Profits are down. The company is having trouble meeting its forecasts. Short-term debt has increased. Employees and customers are exhibiting low morale. If that sounds like the situation in your company, welcome to the recession. But experts say there are ways to recession-proof your company, at least to some extent, to help it weather tough times and come out relatively unscathed.
The first step is taking a fresh look at potential internal and
external causes of problems, said Rebecca Irish, a managing partner in the
Orlando office of Tatum LLC, an executive services and consulting firm based in
Atlanta, Ga. Irish was part of a team of Tatum executives participating in a
webcast this week on recession-proofing companies.
That includes quantitative signs — declining sales, margins or
market share; an inability to meet forecasts or an increase in short-term debt
– or qualitative signs like high management or employee turnover. And any
degradation in the perceived or real market value of the company will have an
impact on the psyche of its employees, so don’t discount that factor either,
she said.
Along with these factors, it’s important to look at the company’s
IT systems and make sure they are providing the type of information that
fosters good decisions.
One of those systems should focus on modeling and forecasting, she
said, and focus on a handful of key performance indicators (KPI). One of the
most effective ways to measure key performance indicators is to use business
intelligence software from companies like Cognos, Microsoft, Information
Builders or MicroStrategy.
“You should have two to five KPIs, not 30” she said. “And if you
have 30, they can’t all be KEY performance indicators.”
And don’t assume that the same two to five KPIs that were
important to the business five years ago are the same today, she said.
Once you have a handle on what’s causing the company’s problems,
it’s time to create a plan of action. That means formulating a plan to get from
where the company is today to where it needs to be.
For the most part, developing the strategy and communicating it to
investors, stakeholders and employees is the job of senior management, but
because company executives often have little time to take on a complicated new
function, it can make sense to turn to an external advisor, said Jerry Mozian,
Tatum’s associate national director of restructuring. An external advisor can
focus solely on the changes that need to be made, taking pressure off of the staff.
When devising a plan, Mozian recommends dividing it into two
parts: the quick hits and the longer term actions. Quick hits are important, he
said, because they show the company that changes are possible and can be
achieved quickly.
One of the more obvious actions ones is to accelerate the
collection of accounts receivable, along with determining which vendors can
wait for payment. But if you do that, make sure not to upset your critical
supply chain, he warned.
Another quick hit is to determine which general or administrative
costs can be cut.
“I don’t think any of us have ever come across a company that
couldn’t find something to cut. And cut until it hurts,” he said. “If you’re
going through a change, everyone needs to go through it top to bottom.”
Substantive changes, which take more time, include consolidating
facilities, dropping products or product lines with poor gross margins,
reconsidering channel strategies and negotiating your loan terms with the bank.
“Start with a white piece of paper. Nothing should be off the
table,” he said.
As changes are being made, it’s critical to constantly reforecast
everything having to do with the business. And the best way to do that, Mozian
said, is to use technology to help.
Forecasting tools with the ability to marry company data with good
decision-making include those from SPSS, Adaptive Planning, Demand Works,
Alight, Smart Software, John Galt Solutions, ALT-C Systems and SAS.
Whatever your method, the goal is always the same, Mozian said.
“In the end, your success
is going to be about having the cash flow to weather the cycle and be strong
enough to come out the other end, to not only survive, but to thrive.”
