Roar Out of the Great Recession

It’s time to place some bets on the recovery.  Buy low and sell high.

 The labor market is softer than it has been since 1982.  It’s time to act.

 0. Reset the terms of employment with staff.  Reduce health care, pension and other benefits to a sustainable level.  Increase the share of incentive versus base compensation.  Hire some support staff to avoid burnout.  Offer a nominal pay increase now.  Provide extra time and flexibility to staff to balance.

  1. Hire qualified director/VP level staff to lead “on hold” initiatives.  They are available for lower base compensation and are highly motivated to earn incentives.
  2. Identify the most qualified scientific and technical staff in key R&D and product development areas.  They are unable to obtain venture capital support and would welcome a paycheck or contract.
  3. Complete your quality staffing, training and initiatives.  The market is loaded with very highly qualified individuals who have the business savvy to deliver value.

 Most suppliers are in weak positions, eager to begin to make progress.

 0. Propose long-term agreements with key supplier partners in return for a 5% per year reduction in unit costs.  Negotiate to a win-win position.  The best partners can reduce costs every year.  Focus on professional services firms.  Legal, accounting, insurance, HR and real estate firms face a new reality of lower revenues and profits.  They are ready to negotiate to maintain business.

  1. Take another look at outsourcing areas that are not strategic core competencies.  The third-party providers are more effective than ever and eager to do business.  All of the line and staff areas should be reviewed:  customer service, finance, accounting, HR, marketing, purchasing, logistics, distribution, manufacturing, and R&D.
  2. Engage contingency based cost saving consultants.  They are eager for business and can do their work with limited time from your staff.
  3. Look at domestic suppliers of key products and components.  The dollar is falling.  Transportation and environmental costs are rising.  Inventory and stock out opportunity costs are rising.  The remaining domestic manufacturers have outstanding capabilities.

 Make a few strategic investments.

 0. The real estate market is very weak.  Re-negotiate existing leases.  Look at sale and lease back deals.  Lease or secure options on properties for the future.  Hire or contract for unemployed real estate experts to reduce total costs of facilities and their associated risks and taxes.

  1. Take out those IT investment project lists.   Invest in the high ROI projects.  IT firms are ready to bargain, especially for larger, long-term deals.  Consider applications like Microsoft Sharepoint that knit together web, sales and communications.
  2. Pursue strategic acquisitions to acquire market share, products or talent.  Equity values have recovered.  Debt for solid larger firms is becoming available at low rates.  Smaller and highly leveraged firms are nearing the end of their liquidity options and need to sell.

 Pursue market share.

 0. Strategically evaluate the structure, number and incentives of your sales force.  You’ve maintained market share for the last 2 years.  Remove low performers.  Revise incentive schemes.  Invest in sales training for younger staff.  Make sure that your sales management team is the best possible.  Hire strong performers from the real estate, banking and insurance industries.

  1. Invest in export sales opportunities.  The markets are growing.  The dollar is falling.  The infrastructure is available to get started with a lower initial investment. 

 Great firms make progress at times like these.

Both/and Trumps Either/Or

The business and political worlds are catching up with what the great religions have long known and science has discovered in the last 200 years.  The deepest understanding and practical progress in all fields is driven by a “both/and” approach, rather than by a deterministic “either/or” approach. 

Post-enlightenment westerners have struggled to fully digest the slippery, evolving dynamic nature of the Asian concept of yin and yang.   Many believers, clerics and secular leaders have simplified, denied or ignored the deeper meanings of the Christian trinity, relationship with Judaism and tension between the vertical (God) and horizontal (community) demands of the faith.  The fully developed religions provide training, terminology, sacraments and advice to attract, retain and grow members, without reducing “the mystery of faith” to a simple recipe.

The western scientific tradition meets the heartfelt needs of man for a deterministic description of the universe, delivering the potential for security expressed in Maslow’s “hierarchy of needs”.  Aristotle, Euclid and Newton are rightfully celebrated for their authoritative development and formalization of logic, geometry and physics.

Nineteenth and twentieth century science shattered the deterministic paradigm, replacing it with a probabilistic paradigm.  This was presaged by Hegel’s philosophical method of thesis, antithesis and synthesis.  Thomas Kuhn’s mid-twentieth century history/philosophy of science documented both the human process of how science progresses and the Necker Cube-like way in which a new paradigm destroys the old and blinds us to any new ways of perceiving.

The Heisenberg uncertainty principle demonstrated that the location and speed of material items was dependent upon the measurement applied and was inherently uncertain.  At the same time, it became clear that the location (energy level) of an electron was only probabilistic!  Kurt Godel’s impossibility theorem destroyed the hope of defining a Euclidean basis for a fully functional arithmetic and algebraic system of mathematics that could include the concept of infinity.  Darwin’s theory of evolution included the concept of random events in populations determining the future of biological species, without necessary guidance from god.  Biology then described the details of genetics, which includes random mutations, reproductive combinations, multiple genes, developmental sequences and the impact of the environment.  Freud described the role which unconscious thoughts, drives and the “mind” can play in determining consciousness and behavior.  Statisticians defined populations, estimates and metrics, emphasizing that there are inherent conflicts in making estimates.  Finally, Einstein developed the theory of relativity, making time, space, matter and gravity functions of each other.  Ironically, Einstein unsuccessfully devoted 20 years of his life to finding a unified theory that would combine all aspects of physics into a deterministic framework.

In the last 50 years we have seen the development of insightful “both/and” approaches throughout the business and political worlds.  Management has evolved from unilateral theories X, Y and Z to situational leadership which uses both task and people factors to deliver results.  Effective thinking coaches have defined the best use of convergent and divergent thinking skills or six thinking hats to improve results.  Jim Collin’s “Good to Great” book highlights the central role of a fixed vision/goal and flexible means/strategies.  Gallup’s Strengthfinder approach to personality profiles overcomes the “either/or” nature of Meyers-Briggs, concluding that some individuals do have apparently conflicting “talents”.  Bottom-up and top-down planning approaches have been incorporated into the balanced scorecard framework.  Goods production has evolved from custom craft work to mass production to a combined lean manufacturing pull system.  Goldratt’s book “The Goal” provides further insight on how defining the goal is logically distinct from the means of reaching the goal.  “Best practices” project management has evolved from informal management to fully prescribed sequential tasks to a new hybrid approach that retains the broad project stages, but allows cycles to resolve issues when needed.

In economics, the Keynesian revolution overturned “Say’s Law” which deterministically stated that supply always creates its own demand.  In governing, representative democracy seems to balance various needs.  In politics, the “third way” attempts to use market mechanisms to deliver liberal objectives.  In religion, the reformed faiths attempt to adapt received faith to current knowledge and realities.

The “both/and” approach is not inherently best, but everyone should be challenged to consider it at all times based upon its impressive track record.

I’d like to thank Mark Cavell, Annamarie Melodia Garrett and Doug Loudenslager for their contributions to identifying this pattern.