize on the features and benefits customers already like.
No matter what day-to-day fires flair up, keep your organization focused on cost control, service and innovation. One or more of these factors is what makes you attractive to customers. Put at the top of your to-do list those things that improve your value proposition to customers.
If there is one key element in navigating through rough economic waters successfully, it is leadership. An organization without a real leader ultimately goes nowhere. Be upbeat, be action-oriented and plan long-range. The business cycle will turn upwards, and you want to be ready.
Part two of “Leading your company in tough times” will describe how to fine-tune your systems, procedures and profitability to see you through tough times and position your business to do well when better times return. •
Jay Cumming, CPA/CVA, MBA, specializes in strategic planning, executive coaching, succession planning and profitability improvement at Tofias PC. He can be reached at JCumming@tofias.com. Tofias, the second-largest regional accounting firm in New England, and one of the 2008 Best Places to Work in Rhode Island, has offices in Providence, Newport, Cambridge, Mass., and New Bedford.