Tuesday, December 16, 2008

Getting to the Focal Point

As the economic rollercoaster continues to hurl the world through insane curves at breakneck speeds it is almost impossible to believe that one day this economic turmoil will be a fleeting memory. How organizations move from this 3G ride to a sense of sanity and survivability is determined how they live out each day. The focus of today, I feel, will dictate the rebound of tomorrow. I feel the approach organizations take to survive these times will solidify their fate when the markets settle. Their focus today defines their future.

Each day global markets undergo huge swings from red to black and everything in the middle. As a means of surviving organizations undertake cost cutting measures while trying to increase revenue. These survival techniques cause me to question where their point of focus is; survival for today or beyond. To me, the slashing of head count screams a short sighted approach to long term survival. Granted, many organizations need to prune their ranks and what better time than now. However, it begs the question why wasn’t pruning done before? I suppose the dead wood have been around before this economic downturn.

Although I am not aware of every company’s circumstances, I do find it interesting how similar organizations take grossly diverging tactics given the exact same environment.
I believe that an organization’s priorities or focal points are a direct reflection of their culture. Their culture defines how they view their circumstance and ultimately how they will react to the situation. It is almost seems like some innate law that ties culture, through perception, interpretation into behavior. Lately, however, it is almost as if brilliant business minds have resorted to simplistic survival tactics of head-count reduction. It almost seems to an outsider that the approach is purely a knee-jerk slash and burn.

The question begs, what was their focal point? Surely the primary focus is survival in this economic turmoil. But, what is the secondary focus? Or was there even one? If the organization’s focus is simply to pare back costs to survive, this is purely a very short sighted view. Organizations must take a broader and more far reaching view as their primary view. The focal point at this time should be customer satisfaction and identifying additional competitive advantages. The organization that focuses on these focal points at a time when head count shrinkage is the norm for their competitors, they now create their kick start when the economic storm blows over.

Until recently I haven’t been aware of organizations adopting a more strategic approach than culling the ranks. However, two recent articles bring to the forefront of discussion how organizations do have options beyond ‘slash and burn’. Ian MacMillan and Larry Selden in Change with Your Customers – Win Big (Harvard Business Review, December 2008); contend that organizations must exploit the economic downturn by identifying and meeting emerging customer needs. When all one’s competitors are downsizing etc, the break-away organization that evolves with their customer now creates a bond with their customer, where the switching costs later becomes enormous. That firm now has a customer for life!

The changing with your customer model requires a strong customer focus as a core belief of the organization. This may be well beyond the capability of some if not many organizations. However, organizations can also gain value by introspection before eradication. An in depth view of the organizations, the skill set of its staff and the geographical business demands can allow organizations to keep their intellectual capital away from the guillotine of redundancy. Luke McLeod-Roberts in Managing the Downturn: Alternative Endings (The Lawyer, December 8, 2008) suggest that organizations need to look beyond the hard cost savings through redundancy and see the enormous soft costs being bled away. The loss of the organizational knowledge and the intellectual capital often far outstrips the costs savings of redundancy. McLeod-Roberts interviewed the leaders of prominent legal practices regarding how firms navigate the road of survival. Once again, to me, the lack of diversity in solutions seems to be culturally rooted. It is interesting how McLeod-Roberts proposals where shot down by some firms and embraced by others. The plethora of options other than redundancy seems so clear to those who are not culturally entrenched in their belief of their uniqueness:

“I don’t think creative alternatives to redundancies are being played out sufficiently,” says Weedie Sisson, ­principal coach at Peer Professional Development, a career consultancy for the legal profession. “These ­alternatives take a little more effort and conversation than going through the redundancy process, which is a specific route.”

Organizational survival at anytime is more than a matter of increasing revenue and reducing costs; it is a matter of competitive advantage. In times of turmoil, the focus of the organization must be to survive not only until the economic storm clears, but to focus beyond. It is those who have positioned themselves well during the storm, will be the ones blazing new trails in the new economic era.

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