Six months ago during our presentation “Preparing for a Downturn”, many clients listed “Tight labor market” as a top issue. Today, with the economy reacting to the Coronavirus and global oil producer actions, different issues are taking priority. Now’s the time to evaluate your organization and make it stronger and healthier.
The bad news is, well you know what the bad news is. The good news is it isn’t too late to prepare your organization to weather this storm and to even outperform the rest of the field in the coming recovery.
According to a McKinsey article concerning the 2000-2001 recession (see link below), 40% of companies fell from their top quartile position. At the same time 15% of lower quartile companies became industry leaders, moving up into the top quartile. This was not a case of all ships rising and falling on the same tide, their relative rankings flipped over. In other words, the new leaders didn’t just survive, they grew during the downturn. They didn’t waste the crisis.
The flexibility of an organization is described by its debt leverage, operating costs, diversification of product offerings, diversification of customer geographies, and cash-on-hand. By this description, an “ideal” situation would be; zero debt, controlled operating costs (high variable to fixed cost ratio), diverse products for multiple industry segments, customer base distributed across multiple regions, and cash-on-hand sufficient to cover fixed costs for three to nine months.
Great, but how do you gain the “flexibility” required to survive and thrive if your company wasn’t in an ideal situation going into the COVID outbreak? The place to start is getting your leadership team all on the same page with the correct priorities and action items. While this seems obvious, many teams are finding themselves overwhelmed. The link below provides a response plan outline proven to get teams moving on the right tasks with successful outcomes.
Some of the steps are simple, but none of them are easy. In future articles we’ll drill down into the seven individual steps included in the response plan.
We know from experience that there is a better way to prepare your organization to weather this storm, and to thrive afterward. This short video shows a seven step session your team can execute now.
Stay well and “be a buffalo”, storms don’t last forever.