Think Carefully About Maximizing Opportunities in a Turnaround
Thursday, June 11th, 2009
By now, it’s common belief, I daresay common knowledge, on the street that financial companies, those that exploded universally in November of last year, are on the road to recovery and some are even doing well.
Over the past 4 weeks or so, we’ve seen some broad stabilization across the stock market and a Dow number that is slowly and reliably pointing upward. I still maintain that my original call of a March 2009 bottom is correct and that underscoring that this is the most delicate time in any broad economic recovery is correct - if we have money to invest then when, where and how should we do this? If we are surviving, where are the jobs that will help us get by, day to day?
TARP money has not completely trickled down to the end-most working level as of yet but it has been making its way down. I’m hearing that some grassroots level companies and sectors are or will be getting some stimulus money very shortly.
Friends in larger companies, multinationals, have been telling me that decision-makers have not been making any moves as of yet because they are trying to figure out what the post-economic-meltdown world looks like. In a way, that’s sad to hear because anyone who has been unemployed through this turmoil (and there are up to 15%+ of such folks in many areas of the US, right now) can tell you exactly what this world looks like and where the priorities are. Some may look at such business leaders and lament that they have been spared the worse and now live in an ivory tower, unaware of what is truly important.
On the other side, this is one of those times in history where haste can make waste. We can be so eager to help the loudest voice complaining about kids to feed and foreclosures to avoid and lose strategic perspective. However, I would like to believe that the past 6 months has been about strategic thinking. Those who have been holding down a job in a position of authority, I hope, have been working on a turnaround strategy beyond merely cutting costs and saving their jobs. If not, it’s time to go beyond self interest and developmental myopia because the public will be demanding the next step in the recovery process with a louder and more pressing voice than ever before and this is certainly not the time to figure it out as we go along.
It has been the job of government to temporarily step in where the private sector has egregiously failed and bring stability back to the markets and calm broad spread panic. This has been done, pretty much.
The next step has been to ensure that money continues to flow through the economic cycle. This also has been done. And, if money disappeared, the government needs to enable the creation of more money to ensure that the value assets is maintained and enough cash is flowing to get business done. And this, too, has been done.
So, money has been available and some of it has been spent (and some squandered but that’s beyond the scope of this posting). Since the firing of GM’s CEO, the focus has moved from Wall Street to Main Street, but it’s now focused on the Park Avenue end of Main Street - meaning that businesses deemed at some point to be too big to fail have been getting all the attention.
I would expect small business, which accounts for the majority of jobs in the country, according to most reports from EDD and chambers of commerce across the country, to get some focus very soon. SBA loans are still ridiculously unavailable and many landlords that lease commercial space are still unaware of the fact that many of their small business tenants have experienced a very serious drop in revenue - to the extent that it is not uncommon to see some struggling mom-and-pop shops paying 25% or more of their gross income to rent alone. The landlords claim that the drop in business of their tenants is not their problem. They are in the real estate rental business, not the coffee business, or insurance business, or hairdressing business. To them I say, we are all in the survival business, right now, and that is all that matters, for now. The government did its part, tax payers have done their part, and entrepreneurs have gone bald and become neurotic over managing their risk in order to survive and push beyond mere survival with gutsy promotions and product introductions in the toughest economic times since the Great Depression. What makes landlords so special that they feel that they are immune to doing their part in keeping our collective head above water? But I digress.
While business leaders on the front line think about their company’s next step and eye ‘free money’ from the government (and tax payers), I would encourage them to think strategically and for the long term while minimizing current woes. Simply plugging random holes with cash doesn’t ever fix anything. And, these same business leaders are in the extremely stressful position of having to think very quickly and act even faster. The best way to ensure permanent dependence on the government for services and business management is to needlessly over-spend taxpayer money. Paradoxically, inaction could be worse than making a bad decision.
So, the true mark of a leader in such times is clarity of thought and swiftness of action. And, this also means that we are in a time where getting the initial steps to a turnaround are critica. Small businesses, program managers, and divisional leaders still need to get it right the first time but a few failures in the context of a larger number of successes will not prevent economic reocvery but could prevent a business from taking full part in it.
This really is the time for Ying/Yang balance in business, isn’t it?
accrongr | 