Shooting From the Hip
An introduction to Deloitte Debates
by Jessica Blume, Principal, Deloitte Consulting LLP
The pressures of economic distress are taking a toll. From the collapse of legendary Wall Street firms to the thousands of smaller businesses closing their doors, companies everywhere have been cut off at the knees.
That’s just the start of a growing trend. In the face of so much uncertainty, too many business leaders are rushing into too many decisions, shooting from the hip with frenzied responses to real and imagined threats. Offshore this. Consolidate that. Shed load here. Down size there. Buy something. Sell something. Do something... do anything... just do it now.
In search of silver bullets?
There’s nothing like the promise of a silver bullet to get the corporate blood flowing. When it works, which is rare, you can win big. But mostly it’s a crap shoot with plenty of unintended consequences. Silver turns out to be lead – with a lot of weight and not much value. And those bullets? They ricochet all over the place.
Smart companies are pausing for a deep breath and then taking a dispassionate look at options based on their unique risks and opportunities. Market leaders with plenty of cash are focused on the growth agenda, including acquisitions. With competitors weakened and the credit crunch taking its toll, it’s a good time to expand strategically.
On the other end of the spectrum, cash-strapped companies with weak market positions are hunkering down. Some will fall victim to stronger competitors. But even if they survive, they are at risk of losing critical talent and nervous customers. If ever there was a time for innovation, this is it.
In the middle, of course, are most companies. Those with decent balance sheets that are working to conserve cash without shooting themselves in the foot. Their job is to preserve options for growth while driving operational efficiency and retaining top talent.
The need to balance growth and operational efficiency is nothing new. These are two of the key drivers of shareholder value. And they are related. Well-managed companies understand that today’s decisions about cost and efficiency have major impacts on future growth.
Debates: A framework for decision-making
In a world gone wild with too much information – and too much risk – getting a handle on complex decisions is a lot harder than it looks. Especially when you’re scrambling under the pressure of the downturn. This might explain why many companies settle for knee-jerk solutions that address part of their problems, instead of looking for more complete answers.
A global manufacturer consolidates its ERP systems without thinking ahead to International Financial Reporting Standards conversion, leaving millions on the table in potential savings. A telecommunications provider trims service costs in an offshoring deal, with no clear plan to limit churn among its most profitable customers. A life sciences company clamps down on training costs, while critical talent bleeds off in a free-flowing brain drain.
How do these things happen, even in organizations with great reputations and strong management? They happen because too many companies rip a page from the “best practices playbook” without carefully considering whether those practices really apply to their unique situations. While offshoring back-office operations might make perfect sense for one company, it could be a cash sink hole for another. While consolidating product development onto a single platform might be the perfect solution for one manufacturer, it might carry unthinkable risks for a company in the same business on the other side of the world.
By covering all sides of a complex issue and planning for the most likely impacts, you increase the odds of getting the results you want, without undue risk. But that requires discipline in evaluating the pros and cons of different choices.
It’s helpful to frame choices as debates – a healthy discussion of options, immediate impacts and long-term consequences. Here’s a look at just two of the Debates that Deloitte leaders will cover in the coming weeks:
Under siege. Recent downturns have been relatively mild and didn’t pose much threat to a company’s extended enterprise of suppliers and service providers. Sure, businesses had to tighten their belts, but they didn’t really worry about whether their critical business relationships would make it to the other side. This downturn is different in magnitude and global scope – and it poses a very real threat to your extended enterprise. What should you do? In a downturn, is protecting yourself enough?
Are people really your most important asset? Until the global financial system melted down, the talent shortage was a top strategic priority for most major companies. That was then – but have things really changed? The financial crisis might have grabbed the spotlight, but it’s not as if the talent crisis magically vanished. And unfortunately, a company’s natural response to the downturn can make its talent challenges even worse. The pain will be especially acute when the economy recovers. So which problem should companies focus on, the cash crunch or the talent crunch?
Debates provide an effective way to dissect problems and get to the heart of important choices. The strength lies in pushing our collective thinking to a deeper level and exploring the implications that are unique to specific industry sectors and leadership roles.
Jessica Blume, a member of the Board of Directors for Deloitte LLP, leads clients and industries for Deloitte Consulting LLP.
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