2020 has already formed itself a rather uninviting reputation, but if you scrabble among the positives, one standout is an interesting crossroads many businesses might have found themselves at. Place yourself in the intersection where the positive experience of employees and the success this drives meets a time of great volatility where tough, decisive decisions need to be made. Have you found yourself in this scenario? The challenge now is that we are far more discerning about the impact of making decisions on the carefully choreographed environment that forms one foundation of a successful business. The decisions are no less important, we are just more conscious of the complex web of things they are linked too. As you would expect some clever types have even come up with a name for this – Organisational Debt.
So, what does this have to do with cash? Well, simple really, I view this as good old-fashioned cause and effect. In unpredictable and scary situations, we could perhaps be forgiven for focusing on the obvious factor that separates survival from disaster. A pilot, for example would avoid hitting the ground by pulling up. There is a problem though, pulling up alone can lead to other bad things occurring and you will likely still crash.
An experienced pilot recognises this, of course, and focuses on all the critical components of flight. So, for businesspeople, what is the equivalent situation? As revenues start to behave like a rollercoaster and emergency signals start flashing, the obvious buffer between you and the ‘ground’ is cash. Businesses simply cannot survive without cash, but simply pulling back may not be enough to save you and could even cause more dramatic knock-on effects.
Here are some of our thoughts on how obvious business safety measures might transform your situation from manageable to critical.
- Believing labour cost is the only tactic to reduce burn rate
Employee costs make up a sizeable part of outbound cash, but conversely, they are also responsible for the other end of the equation. So, when the situation stabilises inevitably you need people again. It isn’t as simple as re-hiring either, putting aside the fact that recruitment and onboarding costs could outweigh your saving, the organisational debt created when you factor breaking up experienced teams, or losing the “collective genius” of empowering your workforce could be substantial.
It would, of course, be naïve to simply dismiss headcount reduction or restructuring, but how do you consider the impact of doing this poorly? Resentful, unsure, overworked, stressed and anxious are all strong words, with even stronger consequences. Telecoms giant Verizon, in a recent bid to retain their people, successfully developed and deployed a rapid re-training program to ensure over 5,000 of their retail employees could keep working and keep serving their customers. So, if losing people or re-assigning roles is a necessity, now is the time to look beyond the short term cash impact and ask the serious and difficult questions – what alternatives do we have, and how can we do this well?
Thought: What if those people clearing their desks hold the answers that could keep them there? We’ve all seen the illustrations of the iceberg. Stating that people across the business have the ideas might seem a bit obvious for 2020, so as we’re focusing on cash flow perhaps the question is different – how can you enable people to speak the same language and make smarter decisions?
- Saving the business by using the word ‘no’
Uncertain times can create the urge to increase control of costs and organisational processes. This is typically branded under an excuse such as “we want to avoid any nasty surprises.” But centralising decisions and re-enforcing hierarchies can mean you expect million-dollar results from people who are working with $50 authorisation limits. Frustrated workers trying to do their best could be left feeling that the company is not living up to the “we’re in this together” motto.
Employees need to be guided through regulations and empowered by transparent cost level decisions that take into consideration the good will and honesty of most workers, instead of creating convoluted processes aimed at punishing everyone for the bad behaviour of the few.
Thought: If employees who are not trusted repay the company with counterproductive behaviours are you opening yourself up to both immediate and future organisational debt? Perhaps it is not about controlling, but instead helping people to be conscious of the impact so they understand where to save and more crucially, where to make the most of an opportunity.
- Taking out a supporting pillar
A lot of companies are cutting costs and, where necessary, this is vital to protect cash flow. But when facing a rapidly rising tide do companies really assess what makes up the pillars of their success or simple view cost ‘zones’ as black and white (i.e. critical or not)?
Having a slower business rhythm is the perfect time to focus on the types of change and enhancement initiatives which set you up for success in the busy times. It is also a prudent time to question objectively if those on-boarding programs, steering groups, office improvements and development programs are nice to have or represent a core pillar of what makes your business successful. If the answer is the latter, what is cost to the business compared to the face-value of the saving?
Thought: If the welfare, development and support of employees is as important as machinery and marketing, consider how to work with teams across the organisation to ensure all your ‘pillars’ remain intact. Have you considered how much effort it took to develop the working environment you have today? From an organisational debt perspective, destroying that work could be as simple as a few poorly considered decisions.
So, what does this mean?
Cash is King, but Kings need advisors too. Tapping into collective responsibility and participatory decision-making can be a breath of fresh air and a highly effective way to endure hard times.
Cash is King but what is Queen? Especially Queen of Hearts? Having a company with a lot of cash and disgruntled employees who are not willing to engage is not a recipe for success; it needs a healthy dose of trusting and empowering employees to achieve long term sustainable growth.
Cash is King but what about making employees kings too? A company is made of people who need to be given the right skills, information, and environment to thrive, no matter how hard the times.
Managing cash levels is vital but the path of least resistance to an improved balance in the short term could lead to a long, hard road back to where you were, or even cause you to stall completely. The right answer is certainly not the easy one. Here is a final thought though – working with a shared understanding, remaining true to your values and empowering and entrusting your people to succeed remains a safe passage, even in uncertain climates.
Ola Kallqvist is the CEO & President of Celemi APAC, managing all the markets in the Asia Pacific region. Ola has been working with people management and transformation with many of the Fortune 500 companies on the global scene for 25+ years in all parts of the talent supply chain, from attract via recruitment to develop and retain the right talent. 1 part Executive, 1 part Entrepreneur, 1 part singer, 1 part movie geek and 2 parts optimist.
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