You may think your organi-sation cannot get any leaner, but rest assured it needs to, after many years of growth
Que: How do you effectively maintain service levels when you’re
headed into a recession? (Rob Chiuch, Toronto, Canada)
Ans: Given the fact that everyone from Ben Bernanke, the Chairman of the US Federal Reserve System, to the corner grocer is predicting a slowdown of some level or another, we were expecting some recession questions.
Thanks for picking service as the focus of your query. You’re onto something important. No matter how bad the economy gets, your company’s response to it should show up last, if at all, in its relations with its customers.
Instead, its response should show up first, and for as long as possible before the next upturn arrives, deep inside the organisation – in its gut, where all the fat is stored. We know what most people are probably thinking right now – their businesses don’t really have any fat, and cuts will go right into muscle. They’re thinking, “With all the competition we’ve been up against for the past few years, we can’t get any leaner.”
But you can, and you will. Because you do have fat. Indeed, virtually every company does, thanks to the past several years of sustained growth. Call it the Recovery Poundage Syndrome. Whatever: It’s not new, and it’s unavoidable. The challenge, as a leader, is to know where to start looking for it.
The telltale signs are myriad. A headquarters parking lot with a growing shortage of spaces. A company cafeteria with longer lines. Now, everyone knows that the headquarter doesn’t make or sell anything. It’s just overhead.
But during the good times, staff functions in particular tend to “put on weight,” with the addition of data gatherers, report writers, programme analysts, and the like, most of them doing not a lot more than adding up numbers around the latest management fad.
Even R&D is not immune from excess. During growth periods, managers sprinkle money on all sorts of non-essential projects that actually seem like good ideas at those moments.
With a recession looming, it is time for rigorous prioritisation.
Similarly, businesses accumulate consultants when the going is good. We’re not going to denigrate consultants: They can be useful for clearly defined projects.
But a fat-cutting mission calls for a close scrutiny of every contract. If your outsiders are not paying richly for themselves in added productivity & ingenuity, it may now be time to say goodbye to their monthly bills. Boom times also tend to give rise to an enhancement, shall we say, in the quality of company gatherings. Normally, one simple off-site retreat an year does it.
With a long expansion, companies somehow find a way to go to two or more, held in increasingly exotic locales. Look, we enjoy these excursions as much as you do. But before people can complain that their company is slicing muscle, such expense multipliers have to go.
To be clear, we’re not saying that, down the road, there won’t be cuts that cause pain. Every recession takes a real and painful toll. But given the natural plumping that goes on in long growth cycles, it will be a good while before companies get all the fat out. In the meantime, leaders cannot fall back on the all-too-common approach of across-the-board cuts that trim where they shouldn’t. Stay focused on your customers. You may be on a diet, but they don’t need to know it.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Que: How do you effectively maintain service levels when you’re
headed into a recession? (Rob Chiuch, Toronto, Canada)Ans: Given the fact that everyone from Ben Bernanke, the Chairman of the US Federal Reserve System, to the corner grocer is predicting a slowdown of some level or another, we were expecting some recession questions.
Thanks for picking service as the focus of your query. You’re onto something important. No matter how bad the economy gets, your company’s response to it should show up last, if at all, in its relations with its customers.
Instead, its response should show up first, and for as long as possible before the next upturn arrives, deep inside the organisation – in its gut, where all the fat is stored. We know what most people are probably thinking right now – their businesses don’t really have any fat, and cuts will go right into muscle. They’re thinking, “With all the competition we’ve been up against for the past few years, we can’t get any leaner.”
But you can, and you will. Because you do have fat. Indeed, virtually every company does, thanks to the past several years of sustained growth. Call it the Recovery Poundage Syndrome. Whatever: It’s not new, and it’s unavoidable. The challenge, as a leader, is to know where to start looking for it.
The telltale signs are myriad. A headquarters parking lot with a growing shortage of spaces. A company cafeteria with longer lines. Now, everyone knows that the headquarter doesn’t make or sell anything. It’s just overhead.
But during the good times, staff functions in particular tend to “put on weight,” with the addition of data gatherers, report writers, programme analysts, and the like, most of them doing not a lot more than adding up numbers around the latest management fad.
Even R&D is not immune from excess. During growth periods, managers sprinkle money on all sorts of non-essential projects that actually seem like good ideas at those moments.
With a recession looming, it is time for rigorous prioritisation.
Similarly, businesses accumulate consultants when the going is good. We’re not going to denigrate consultants: They can be useful for clearly defined projects.
But a fat-cutting mission calls for a close scrutiny of every contract. If your outsiders are not paying richly for themselves in added productivity & ingenuity, it may now be time to say goodbye to their monthly bills. Boom times also tend to give rise to an enhancement, shall we say, in the quality of company gatherings. Normally, one simple off-site retreat an year does it.
With a long expansion, companies somehow find a way to go to two or more, held in increasingly exotic locales. Look, we enjoy these excursions as much as you do. But before people can complain that their company is slicing muscle, such expense multipliers have to go.
To be clear, we’re not saying that, down the road, there won’t be cuts that cause pain. Every recession takes a real and painful toll. But given the natural plumping that goes on in long growth cycles, it will be a good while before companies get all the fat out. In the meantime, leaders cannot fall back on the all-too-common approach of across-the-board cuts that trim where they shouldn’t. Stay focused on your customers. You may be on a diet, but they don’t need to know it.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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orilla! While economists and experts are lavishing praise on India’s capability to attract capital flows resulting in India’s tremendous economic progress, it’s surprising how these experts have quite succinctly ignored debilitating warnings released by global advisories and even IMF, which commented as recently as in February 2008, “Large capital inflows are complicating the conduct of monetary policy, creating excess liquidity and pressuring the rupee.” Morgan Stanley’s clear warning advisory mentions that even as private capital expenditure has picked up significantly to an estimated 13.7% of GDP in FY 2006-07 from 5.9% in FY 2002-03, capital expenditure on infrastructure has improved at a relatively slower pace to 4.2% from 3.5% during the same period. But the pathetic part is that in order to sustain a GDP growth of 9%, or 10%, infrastructure spending should have been 7-8% of GDP, and not the much achieved 4.2%.
master. In case any hack needs a comment or two on seemingly controversial macro issues, his or her first reaction is to call up Rahul Bajaj, Chairman, Bajaj Auto. Invariably, Bajaj will make a crisp and cutting remark. The reason: Bajaj is probably one of the few Indian industrialists who are not afraid of anyone – neither policy makers, cabinet ministers, nor other promoters. He has the ability to criticise anyone – if he thinks it’s right to do so.
seem to be doing these days. Raison d’être, driven by huge surge in both business and leisure travel, the industry is on a roll. And with over $2 billion waiting to be roped in the next three years, the sector seems hot among investors. However, interestingly, most of the treasure hunt happens to be in the mid-size and low-budget segments.