We’re currently in a downturn, and many leaders, CEOs and business owners have not led through a downturn. It’s disconcerting.
There are other, older folks who have led through multiple downturns. We had two seasoned leaders on the radio program who shared their wisdom.
My first guest was Bob Pene, who has turned around dozens of brands or divisions of larger firms and dozens more mid-sized and smaller firms. He’s helped at least 100 different firms or groups, including:
- Beaver Coaches
- Fisher Implements
- G.D. Searle
- Jubitz Travel Center
- Kellogg Company
- Mary Kay Cosmetics
- Rainsweet Corp.
- Ralston Purina
- Texas Instruments
Bob has noticed some themes to downturns, one of which is the mistaken approach so many leaders fall into. The successful companies like P&G will push forward during the downturn and gain 6-7 percentage points of market share, which they retain during the recovery.
By contrast the average CEO will put his head down, cut costs solely, and cut back on marketing and sales. The overall market is shrinking, so the competitors are chasing fewer sales harder.
The result is that the As and Bs will consolidate their positions and drive the C and D companies out of business.
The winning approach – and most CEOs have not seen this – is to grow sales and grow market share during the recession.
How am I going to do that, with no money, no deep pockets, and smaller margins?
Bob says most companies are actually unaware of exactly what they sell and exactly how they provide value.
For example, Bob worked for a millworks – cabinet makers – and Bob helped them discover that they were pricing themselves at parity with their inferior competitors. The customers recognized the quality already. So Bob helped them raise their prices, and helped them persuade the architects that the high quality was part of what helped the architect keep a reputation for high quality.
The price increase was successful and sales remained solid.
Another client sold farm implements. They had superior products, reliability, parts and service. They had not previously shown the farmers that it made a huge difference, if your key harvesting equipment is sitting waiting on parts while half your grass seed crop is about to rot in the field. Suddenly the extra cost pays for extra value that reduces the farmers’ risk enormously, making it more than worth while.
To accomplish this you have to get closer to your customers and get closer to your own front line workers.
My second guest was Mike Barnes, who has also turned around several firms.
Mike entered the work force when the “command and control” style of management was standard. He adapted to it, however it never really worked well, and fails even more completely today. The Gen-X and Gen-Y workers demand more feedback.
Sharing financials is something that gets resisted more in privately owned companies. Some owners don’t want the workers to know how much profit is being made.
Mike discovered the value of the goodwill that gets built from sharing the financial numbers. He started work at a paper and pulp mill, and went into negotiations with the union. When management showed the union how unprofitable that plant was, the union flatly didn’t believe them — they believed the books were being cooked to manipulate the negotiations. Mike began sharing the numbers monthly with the union, and two years later the negotiation took place in an atmosphere of much higher trust, and resulted in a contract with profit sharing — the first such contract in that company with that union.
Information Sharing, Innovation, and Morale
Other ways of sharing information will also build goodwill. Consider taking suggestions from workers on money-saving innovations. The way to do that is to pay good attention, give credit, and follow up — show everyone the results of implementing the ideas.
These suggestions also become huge opportunities for educating the workforce. Once a worker makes the suggestion, you invite that worker to stay involved with implementing the idea. Teach them how to talk to a vendor. If there’s engineering to be done, invite the worker to sit in on the design meetings. Teach them how to calculate return on investment.
Eventually the workers become very aware of the trade-offs to be made, the limited capital available, and soon the entire workforce becomes keenly aware of the need to pick projects.
In Mike’s experience, when this was rolled out, the engagement level of the workers was so high, turnover dropped to zero, and the workforce submitted the company to be considered for one of the Top Places to Work in the state — and they won.
As part of these innovation projects, vendors come out and interview the workers involved in the projects, and they go out onto the floor and learn a lot about how their product is being used, and how they can make it better. It’s very powerful for vendors, very educational.