Be a strong, visionary leader
in tough economic times

Don’t obsess about the state of the economy. Direct your efforts productively toward coping in hard times.

By Wayne Rivers

Things are a little scary in business right now. Wall Street has experienced its most precipitous daily decline in many years, gasoline prices are high and news reports are drawing comparisons not only to 1987, but also to 1929. What should the family business leader do in this atmosphere of relentlessly downbeat news; increasing anxiety among customers, suppliers, lenders and employees; and overall gloom and doom? Here are a few tips that, individually or collectively, can help business leaders and their companies refocus on coping, and maybe even prospering.

1. Meet with your family and staff as often as necessary. Your people aren’t stupid. They know what’s going on in the world at large, and they often know as much as you do about what’s going on with your customers. Sit and talk with them. Be candid about what the economic slowdown is (or could be) doing to your company. You’d better get ahead of the gossip curve before things spiral out of your control, especially if you’ve experienced a significant negative event (such as loss of a key customer or delay in a major project).

If you’re not comfortable talking to your employees face to face, solicit their input via an employee survey. Finding a way to communicate with and understand your employees in tough times is more important than listening and talking with them in prosperous times.

2. Acknowledge your shared fears. Recognize that there are fears and concerns at many levels of society and business. Talk openly with your family members and employees, attempt to understand their concerns about the future, and do a bit of listening. Just allowing them to air their concerns is sometimes enough to change attitudes and to help people see a more positive side of the story.

3. Put things in perspective. Most likely your business has weathered bad economic or industry news before, and it will almost certainly have to do so again. Take the long-term view.

4. Engage your family members and employees in seeking creative opportunities. In a client company, employees were asked to participate in a contest to cut expenses during the recession of the early 1990s. Management pledged to pay a bonus based on the value of the cost-cutting suggestion. One employee earned a $2,000 cash bonus by coming up with a money-saving idea in a manufacturing process. If things are going poorly, working on a “turnaround” plan with your family members and key managers could produce tremendous benefits.

5. Review your strategic plan. If you’re on target with your plan for the current period, how do you stay on target going forward? If you’re off target, how do you get back on track? Does the plan need to be readjusted? If so, where and when? What are the specific action steps that you or others in your company should take (with accountability measures firmly in place, especially for family managers) to put the company on a more solid and success-oriented footing? If you don’t have a strategic plan (shame on you if you don’t!), now is a good time to put one in place. Developing a strategic plan is an excellent big-picture assignment for an up-and-coming family business leader and can help her better understand the many facets of the family enterprise.

6. Examine your budget. Are there expenses that you could cut (remember to use a scalpel rather than a meat cleaver)? Can you bring in an outsider to review your expenses with an objective eye and to help you benchmark in order to find fat that could be trimmed where you may not have seen any before? If you don’t know what your industry’s standard numbers are, you have nothing to compare against, so make sure you have accurate numbers from outside your firm as well as inside. If your chart of accounts is a mess and you haven’t broken your numbers down into cost centers, those are things that you should do before undertaking serious cuts. Many entrepreneurs make the mistake of simply cutting costs across the board by 10% only to find that by doing so they cut off future opportunities. For example, many business owners seek to cut marketing expenses during a recession only to find that when business conditions improve they’ve cut off lead-generation opportunities and are starting from a point of disadvantage relative to their competitors.

7. Assess your current staffing. Challenging economic times usually require executives to take a hard look at their payroll, which generally constitutes 40% to 80% of their overhead costs. Are there employees who were extremely productive at one time but who’ve gotten a little too comfortable in their jobs? Are there morale-busting people on the staff who’ve never truly bought in to your concept of “team”? Is it time to prune the family tree of under-producing nieces and nephews, in-laws or even your own children, who should be liberated to go on to bigger and better things? If an economic slowdown isn’t an opportune time to exercise tough love in the family business, when is?

8. Remind your team about previous successes in lean times. Talk about the company’s joys, successes, unexpected positive outcomes, successful new hires, etc., in previous times of recession. Pat Joyce of Joyce & Associates, an Eastern North Carolina construction company, saw the handwriting on the wall prior to the recession of 1991. He rallied his team and undertook a rigorous business development process in order to secure work. Instead of the normal eight to ten project bids they’d typically generate in a month, they planned, prepared and rolled up their sleeves to produce 40 in a single month! The intense work plan was a success, and they had a record year when other contractors found themselves in danger of outright failure. That tremendous success in the face of a serious construction downturn gives Joyce & Associates the assurance that they can weather virtually any storm as a team and come out unscathed.

9. Finally, be resolutely optimistic. If you as the leader adopt a “woe is me” attitude, it won’t be long before that negative vibe runs through your company. If you can’t be optimistic, stay out of the office until you can be. At the very least, show strength and resolve in the way you personally handle yourself.

Light at the end of the tunnel

Coping in a downturn often comes down to leadership. What your employees want from you is a sign that, while things may be challenging now, they will get better. If you’ve ever checked into a darkened hotel room, you know how difficult it is to take that first step into the room in the darkness where you don’t know exactly where your footsteps will take you. Flicking on even the tiniest light gives you the clarity to move with confidence into the room. Showing your family business team that light at the end of the tunnel will give them the confidence and clarity they need to move forward with you into more prosperous times ahead.

Wayne Rivers is the president of The Family Business Institute Inc. FBI’s mission is to provide solutions to help family and closely held businesses maximize their family and organizational success (www.familybusinessinstitute.com).

Copyright © 2000, Family Business magazine