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During these times it seems that newscasters and reporters are trying hard to describe and define this difficult economic environment. Is worse now? Will it get worse before it gets worse? Sure, psychology plays a significant role in our spending behavior. The economic cycle can slow down when everyone cuts back. But the wheel goes the other way also. The older we are the more cycles we can recall. We have always come out of a downturn and this time will be no exception. The world population continues to grow and people have growing needs for food, housing, transportation, and uniforms.
This is not a news report but a business manager’s viewpoint. How do we handle these rough times until the eventual upswing occurs? As sales dip, where do we make cutbacks? The last place you want to look to eliminate expenses and assets is among your human capital. With few if any businesses excepted, people are your most valuable asset. So you need to think about how to keep your organization in tact given the current economic pressure so that you are properly positioned for future growth and profits.

Henry Ford was known to quip that you could take away all his money but if you left him his men, he would build up his empire all over again. My mentor, Jim Rohn, once said that if you took all the money and divided equally among all the people in the world, it would soon all wind up back in the same pockets. What’s guiding this principle if not the intelligence and experience that comes from the right people in the right positions?

From the book, “Good to Great,” by Jim Collins, we learn the principle that in building a truly great company, the first question asked is “Who?” then “What?” People come before the strategy. Ken Kesey said about his travels and to his fellow travelers: “There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus.” Our job as managers is to see that the right people are on the bus; in the right seats and that the wrong people are off the bus. This takes time, effort, hard work and a not a small bit of luck. If you have been successful in building your team or organization be careful not to disband it as a knee jerk reaction to our tough times.

Think about what can be done to hold your people together so you can take advantage of what you have built. You want to retain your collective intellectual capital. This is real knowledge that can be converted into profits. This asset is what you want to leverage the most and not just the hours that someone works. All of us are smarter that any one of us. Retain the lessons learned the hard way from real experience. The US Army conducts regular “AAR’s” or ‘after action reviews.” Typically after mock battles, the commanders will gather to ask the questions that lead to real learning that will save lives on the real battlefield. In your business actions you can ask, “What happened, why it happened and what should we do about it?” The value of these lessons resides in the collective conscious and unconscious of yourself and your people. Don’t lose this valuable asset by laying off people that you may never see again.

Examine other areas to cut costs. Most contracts are negotiable from the telephone company to your freight carriers. Everyone wants to hold onto customers. Ask and you shall be surprised at discounts or extended payment terms that can help reduce costs before you reduce personnel. Fed Ex instituted across the board benefit cuts rather than eliminating jobs. The State of California is considering a mandatory two days per month off without pay to deal with budget shortfalls. Limit or reduce large executive salaries. I have done this in my company and worked with my understanding wife to reduce expenses in our daily lives. The sacrifices are not that hard if everyone cooperates. President Obama limited executive pay increases for those earning over $100,000. Surely you can think of something and so can your people contribute ideas.

Keep your mind focused on the big and profitable goal. When the turn around in the economy starts, you will be in excellent position with your experienced work force to take advantage of the opportunities quickly and efficiently. You won’t have the task and risk to re-build your staff. You have already paid the price to get the excellent people you have. To paraphrase an old cliché, “Tough times don’t last but smartly educated people will.” See you on the up turn!

What lessons can be learned from the current Toyota quality issues? This is a quote from a CNN/Money internet article of February 10, 2010:

“…if any documents come out which prove Toyota engineers knew something needed to be fixed, it will be difficult for Toyota to ever regain consumers’ trust. When your image is one that has been largely built on quality and dependability, you can’t afford that kind of smoking gun,” Hutson said.

I have been drawn recently to the bad news coming from Toyota. I don’t own one now but we used to. I have had high regard for the company and their Lexus division which products some of my family members and friends own. There have been no problems with those models.

Toyota seems to have at least three areas of technical problems including sticking gas pedals, non-functioning brakes and problems with steering. The loss of sales while these repairs are taking place has been estimated at $155 million per month. This does not count the cost of repairs being made around the clock. These costs may be small in comparison to the 30 class action suits (so far) for damages and loss of value to the re-sale of cars that is estimated at up to $6 billion. I understand that these diverse problems of quality occurred over a number of years and different types of models.

Further, I heard on the CNBC that Toyota may have been more concerned with increasing market share at the expense of quality. I am not typically a prognosticator of bad news, but this set of events is going to be threatening the future of the company and could be catastrophic. Toyota should be able to make the repairs, but will they gain the trust of their current and future customers? It took Audi more than 20 years after non-confirmed reports of their gas pedals sticking for the company to improve the image and grow by delivering quality cars. How long will it take Toyota to get back to a quality image with the confidence of the consumer?

What further intrigued me and focused my interest is the method and manner in which Toyota is handling the problem from a public relations standpoint. The commercials they are running point to their 50 year history of happy customers and quality cars. Top executives from both Japan and the USA have been on the news making statements of apology and announcing repair remedies.

What this brings to mind is the adage that there are two things that any business is judged upon. First is the ability to perform on the initial promises made to customers. Second is the ability to fix problems once they occur. I know my company has become very adept at fixing problems as they occur regularly and randomly in the manufacturing process. In the process of repair, we try to minimize costs, reduce delivery time and maintain client satisfaction.

Toyota is now facing judgment on the ability to fix a multitude of auto problems across different models and years, different continents and manage the law suits and bear the costs of all these issues accordingly. Johnson and Johnson has been the model for fixing problems with their adept handling of the Tylenol affair of years ago. That process resulted in seals being placed on many consumer products to assure tamper proof quality.

What are the vulnerable issues in your business that if left unattended can result in major company life-threatening situations? How well does your quality assurance model perform? Do you have appropriate and adequate insurance? Are you sacrificing quality to gain market share by saving costs?

While a bad garment may not kill someone as faulty brakes may, the crux of the issue is parallel. Can your clients trust that you are delivering the quality product or service you have promised?

You may want to do some risk analysis before your president needs to appear on TV and apologize or face a call from a valued, profitable client that you will be losing their business. As always, the cost of fixing the problems in a proactive preventative mode is significantly less than the penalties and extra costs to be suffered later on. Was it Ben Franklin who said “an ounce of prevention is worth a pound of cure?” I know Ben didn’t own a Camry but principles don’t change.

In these times of recession, vast uncertainty and global economic downturn, we may want to take a step back and reassess or be forced to reconsider the reasons for our goals, business strategies and other key decisions. But before taking any further paths to implement previously approved plans, consider some guidelines for making sound decisions as if you were to make them afresh today.
Think about establishing clear goals that will address two areas of need. Ask the question about the quality of the decision- is it the right one for these times and market circumstances? And can you be assured of continued commitments and support from key stakeholders who have an interest in your future success? This group would include your employees, managers, lenders, vendors and clients. Are your plans devised to serve the long term and short term interests of the enterprise? Consider and devise methods in advance to resolve issues and conflicts that you may imagine can occur. What will be the impact? Be ready with your back up plan B and C if you can. Use these times of course corrections to increase your intellectual knowledge base and learning’s so that you may strengthen your chances for greater future success. If you’ve already paid a price, get the benefit of that investment and don’t pay the same price twice.

Identify and analyze all relevant issues pertaining to each of the goals you adopt. Consider what happens if all goes wrong or if all goes right. What is your fall back position or plans to downsize if required or to attract more financing for increased business? What facts can you list as known and unknown? Which assumptions need to be challenged? Do you have the right personnel, funding, and infrastructure to support your supply chain, the technology and software to accomplish the mission?

Accumulate that information you need and schedule discussions, face to face if at all possible, with your clients, vendors, employees and professional advisors such as accountants, attorneys and your advisory or board of directors. The rule of thumb in a crisis situation is to over communicate. People’s stress levels are elevated and they need more attention, not less. Tap into the business experience of those you trust in other businesses. The principal considerations are typically similar and transferrable to your business. Use these times to alter the method of your operations. As long as you communicate your intentions and have the other party agree all should be well.

Here’s very helpful guideline I learned from my friend Harvey who sold his business for millions. A customer asked him for a price discount based on a promise for increased order volume. Instead of giving the price break immediately on all products ordered, Harvey confirmed that he would tender a check in the amount of the discount after the promised volume was ordered and paid for. A year later he walked in with a check payable to his customer for more than $80,000. The customer was thrilled to get the money and Harvey as glad to get the business. But most of us don’t operate in this sophisticated manner. We start to give the discount immediately. Then when the promised quantity is not ordered through the year, the onus falls on us, the vendor, to now, tactfully and maybe somewhat uncomfortably remind the customer that the volume has not been achieved. Do you imagine the customer will be ready and willing to give back the discounted money? I don’t think so.

Beware to curb impulsive decisions. Did you get all the information you required? While actions are based on emotions, sound logic should support moves that will affect your financial success. You may find that more time is necessary so arrange for it if all possible. And once your analysis has been fully completed then act decisively. Your job as the leader is to create the perception that success will be possible and that you and your organization will perform. Stake you reputation to your success. Benjamin Disraeli was quoted as saying that “nothing can resist the human will that will stake even its existence on the extent of its purpose.” Translated to mortals like me, in short, this means, “I will do it or die.” Those are powerful words and magical also. Goethe said that “magic has power in it.” In these times, who among us couldn’t use a little more magic to accompany our hard work?