Businesses in trouble are never a short-term fix and yet so many times I see short term tactical approaches being applied and implemented to save costs.
So what is involved with a short term fix?
Simple Fix 1 Cut the overheads or more specifically slash and burn employees. Two to four weeks notice and they are gone. The team know it’s coming. Management office doors are continually shut. Friendly corridor banter becomes hushed and gossip is rife.
Simple Fix 2 Put the prices up. Easy to implement.
Simple Fix 3 Slash the terms of credit – 20th of the month just became 7 days.
Simple Fix 4 Bad debtors – Put the acid on the bad debtors to pay or nasty circumstances will follow.
Viola. But is it really this easy?
The challenges with short term gains happen about two quarters later. There may well have been good reason to go for short term gains – like avoiding the downward spiral to liquidation, but there needs to be an awareness that the gains will always come at a cost.
These costs manifest themselves in the form of:
1. Staff turnover which is expensive at the best of times. Demotivated disillusioned staff leaving because they are overworked; or translation; they know they have no say in the restructure,they know a slash and burn approach when they see one and equally good motivated employees leave because they need to be working in a connected collaborative committed team environment.
2. Risk of becoming uncompetitive through increasing prices without knowing what the market will tolerate or better positioning the business in the minds of the clients so that the price increase will be tolerated, i.e. no added value. Two quarters down the track, these clients will have gone to find someone who cares about them just a little bit better and one who provides more value.
3. Long term clients who may be going through cash flow issues themselves have nowhere to go with strict terms of 7 days.
4. Loads and loads of management time is used up dealing with the issues (usually HR related – like writing job descriptions prior to making people redundant and trying to implement sick leave policies to better manage leave amounts). Less focus is actually spent on the looking forward strategy; it becomes about getting through the days.
So if the business is simply struggling and is in a bit of pain, take a longer term view. Take the time to look at the strategy, analyse what’s working and why and then bridge the gap. When you can see it all out on the table without the emotion, it’s easy to start.
Invest in the staff, set the performance targets correctly across the board and manage accountability structures around these. Grow the business development strategy, find other solutions for bad debtors and cash-flow and yes, it may well include decreasing some overhead or bad debtors. Look outside the box to implement new paradigms for shifting performance in business across the board.
It can be likened to starting the training for a half marathon run. You know there will be pain, more intense at the beginning, however the mindset used to build on fitness, drive and determination overtakes any desire to quit or take shortcuts.
If you are focussed on the right things it will take shape.
Love to hear your thoughts on SHIFTING the pain game so leave them below.
Do have a relaxing Easter and enjoy the school holidays for those of you taking time out with children.
Until next week,