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MWorld Spring 2009 By Dan Coughlin

When times are tough and cash flow is short, the first step not to take is to cut costs. That's actually the second step. The first step is for you to go back to the beginning and establish why the business exists.

Assemble the top eight to ten people in your organization and ask them, "What is the purpose of our organization?
What is the value our organization is trying to deliver that people will be willing to pay for?" Take a few hours to discuss these questions. Whether your purpose statement is written down or not, take the time to discuss it and clarify it, even if it turns out to be different from what you orignally wrote.

Only after you know why your organization exists, can you begin to make financial decisions. Go through every single item your organization is currently spending money on and rank its relative importance in supporting the purpose of the organization.

Next, establish the amount of money your organization realistically has to work with for the next 12 months. Be courageous in letting go of investments that your organization simply can't afford right now and preserve your money for the items that matter the most. You may have to add some items that are more important than anything you are spending on right now. Just make sure that whatever items make the final cut have the potential impact of supporting the purpose of your organization.

THE BUSINESS UPSIDE OF AN ECONOMIC DOWNTURN

There is one huge advantage of tough times: it forces people to differentiate between what is important and what is not and focus on the former. From that focus, extraordinary innovations can be generated. The first step in creating an innovative product or service is to say "no" to a lot of good ideas so you can say "yes" to a few great ideas.

In an interview with Fortune magazine (March 17, 2008), Steve Jobs, CEO of Apple, Inc, said, "People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the 100 other good ideas that there are. You have to pick carefully. I'm actually as proud of many of the things we haven't done as the things we have done." Starting in 1997 when times were extraordinarily tough at Apple, their maniacal focus on just creating a few items at a time generated the iMac, iPod, and iPhone. I would call those some pretty extraordinary innovations.

When cash flow is very low, you are forced to choose one or two items from a lot of options, and that is actually a good thing. It's actually a good thing to do when cash flow is strong, but for some reason managers tend to try a lot of ideas when they have the money to do it. It's far more effective to focus on doing a few things extremely well.

DEALING WITH THE DAILY DRAMA OF ECONOMIC TRENDS

What is an economic trend?

You probably have a more technical definition than I do, but here's mine: an economic trend is a bunch of dots. If you took all of the economic performances of all of the businesses around the world on a given day and averaged them into a single dot, then you would have the beginning of a trend. If you did that every day for several weeks, months, and years, then you would have a bunch of dots. You could then draw a best-fit curve that represents the flow of the dots. At that point you could say, "We're heading into a recession" or "We're in a recession." You could then use either of those statements to justify stopping investments in innovative ways to add more value to customers.

I suggest you don't do that.

The more important factor in determining your long-term success as a business is not how the dots are trending, but rather your willingness and the willingness of the people in your organization to persevere and sustain your focus on creating value for your customers and prospective customers.

THE PSYCHOLOGY OF RESULTS

Have you ever noticed how people get very excited when they get results that are better than they expected? When this happens two times in a row, they are really excited. And when it happens three times in a row, they become irrationally optimistic and think good times are never going to end. Remember the dot-com craze in 1999 and the housing boom in 2004?

Have you also noticed how people get bummed out when results are less than they expected? When it happens two times in a row, they get really bummed out. And when it happens three times in a row, they become irrationally pessimistic and think bad times are never going to turn around. Remember the dot-com bubble crash in 2000 and the housing market collapse in 2008?

This emotional roller coaster eats up a lot of valuable time, energy, and money.

RAISING THE BAR

Rather than get emotional about the results in your business, I encourage you to be logical. Take out a sheet of paper and invest two minutes in answering each of these seven questions for the previous six months in your business.

1. What were the top three business outcomes we wanted our organization to achieve in the past six months?

2. What did we actually achieve in those areas?

3. What did I personally do to try to help our organization achieve those three outcomes?

4. What did I do that worked well and why did it work well?

5. What did I do that did not work well and why did it not work well?

6. As I look back on the last six months, what lessons did I learn or relearn?

7. Now that I've reflected on the past six months, what will I do the same and what will I do differently in the next six months in order to improve our performance and results?

Stop. Before you read further, invest 14 minutes in answering those seven questions above. I think you will notice a shift from feeling emotional about your results to being logical about how to improve them in the future.

A CASE IN POINT

Mark was a results-driven executive. The reason I know that is because the very first time I met him, he said, "Dan, I'm a results-driven executive."

I said, "That's good because I think the role of an executive is to make decisions that improve results in a sustainable way." Mark then went on to tell me four more times in the next 45 minutes that he was a results-driven executive.

I asked, "Mark, what do you mean by a results-driven executive?"

He said, "At the beginning of every quarter, we set a goal. At the end of the quarter, if we achieve or exceed our goal, then we celebrate. If we don't hit the goal, then I come down pretty hard on people. Sometimes I lay people off just to get the point across that we have to hit our goals."

I said, "Mark, how much money are you leaving on the table using that approach?"

e said, "What are you talking about? I'm not leaving any money on the table with this approach. Sometimes our results are up and sometimes they are down, but that's true throughout the industry."

I said, "Well, how much time and energy are your employees wasting worrying about results when they can be improving results?"

He said, "People have told me it can be pretty nerve racking to work for me, but, hey, that's business."

I said, "Mark, you're only answering the first two questions. There are five more questions to answer regarding results."

He said, "What are you talking about? What five questions?"

I went over the last five questions listed above.

Mark looked at me and said, "Dan, I don't want to drive our business looking in the rearview mirror all the time."

I said, "I don't want you to look in the rearview mirror all of the time, either. However, if you don't pause and reflect on what has happened, then you're just repeating the same approach over and over again and putting your folks on an emotional roller coaster."

Over the next three years, Mark still celebrated successes and still came down hard on people when goals were not met. However, every 30 days he brought together his top eight managers, and together they invested one hour in discussing their answers to all seven questions. Over those three years, his organization's key business results steadily improved in an industry where results constantly fluctuated.