Situation: From time to time companies face crisis situations. A company, planning ahead, wants to establish a culture that can deal with crises effectively. What are the most important elements that should be part of this culture?
Advice from the CEOs:
Everything starts with a brutally honest SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats) of your company and operations. Identify where you are Strong, where you are Viable, where Urgent Care is Necessary, and where you have No Reason to Be. Based on this assessment, cut your losses – for example, eliminate exposure to the No Reason to Be activities and efforts – and focus resources on your strengths and what is necessary to assure your future.
Support all efforts or activities that you will keep or pursue with a Bottoms-Up Financial Analysis. This will include a P&L, Balance Sheet, Cash Flow Analysis, assumptions, variables, and best, most likely and worst case scenarios. This Financial Analysis is an essential part of facing up to the Brutal Facts of your business and environment. From this exercise you will gain clarity on where to focus first.
The greater the potential crisis, the more frequent this exercise must be.
When dealing with creditors, remember their priorities: honesty, eventual payment, fair treatment and long-term customers. Present them with a credible plan, don’t make commitments you can’t keep, keep all commitments that you make, keep in touch monthly, and pay what you can. The development of trust makes it possible to negotiate incredible terms.
Special thanks to Tom Spanier of Spanier & Associates for his contribution to this discussion.
Situation: A company wants to execute a strategic shift in direction – taking it into a new business which will diversify its offering to customers. The CEO needs to assure that everyone is on-board to both speed the shift and minimize cost. What are the keys to successful strategic change?
Advice from the CEOs:
Be front and center with your vision. State the vision clearly, in terms that everyone will understand. Focus on the benefits of the change for the company and employees and be realistic about the challenges involved.
Be enthusiastic. This is critical to all change efforts. Be cheerleader as well as leader.
Plan ahead and begin to communicate well in advance of the anticipated change. Plant seeds and encourage the team to generate options or solutions. Give all levels of the organization the opportunity to become involved and participate in both design and implementation of the change.
Be consistent in messaging and support across the team. Don’t vacillate or promise what you can’t deliver. Employees will watch for the presence or absence of consistency. If it’s absent, they won’t join in.
Conduct scenario analyses. This enables you to try out different futures and implementation options.
Identify critical issues. Look at possible results – first consider the “most likely”, then “best” and “worst” possible outcomes. Considering best and worst generates new alternatives, and improves the perspective on the most likely outcome.
Conduct visioning exercises. Create a graphic vision of possible futures.
This increases group participation and sparks creativity.
It improves group function, thereby enhancing results.
Visual representation is more memorable than standard bullets and lists.
Special thanks to Jan Richards of J G Richards Consulting – jgrichardsresults.com – for her insight on this topic.
Situation: A company is negotiating an agreement to resell another company’s software. In due diligence the company encountered a customer who was offered a single user license for the same software at one-third the price that they have been asked to pay upfront. What is the best way to approach the vendor for additional information without divulging the source of his intelligence? Does this change the negotiation?
Advice from the CEOs:
There is no need to divulge your information source. Just say that you have done some research and quote the price that you found. Ask them to explain this to you. See how they respond. This may tell you a lot about how they operate.
What rights do you receive under the arrangement that has been offered by the firm? What exclusivity and guarantees will they offer? Will they write these into the agreement? How will they handle direct inquiries?
Perform a careful financial analysis of the opportunity. Model the market and the full cost of sales that you will encounter. What is customer purchase behavior? Is it changing?
Counter the vendor’s offer to you with a pay-down option that pays the vendor more over time, but allows you access to the software without a substantial up-front payment. This limits your exposure if sales do not ramp as you anticipate.
Visit the vendor and sit down with the President. See how this individual responds to your questions. You may get a much better deal through this approach than through the sales team. You also may develop other partnership options that can benefit you long-term.
Key Words: Reseller, Agreement, Price, Software, Due Diligence, Negotiation, Research, Exclusivity, Guarantees, Direct Inquiry, Analysis, Customer, Behavior, Counter, Visit
Situation: The industry is changing and the Company must adapt both structure and focus. This may require a layoff of staff not aligned with the new focus. How do you maintain morale in the face of uncertainty and possible layoffs?
Advice from the CEOs:
Ask for employee input as to industry trends and what possible directions for the company.
Employees are closer to the customer than the CEO and have valuable insights.
Gather input in small group meetings to prompt discussion and ideas.
Make this a research talk. Leverage the “wisdom of the crowd.”
Research other industries that have undergone similar changes.
What strategies did the most successful companies pursue? Could these work for you?
If faced with protracted uncertainty, what did they do while waiting for market clarity?
If a layoff is necessary, conduct it in one day:
Monday is better than Friday.
Do it early in the day. Give final checks the day of the layoff.
Provide instructions for filing for unemployment assistance via the Internet.
Hold a company meeting for remaining staff immediately after the layoffs. Focus your message on the future and positioning the company for the future.
Prepare a brief summary of your message, to distribute as a take-away.
Be prepared for a grieving process following the layoff. Consider outside assistance on grieving to overview the process.
Following the company meeting, have key employees conduct smaller group meetings to lead discussions and allay fears about the layoff. Fully prep these individuals about the situation with written responses to likely questions.
The benefit of a Monday layoff is that you will see everyone on Tuesday, and the team can continue to address their concerns.