How should corporate leaders manage tough times?  In good times, organisations had generously expended their resources.  They had become lax in their control systems and their management of risk was non-existent.  They had become too tolerant towards wastage.  As long as they kept getting lucrative contracts, they were not concerned about their low productivity.  Neither were they concerned about quality.  There was massive denial of poor customer service.

But the reality is that good times have gone; tough times are here now.  Organisations have to find ways to move forward.

Below are six key strategies to untangle to web of challenges that organisations should consider.

Renew Sales Strategies

Many industries are facing a slowdown in business.  The fact that demand is less does not mean there is going to be no business.  What it translates to is that the cake is now smaller due to decreased buying power.

Many companies simply focus on cutting cost but do nothing to retain or improve their business.  The frightening part about pure cost-cutting and retrenchment is that you cut an organisation to the bone, bringing it to its knees.  There are other options, like working harder or smarter.

There are business strategies company can undertake to improve sales performance, namely:

• Adding value;
• Building long-term win/win relationships with customers; and
• Repositioning to achieve a unique advantage.

The Webster’s New World Dictionary defines value as “fair or proper equivalent in money, for something sold”.  A firm which sells a product or service that meets the buyer’s needs, at a price that is deemed fair, has created value for that buyer.  Adding value is about increasing the sense of worth a customer has towards a product or service.

First, adding value to your product or service is a smart way to compete in an environment of shrinking demand.  A good way to do so is to do more than just sell a product.  Focus on delivering solutions.

Customers buy products to solve their problems.  Thus, a customer buys a phone to improve communication.  A teenager buys a pimple cream to help her improve her complexion.  Move away from focusing on the physical attributes of a product.  Emphasize instead on delivering the results of solutions that the customer wants.

For example, hold a simple demonstration or provide a self-help and self-driven manual of software to show how to set up or run your technical equipment.  Provide follow-up services or advice to ensure effective usage of products.

Secondly, build long-term win/win relationships with customers.  The key in retaining customers is understanding their needs and coming up with ways for your products to resolve their problems.
  Studies on customer service have shown that it costs five times more to win a new customer than to maintain an existing one.  These studies also find that customer loyalty increases with better customer relationships.

Get your marketing people to learn more about their customers by being in constant contact with them.

Thirdly, reposition your company to achieve a unique advantage make your business recession proof.  To achieve this, you must first understand the unique needs of your customers.  Understanding the customer’s normal needs will not gain you a unique advantage in the market place.  Most customers will choose the product or service that meets attributes they value most if they have to make a trade-off.  For example, most customers want better quality, lower price, greater convenience and faster delivery.  Understanding your customers intimately on what attributes they value most and positioning yourself to meet them will provide you the edge.

Increase liquidity

In these bad times, cash is the real life-line of your company afloat, you need to prevent cash drain and increase cash reserves.  Cash is king for good reasons.  Only with cash can a company replenish stocks, market products and services to secure profitable sales and also build up a pipeline of potential sales for the future.

One of the great fallacies about business is not profitable.  The truth is that many profitable businesses may collapse because of poor cashflow.  This is especially so with the current credit crunch and higher interest rates, which mean that companies cannot turn to external sources of funds to help them pull through.  The way forward is for a company to improve its cash inflow position quickly.

There are many ways to do this.

A company should start by improving its collection of receivables.  Try using a positive approach by providing those who pay up with attractive discounts.  Get people to be conscious of overdue accounts and assign clear responsibility to the relevant people to collect those outstanding payments.  Of course, improving the collection of receivables is a reactive approach to improving cashflow.  A proactive way is to persuade your customers to buy in cash or tighten your credit terms.  Again, a positive approach is to offer discounts or freebies if customers buy in cash or under decreased credit terms.

Explore cost savings

Improved cost savings will reduce your cash outflow.  One way to do this is to slash unnecessary inventory.  Improve purchasing policies to get the best value.  Enhance the negotiations skills of staff in purchasing department.  Staying lean and mean with tight budgetary and inventory controls is the key to improving cash outflow. Companies should explore all ways to diminish its cash outflow position immediately – from renegotiating rental to slashing down travel and entertainment costs.  All costs that do not improve the cash inflow or add value should be targeted for a cut.

It is critical that organisations develop a good control system to ensure that there is no unnecessary wastage.  Of course, a company has to balance its short-term and long-term goals.  In difficult times, extra care should be taken so a company does not skew too much towards the long-term to the extent that it immobilizes the short-term activities needed for survival.

Keep motivation high

During a crisis driven by tough business conditions, the challenge is to keep staff morale high.  This is challenging especially with drastic cost-cutting measures.  Employees often fell insecure about their jobs, especially if there are staff cutbacks or rumours of impending retrenchment.  Quick and effective communication is critical if retrenchment is to be done.  Often, rumours about firings that spread like wildfire create more stress and depressed morale than the actual retrenchment.

The key is that if a company has to cut down staff it has to do it quickly and in a transparent manner rather than let the rumours linger until it becomes very destructive.

While cost-cutting measures are being carried out, it is important for leaders to present a new plan to take the company forward.  Corporate leaders need to communicate a dynamic and compelling vision of future to rebuild the confidence of existing staff.  They need to communicate often with staff to keep them posted on the progress of steps taken to strengthen the foundation of the company.  The staff wants to know that they are secure and have a future ahead.  Until they feel safe, they would not be able to concentrate on their work.

Most importantly, managers must redouble their drive and provide strong leadership to steer the organisation to safe shores.  The true leader is one who, in tough times, rises above ordinary souls and comes up with strong and compelling reasons for an organisation to go on.  Such great leaders create new meaning and rationale for fighting the battle for survival.

Remember, all battles can be won based on a strong desire on the part of every employee to go beyond their ordinary motivation in work.  And to do this, leaders must provide a new vision of hope of a dynamic future to replace their current fear and gloom.  Dr. Robert Schuller, a great motivator, once said “Tough times do not last, tough people do.”

Manage change

The sixth-century Chinese sage Lao-Tse had useful advice for those who want to manage change: “Be like the willow tree, whose roots go deeper than other trees.  When the storm comes, the willow tree bends with the winds of time and change and remains standing, while the other trees crack and break.”

The ability to be resilient and adapt to changes in the environment is one critical requirement for survival.  Leaders need to take charge and take tough and decisive actions to turn their organisations around.  They need to get people to be innovative and productive.

An effective way to manage change is to start by changing the mindsets of people.  To do so, leaders must address the five components, namely blind-spots assumptions, complacency, habits and attitude.

  They need to eliminate blindspots of people so that weaknesses can be strengthened and mistakes corrected.  They must begin questioning some of the existing assumptions so that they can take on new opportunities.  They need to help people reduce their complacency level by increasing the sense of urgency and strict follow-up actions.

They need to identify unproductive habits of people and substitute them with productive ones.  They must eliminate negative attitudes and inculcate positive habits towards work, the company and the future in people.  Leaders must learn to increase their anticipation skills to what lies ahead.  They have to double their adaptability, resilience and speed of response to changes around.

Create the future

The best philosophy to live by in this economic slowdown is this: if you do not like the present conditions you are in, create a new future that you will be excited to be in.  in times of great crisis, great leaders emerge.  And great leaders are those who create a future that people look forward to.

Be ready for discontinuous change.  And do not become overwhelmed by the problems that lie in front of you.

Creating the future is about making desired possibilities happen.  It is about seeking opportunities all round us.  One man’s great achievement is often another man’s small oversight – such as new products or services you can come up with to change the future of your organisation; or new ways of doing things that can increase the productivity of your organisation in a quantum leap.

What changes can you create to transform the lives of you staff, your customers, your suppliers and the world?  What can you do today to change the fortunes of your company in the years ahead?

Creating the future is about thinking, feeling and acting on the possibilities that you see for yourself, your organisation and others in the years ahead.  It is about doing something daring, different and extraordinary today to arrive at an astounding destination tomorrow.

In difficult times, the role of leaders is to help others transcend the current challenges to exploit the abundant opportunities of tomorrow by communicating the message of possibilities rather than difficulties.

Victor S.L. Tan is an international consultant and authority on change management.  He is the author of 4 books and the CEO of KL Strategic Change Consulting Group. He can be contacted at 603-90741129 / 90742219 or email: victorsltan@klscc.com