Saturday, September 29, 2012

Managing During Good Times & Bad Times

Managing a company during Good Times is actually pretty easy.  Setting priorities and spending money when a company is Fat and Happy is easy to do.   During Good Times, Management should avoid the temptation to spend money on nice to have things, or new positions and or to increase employee compensation and benefits because during Bad Times those things are usually the first to go.  Reducing employee compensation and benefits, in particular, always causes morale problems, which is the best reason to maintain compensation and benefits at no more than the 50th percentile of what is common in an industry, even in Good Times.    In Bad Times, this level of employee total pay may actually be too high.

Management skills are actually built during Bad Times, rather than Good Times.   While managing growth has it challenges and can be hard work, it is a whole lot more fun than downsizing.   As a Senior Manager, who has managed through three Recessions, at least two Real Estate Downturns, mortgage interest rates at 18%, 9/11 and the Financial Collapse that began in 2008,  I can say that most of what I have learned about managing a global company has come during Bad Times. 

Dealing with the financial management of the company is hardest when business activity is shrinking during Bad Times.   The saying the tough get going when the times are tough is really true.  Since the President and CEO's first job is to insure the survival of the company, no matter what it takes, within legal and ethical bounds,  Bad Times often require tough and very painful decisions.   Downsizing, in particular, that involves laying off good people, that have worked for a company for years, is probably the most difficult decision any company President, or CEO must make.  Yet, the goal is always to live and fight another day, rather than allow a company to go out of business.  

Capitalism has produced more wealth for more people than any other system in human history; yet it involves boom and bust business cycles and creative destruction along the road to innovation.   It may sound heartless; but Bad Times ultimately weed out weak companies and weak managers unable to make tough decisions.   It sounds cruel; but it is the basis for long term growth, both for individual companies and the national economy. 

During the course of a long career in business, managers will face various business cycles during Good and Bad Times.  Successful managers roll with the punches and get the job done.  In many cases, business management is about two steps backward and one step forward.  The key is always going forward during Good and Bad Times.   And, when bad things happen in business, a good manager will allow for a short time to grieve (not more than a day) and then should quickly move on to Plan B.  

People come and go in every company.   And, no matter how indispensable someone may seem, when turnover occurs, it is an opportunity to rethink the organization's structure and talent management within the company.   Some degree of turn over, as long as it is not excessive, is a good thing.  Bringing new blood into a company is healthy.   This may sound like people don't matter.  Quite the contrary; people really do matter and are critical to the success of any company, especially during Bad Times.

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