It has been a long, nasty recession. Now that most economists agree that it is over, it will be some time before we feel that it truly is. Consumer spending is slightly improved but still down, unemployment may increase more before decreasing, credit remains tight, and uncertainty regarding taxes and regulations is suppressing investment.
While some businesses have failed, others which have felt the pain of decreased revenues and staff cuts have managed to make themselves much stronger. This strengthening has taken a number of forms: acquisition of weakened competitors, hiring of top-notch talent which might not have been available otherwise, and an opportunity to move into new markets or services. The question is what can now be done to solidify these gains while the economy slowly recovers?
One of the most important things for survival is to avoid complacency. This may seem at first to be a remote danger in such uncertain times. Yet philosophers and prophets before and after Plato have said most of humankind most of the time goes through life half asleep or blind. If their view is true, complacency is the default emotional or mental condition for a large percentage of the population. It can also result from the “battle fatigue” of a long, drawn-out recession.
How can you recognize complacency at your company? It can take one of two forms: 1) either a helpless fatalism or 2) a false optimism. The fatalism is expressed by the attitude, “Whatever will happen will happen; there is nothing more I can do about it.” A false optimism may take the form of, “Oh, I guess the worst is over. This thing will turn around any day now.” Both attitudes are rationalizations for avoiding extra effort and for conducting business as usual. True, the economy is turning around. However, there is the tight 180º of a speed boat, and there is the miles wide turning radius of a giant oil tanker. The economy can always surprise us, but we are more likely to undergo something like the latter than the former. Half-hearted efforts and mediocrity today may be fatal to the business. The antidote to both forms of complacency is a constant, disciplined quest for the opportunities to break out of the pack. Some ideas for doing this are contained in the points below.
- Find creative ways to save money and increase revenues—Ryanair is one of the most profitable and fastest growing airlines in the world. This largest and lowest-fare European air carrier recently made news by proposing to install pay toilets on their planes. It is not the revenue from the toilets they want, CEO Michael O’Leary explained recently in the Wall Street Journal, but to change habits so that passengers use the facilities in the terminals before and after flights. This would allow the airline to replace some of the toilets with additional paying seats. Encouraging innovative ideas—the crazier the better—is a key component of their culture—and of why they have sufficient assets to attempt to acquire Aer Lingus, Ireland’s global flagship carrier. Similarly, MacDonald’s years ago was among the first to train its customers to bus their own tables. Does your company encourage unconventional thinking, or frown upon it?
- Increase customer loyalty. John Frederich is a Senior Financial Advisor and franchisee with Ameriprise in Pasadena, California and a long-time executive coaching client of Mulkern Associates. In a tough year for his industry which has seen some advisors lose up to 50% of their clients, John and his team have lost only 1% (one per cent), while growing assets under management by $10 million to a total of $120 million. With a background in psychology and theology, John wins client loyalty through a deep commitment to uncover and serve his clients’ dreams, minimal frills, and frequent personal contact. One factor behind Amazon’s double digit growth in 2008 and 2009 is the clarity and functionality of its web site. It is secure, reliable, and easy to use, with a minimum of distracting, merely decorative and computer-slowing graphics. Bookstores will tell you it will take six weeks to fulfill a book order, while Amazon will have it delivered to you in a few days for shipping costs that are less than the cost of driving back to the bookstore. Do your customers find that it is so satisfying to do business with your company that they automatically come back, hardly even considering the alternatives? If you want customer loyalty, that should be your goal.
- Maintain team-member loyalty. Ernest Hemingway is credited with the expression that people are like tea—you only find out what they are made of when they are in hot water. You need to observe your employees, because they are certainly observing you. If you reward or give too many chances to those who show no sense of urgency in tough times, your best performers will interpret this as your lack of loyalty to them! Loyalty means there have to be consequences both ways. Cull those who are unwilling to make the extra effort when needed. Preserve resources for those who show gratitude for having a job and a desire to extend themselves to maintain and grow the enterprise. If you act otherwise, you may find that when the economy recovers, your best performers leave, and all that remain are your least committed.
- Renew vigor around the corporate mission. Tough times can generate much reflection and self-doubts. Use this occasion to re-examine the purpose of your business and to reemphasize, deepen or revise the mission. Human beings have an astounding capacity to withstand hardship if they can see a purpose to the pain. How does the purpose of your business fit into your overall purpose in life? Have you had in-depth conversations with your team about these themes and about their sense of purpose? One client told me about a recent addition to his sales force who said, “I can sell anything that I believe in.” The implication was that he cannot sell anything he does not believe in. Some business owners seek to hire those who will demonstrate a much higher level of commitment and enthusiasm for the company than they themselves show. If they succeed, this is always short-lived. No one else in your company will for long be more excited about your business and mission than you are. When you look at the level of commitment and motivation in your organization, you are in effect looking in the mirror.
- Renew belief in the strength and virtue of the American economy. Entrepreneurs embody the free market system, which has come under severe criticism in the past year. Without getting into political debates as to who is to blame—irresponsible corporations or intrusive government—it is appropriate for entrepreneurs to periodically remind themselves and their teams that history shows we will get through this to a much brighter future. The nation has been undergone worse economic times and worse wars, which also weigh on people’s spirits. Unprecedented wealth, freedom, opportunity, and commitment to individual dignity have been made possible through this economic system. But free enterprise includes the concept of “creative destruction” and of “economic dynamism” of free people in free markets. Half of the jobs in the U.S. service economy today had not even been conceived of 50 years ago. In 1900, some 90% of the U. S. workforce was involved in agriculture—today it is less than 10%. Industries and companies come, go, mutate, and grow. Jobs are created, destroyed, exported, and imported. These can sometimes be hard principles to apply in the privately-held business that prides itself on a “family” environment. If you think your function as a CEO is to produce job security, you have yet to fully understand or embrace the free market. It is more accurate to say that your most important function is to produce a creative kind of job insecurity which is essential to the health and growth of the enterprise. No one can be allowed to stop learning, no one can just “go through the motions,” and everyone must continually adapt to the new. In the process you will create ever more possibilities for creative employment.
- Develop optimism about the future. This is not simply about pep talks and encouraging the troops, but about learned optimism, an area of much scientific investigation of late by psychology professor Martin Seligman, Ph.D. and others. A recent experiment divided people into two groups—the more pessimistic and the more optimistic—based upon pre-screening. Members of each group were then given a newspaper to read, which contained within its pages a coupon that could be redeemed for $50.00. By a statistically significant margin, more optimists found the coupon than did the pessimists. How can you cultivate and strengthen this outlook which allows you to see riches for the taking that others miss? While the question is the subject of many books, the most important lesson for entrepreneurs is to constantly emphasize strengths, assets, positive possibilities, the impact of choice, and histories of success—both one’s own and others. It also means looking squarely at threats and weaknesses and reframing them as areas for improvement. Seligman’s book Learned Optimism: How to Change Your Mind and Your Life is a ground breaker in this field.
Fundamentally, the character “brew” which emerges in the “hot water” of life is dependent upon faith, or lack of it, in oneself, one’s team, the mission of the organization, and the system which gives us such opportunity. For many, there is also a faith that goes beyond all these, dealing with the most enduring values and realities. For those with that foundation, they have a resource valuable beyond all measure. For those seeking it, times of great difficulty may provide the motivation and opportunity to find it.
BEST WISHES FOR A MERRY CHRISTMAS, HAPPY HOLIDAYS, AND A PROSPEROUS NEW YEAR!