Tip # 9 - Best Practices in Downturns

Dear Friends, As the economy turns it will present new challenges for you and your business. You may face very difficult decisions about layoffs, prices, strategies, operations, and even survival.

Whether you are an employee, installer, sales person or owner - we hope that you will take this opportunity to reflect on the current state of your business or the company you work for. The one thing that remains constant is You. Take this opportunity to Lead. You may have to try a new approach at something or try something completely new altogether. We offer you the following counsel from experts whom we respect. We send it as a seasonal gift to you in place of a Christmas or Hanukah card. We hope you might find some useful ideas to increase hope and reduce stress for you, your employees and their families. We also hope the ideas might help you fortify you and your company.

Best Practices in Downturns (These ideas come from the Harvard Business Review, Dec. 2008)

Dial Down the Stress During Tough Economies, it’s natural to try to glean more productivity from every remaining employee. But this can hurt more than help, by fueling resentment and burnout. (Taken from Stewart D. Friedman, “Dial Down the Stress Level” in Harvard Business Review, Dec 2008 at 28)

Mr. Friedman writes: “A smarter approach: Be open with employees about the business problems you face, and invite them to be part of the solution while encouraging them to meet critical needs in other parts of their lives. Do this right and you’ll reduce stress, decrease wasted time, boost trust, build resilience, and improve productivity.”

Try conversations like this: Hey, Sarah, I know there’s a lot of pressure on you now, on all of us, really, and I want to make sure you’re taking care of all the things that are important to you – not only at work but in other areas of your life, too. I don’t want you to burn out. What small changes could we make here that might make things easier here, so you’ll have more energy to focus on your job while you’re here, and you’ll feel a lot better when you go home after work.” Ask your salespeople, “Is there anything I’m not doing that I could be doing to help you sell better?” LISTEN. Help them to know that you intend to support their efforts and help them reach their goals.

Protect Strategic Expenditures Two profound thinkers about company strategy, Robert S. Kaplan and David P. Norton, advise company owners to protect their strategic expenditures—those that you believe will lift your company beyond the reach of competitors. In weak economies, you can profitably search out and destroy operational slack and inefficiency. But protect expenditures that you are convinced will strengthen your company and boost it when the economy turns “north” again.

Use Downtime To Enhance Skills During the periods when the showroom is empty of customers and staff has breathing room, you can use the time to convene staff meetings. Brainstorm the situation and seek everyone’s ideas to sustain and grow the business. Certainly, in these times, you have everyone’s attention. They realize their jobs are at risk. They are likely to offer you their best ideas. You can also plan skill-training sessions. Finally, ask each employee to use their spare time to re-examine their work processes. Have them look for useless work and processes that allow mistakes to happen. Invite them to think of better ways to work, and report these back to you. (Taken from BV Krishnamurthy’s article, “Use Downtime to Enhance Skills”)

“Give Me the Ball!” Is the Wrong Call Tamara J. Erickson in her article of this title sees that nearly all executives feel a great obligation to keep the business going. They feel a heavy duty to staff and their families, customers, suppliers, and co-owners. “So it’s no surprise,” she writes, “that, in troubled times, many leaders believe it’s their job not only to call the shots, but also to personally execute the key plays. That’s the nature of leaders. Faced with a crisis, executives often shout, ‘Give me the ball!’” While she commends leader’s sense of obligation to others, she condemns their natural sense of turning inward for answers. She would remind owners that the wisdom of crowds applies in their own companies. She suggests that owners

     1. Ask great questions. “How can we do better? If you were President, what would you do? What do customers complain about? Where have we goofed? What could we do to delight customers?”
     2. Articulate a compelling mission that will incite people to rally. (Keep money and profit out of this mission. Make it a people mission.)
     3. Encourage employees to collaborate and trust each other more. Build their relationships and encourage them to exchange knowledge.
      4. Ask customers what the company could do better. Ask employees to look at other companies where they do business. Which of their best practices could your company adopt?

Discounts Can Be Dangerous “During tough economic times, companies often rush to reduce prices. That seems like common sense: people can’t afford to spend as much, so charge less to keep them buying. But discounting has its perils.” (From “Discounts Can Be Dangerous” by Jeffrey M. Stibel and Peter Delgrosso) Discounting when done wisely can encourage consumers to buy more. However, the principle that people want good value for their hard-earned money remains true in recessions as well as booms.

“The price of something is often an important determinant of [the value that customers perceive]. Remarkably, the more customers pay, the more value they ascribe to the purchase. If you discount prices, customers may begin to question the value of what you offer. Retail flooring stores that maintain or even raise prices in downturns, if they are reputed to be honest and reliable, are known to increase sales, while other stores lose sales.

That said, there are safe ways to discount. Discount not the prime product, but an accessory, as Chrysler Corporation did in 2008 by maintaining its car price, while providing gasoline at no more than $2.99 per gallon. Before discounting your prime flooring products or services, consider the risks. Will discounting cause customers to think less of your brand—your integrity, honesty, expertise, as well as your products and reliable services. If you lower prices on the essence of your Customer Value Proposition, customers may judge the discounted price to be the new, real value, and will protest your subsequent attempts to re-instate your former prices.

Thanks for reading.

Sam Allman
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