I’m one of those people in the camp believes that the more we talk about something, it happens. American oligarchs, wall street, the media, and even my brother are talking about the big R word. Recession.
I’m not saying the United States economy is in one. In fact, there’s tons of evidence to suggest otherwise. Nevertheless, my news feeds are filled with opinions on how to survive one, and it doesn’t seem to be letting up. (Good vibes, people. Good vibes.)
All the news has me thinking about the many downturns and business situations I’ve worked in over my career, and I feel compelled to share a few lessons I’ve learned along the way. Here are a few things that come to mind when faced with uncertainty:
Check Your Sales Structure
On the heels of the 2007/2008 Financial Crisis, I took over a drowning lead generation business in the automotive vertical. The company had gone from $23M in annual revenue to under $7M in a year and was losing nearly $150K monthly. The best-case scenario had it losing over $1M in the fiscal year we got to work.
The sales team had been gutted before my arrival, and all but one Account Manager had been eliminated. There were over 350 clients, but the business was churning 20% monthly. Very few new clients were coming on board. The sales goal was to outsell attrition every month.
The strategic decision had been to retain inside sales competency to prepare for the economic rebound. But the account managers let go were experienced industry people that knew our customers and had relationships that mattered. The inside salespeople found it impossible to hit their numbers, and the sales function had lost its mojo.
It took me less than six months to understand the situation and another six months to reset the sales function. I hired back as many lost account managers as possible built new comp plans for the operating environment, and retained as much revenue as possible while the market stabilized.
This turned out to be the best move. We reached breakeven faster, beating our budget projections in the first year and making us more competitive as the market recovered.
Take a long look at your revenue. If things tighten up, an extra salesperson won’t make a difference.
- Lean into your customers with the best people you have.
- Align your sales compensation plans to what matters most.
- Look to innovate and add value!
Understand Your Key Partners
It’s so easy, so, so easy to cut costs when things are bad. And the big numbers fly out of the P&L like a baseball coming off Barry Bond’s bat. But are they the apparent fixes to what may ail you or the best items to cut?
There’s no doubt that the supply chain woes of the past few years have taught many businesses the valuable lessons of partner relationships, and it’s one of the reasons why I remain optimistic that our businesses today are prepared for what may come next.
However, when the chips get down, many businesses will look to their marketing lines for help, and expenses not explained or tied to revenue are the first ones to fall. And justly, too, right? I mean, we are in 2022. If you’re not linking marketing to your P&L in terms of performance, you may want to address that first.
By partnerships, though, I’m thinking of items like brand partnerships, sponsorships, and experiential assets.
Many years ago, we had a high-profile partnership with Yahoo!. The deal was a legacy arrangement, upside down in profitability, and needed an overhaul. We paid a flat rate monthly for sponsoring a content area relevant to our industry.
It seemed a no-brainer at the time to cut the expense – web traffic from Yahoo was unpredictable, user intent was inconsistent, and thus our acquisition cost from that channel was 3x higher than anything else we were doing. So we chose not to renew our agreement while shoring up our turnaround.
Our primary competitor didn’t take long to jump into the slot we vacated! Using it as an anchor of their sales pitch, they started to win business faster while we struggled. Our P&L looked better, but our market positioning lost its swagger.
It’s not all dollars and cents when evaluating partnerships or related assets. Think through the intangibles.
- Understand what can drive your sales and fuel your brand positioning.
- Dig deeper, and work harder to find mutually beneficial solutions with your valued partners.
- Hang on to everything you can to remain competitive.
Align Your Teams to Values and Performance
How often have you worked with someone who seemed to get away with everything but hit their numbers, so your manager put up with them? Or perhaps there was a person everyone loved but couldn’t be depended on to get their work done on time? It’s a downer.
Values and Performance. It’s not a new concept, and I think the late Jack Welsh popularized this while leading the turnaround of General Electric. The concept is straightforward but requires discipline: hire and invest in people who demonstrate your core values AND perform at a high level.
Say what you will of a company operating in Chapter 11 and selling its assets. At Adelphia in the early 2000s, new leadership used this concept to help reshape the company culture and skyrocket its performance. Adelphia was valued at $8B when entering bankruptcy. Its assets sold (accepted offer) for over $18B, nearly $10B in value created in just the three years of the turnaround.
Senior leadership was focused on investing in people who demonstrated core values and performed at a high level. Expectations were communicated clearly. Employees were aligned to company objectives through a practical PMP (where performance and values were measured). Leadership was disciplined in their approach.
I had never thought of values beforehand and have never overlooked values since. Values such as Accountability, Teamwork, Integrity, Hard Work, Recognition and Celebration, and Ethical Conduct have been tattooed into my brain.
When I’ve hired for values, I find the performance takes care of itself. This doesn’t excuse us as leaders from coaching our people and teams or rolling up our sleeves to do hard work ourselves. People aligned to a purpose with shared values accelerate growth. And that’s the point.
Creating a winning culture isn’t about having many top performers. It takes a team of people across every function sharing values and performing at a high level to accelerate growth or overcome adversity.
- Define your values. Live them.
- Build values into your PMP. Always be coaching.
- Hire and invest in people who do both: perform at a high level and demonstrate your values.
Celebrate the Little Things
Ok, so yeah, I had a boss tell me, “you get too excited about the little things. You need to cool down.”
“Uh…,” thinking to myself. “These people just went through a downsizing, we’re bleeding customers all over the sales floor…” I heard my late father’s voice inside my head, “you’re damn right I’m celebrating the little things!”
In a downturn or turnaround, your teams will know it. They’ll recognize it. They’ll feed off your energy as a leader. If you find yourself in a turnaround, celebrating the little things your people do right every day is the difference between winning and losing. And once your people start winning big, they’ll tell you, “hey, Tom it’s ok, we got this.”
There are lots of things to celebrate when chips are down, like being on time on a critical deliverable (web team delivers LP to marketing on time, for example), owning a problem and finding a quick solution, helping a teammate with a challenge, teaching an intern a process, and even contributing to a discussion in a team meeting.
In celebrating the little things, ask yourself a few questions:
- What behavior am I reinforcing?
- How will the celebration impact culture and performance?
- What’s next? What do I expect?
Can you go overboard on celebrating little things? Yes. Can you go overboard on celebrating big things? Yes. So sync celebrations with your brand, values, and goals the best you can. But often, in adverse situations, find reasons to celebrate.
So there you have it, a few items from the top of my brain influenced by my news feed, and I hope you found a thing or two worthwhile. Feel free to comment or send a note. I would enjoy hearing your feedback.
Do you know? Of all the economic calamities and downturns I’ve lived through, there has been one constant: we get through them. We get better. We grow. We learn. We carry on.