How is your company going to survive the recession? Here are some fundamental steps to take to help your business wave the choppy waters ahead.
Create a budget
If your 2009 budget is not already built, you are behind and potentially putting your company at risk. In all economic times, good and bad, all companies need a financial plan, but during tougher economic times, it is essential to have a detailed financial plan.
In fact, if you fail to put a financial plan together during difficult economic times, then by default, you are planning to fail.
In simple terms, a budget provides a forecast of revenues, expenditures and cash flow. It converts your operating plan into a financial roadmap. A financial plan ensures your operating plan leads to profitable growth, or at least leads to profitability during no growth periods of time. It provides the basis for conducting meaningful monthly financial reviews, and it provides management with the visibility required to incrementally and substantially enhance financial performance.
During tougher economic times, building a financial plan requires that you consider multiple scenarios. So, when you build your budget for 2009, build three financial plans. Build one plan for growth, one for flat (no growth) and one assuming your revenues decline.
Having a financial plan for each potential scenario will help to ensure a pre-defined outcome, because in order to build a financial plan for three possible scenarios, you will have had to make thoughtful decisions with pre-determined trigger points along the way.
Basically, this is your battle plan for uncertain times.
Evaluate your team
Evaluating your team is also an important part of your battle plan. This is going on in most companies today. Management is behind closed doors evaluating the performance of their individual team members … and they should be doing this.
During tough economic times, forced ranking comes into play. The better performers get to keep their jobs, while the less impactful performers are on the top of the list to be cut if things get difficult enough. As a business owner or manager, this is an unpleasant exercise that should be done so that you are prepared to make the difficult decisions necessary to protect and preserve the company during tougher economic times.
When evaluating your employee team, three criteria to consider for use in the process are overall performance, attitude and employee engagement.
During tougher economic times, it is human nature to either pull together or to pull apart. To ensure your team stays united through the tough times, do not practice avoidance behaviors. Be candid and be honest with your team.
Everyone knows the economy is languishing, negatively affecting many businesses, so if you’re not candid and honest with your team about how the recession is affecting your business, your team will be even more nervous and will draw their own conclusions about what they think will happen this quarter, next quarter, and so on.
This is a great opportunity to help your team clearly understand the connection between how their individual and departmental performance impacts the success your company experiences.
Let the team know exactly what has to happen to ensure no jobs are lost. Be specific. People need to understand that their performance matters. And no, we can’t change the global economy, but we can impact the success of our company.
It has to be all hands on deck. And you know what? Be courageous. Let your team know that the possibility does exist for people to be laid off, but if everyone does their part and achieves their performance goals, you may make it through this recession without a layoff. Plenty of companies will, and your company might as well be one of them.