Provocative Propositions

In the hyperactive and challenging world in which we all live, it is becoming harder and harder for business leaders to find time to read, reflect and gain insight from the many valuable sources at our disposal.

In "Provocative Propositions", The Beacon Group attempts to fill that void by offering our opinion, often rather pointed, on a wide array of issues we believe are relevant to leading a modern organization.

The articles are catalogued into 12 categories so you can quickly and easily find a topic of particular interest. We then offer three easy steps under the heading "In Our Opinion" to help business leaders take action on the key themes.

Simply click on the category and read away.

Leading with Conviction
Let’s face it. Most leaders in your company have not had the opportunity (or misfortune) to deal with an economic crisis on this scale. They don’t know how bad things could get. They’ve never managed in such a toxic work environment, poisoned by layoffs and negative news, and they’ve never had to actively let go of low-margin customers.

Are your leaders ready to make a fundamental shift from looking at return on investment to basic cashflow?

Are your leaders ready to change the way they serve customers?

Are your leaders ready to reshape, and possibly shrink, your organization in one decisive stroke, without mulling and painfully extending a period of layoffs?

Are your leaders ready to let go of less profitable customers who are consuming precious cash flow?

If your answer to any of these questions is “No”, then Ram Charan’s latest book “Leadership in the Era of Economic Uncertainty” will be a timely read.

The Fact is these are unprecedented times that will require your people to see the business in a different way and take some unorthodox actions.

The Problem is leaders may not recognize fundamental shifts that are taking place or the speed with which their organizations must adapt to this change. This is not a typical recession, where downsizing is the preferred method of dealing with the slowdown. Organizations need to reshape the way they do business.

The Outcome is failure of major organizations – quite simply.

The Solution is to position your business to thrive in the aftermath of this crisis. Avoid being overwhelmed by current events, manage for today and plan for tomorrow.

Frontlines

Now, more than ever, it’s important to have your eyes on the frontlines of your business, watching the latest trends… and when we say trends, we mean day-to-day trends, sales trends, consumer trends, not distant year long product trends. That’s not to say those aren’t important, but they are less of an issue now.

Ram Charan calls this “ground level intelligence”.

An example…

Wal-Mart recently observed that, for the first time in its retailing history, sales of baby formula were timed with twice-monthly pay periods, perhaps a sign that consumers were under financial pressure and managing their purchases from paycheque to paycheque.

This information is undoubtedly useful for the retailing giant as they can begin cutting supply inventories, restocking the product at timed intervals and taking other measures.

Depending on your organization’s processes, this kind of detailed tracking may or may not be in place right now. Something to think about?

Shifting Paradigm

One of Ram Charan’s early childhood experiences was learning to keep track of the money his parents made in their little shoe store in India. Each day Ram would count the amount of Rupees in the till and keep track of what major corporations would call cashflow projections.

Well, as a leader, cashflow is definitely not a new concept to you.

However, the shift from return on investment concerns to cash concerns may be a new working paradigm. It’s a paradigm that may include letting go of unprofitable customers that hold up inventories and tie up precious cash. Some investments, which in good times may look like perfectly good opportunities with decent returns, may now be turned down, simply because the cash on hand is too important.

Charan cautions leaders not to assume that everyone in the organization is 100% clear on the cash ramifications of their decisions. Communication is key.

Decisiveness

We’ve all heard about recent layoffs in the news.

A reduction in demand, necessitates a reduction in supply. And that usually entails a reduction in employees. Business 101.

But it’s not so simple.

These drastic changes need to be made within the context of completely reshaping the organization. It’s not enough to take a hack at headcount without rethinking the business model and reworking how you serve your customers.

That’s the complicated part. Cuts need to be made quickly, but leaders need to think carefully about their downsizing. Meanwhile, headcount cuts should not drag on and on and on. They need to be done decisively to avoid creating a toxic work environment driven by fear.

All of the above might be a tall order for your leaders, and it’s just the tip of the iceberg according to Ram Charan. Are your leaders ready to act?

In Our Opinion
The Beacon Group’s Advice for Leading with Conviction

Identify your least profitable customers - Create a list of your least profitable customers – the bottom 20%. Not just those that deliver the lowest yields and margins, but also those that tie up cash in the process of catering to their needs. You don’t have to drop them immediately, but get your employees and sales team in the mindset of weighting customers versus cashflow.

Get your HR department involved - Not everyone in the company has the financial acumen of a CFO. Even managers may not understand why certain decisions are being made. Why would you drop customers in a recession, for instance? Your HR department needs to be actively involved in communicating the reasoning behind company decisions.

Get out of your box - It has never been more important to leave the office and visit co-workers on the front lines. Not just for a morale boost, but also to get a feel for the challenges and business environment. Too many leaders bury their heads in the overwhelming tsunami of decisions that need to be made in these difficult times. Sometimes leaders are so narrowly focused they couldn’t tell you how their competitors are reacting and what their customers need.
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