There’s no question the broader economy is a tumultuous place to be. How it’s affecting your company, however, isn’t always so clear. Would you know if you were in trouble? Unfortunately, many companies can’t answer that question.
Recognizing when it’s time for an intervention could be the key to managing successfully in these volatile times. The longer it takes to address underperformance, the more rapidly a company descends into crisis mode — and the more likely it is to suffer permanent, irreversible damage.
“You need to be continually looking at your operations, re-assessing and re-evaluating whether everything’s fine, or whether your company is in need of some performance improvement initiatives.”
— Ryan Brain
Getting squeezed from both sides
At the root of today’s challenging market conditions are two worsening trends: first, demand for products and services is declining as customers rein in spending, and second, access to capital is shrinking as creditors tighten their lending criteria. If these factors aren’t yet influencing your business, chances are they soon will. And when they do, you should be
ready to respond
Response strategies to demand- and credit-driven business emergencies are fairly well known. You can adjust strategy, operations, finance or combinations of the three. But which ones require tweaking and by how much? Will you be able to respond quickly enough to mitigate further damage? Speed is always crucial, as most companies cannot respond quickly enough even if they know what needs to be done.
Take control by understanding your situation
You need to come to grips with how the global recession is affecting your company now and in the future. If you don’t have that basic understanding, you could be in trouble without even realizing it. “You can’t address what you don’t know,” says Ryan Brain, a partner in Deloitte’s
practice. “So you need to be continually looking at your operations, re-assessing and re-evaluating whether everything’s fine, or whether your company is in need of some performance improvement initiatives.”
The following questions will help you get a handle on your vulnerability to an economic downturn:
- What are your real short-term requirements? How and where should you focus your immediate efforts?
- What medium- and long-term implications could arise by stabilizing the business in the short term?
- How quickly can you implement larger scale change, such as new products or concepts, if required?
- How cooperative (or uncooperative) can you expect customers and suppliers to be?
- How will competitors and other stakeholders react to a turnaround initiative? Similarly, how will competing interests affect company efforts?
“Your long-term goal shouldn’t simply be to address the current economic downturn,” says Brain. “Ideally, you should be laying a foundation that allows your company to respond effectively — no matter what the economy throws at you.” As difficult as it may be to admit that your company has a problem, the riskiest behaviour is to ignore worsening performance. If you recognize that your company is in distress, whether it’s the most acute “crisis” stage or the earlier “underperforming” state, then at least you can take action to improve your odds.
If you don’t already have a decision-making framework to help you determine if you need to enhance your business performance, you need to make this happen — and soon. Companies that manage to survive in volatile times are those that recognize the signs of underperformance early on and take control swiftly.