The current recession has many corporate leaders facing a survival challenge for the first time in their business’ history. While this level of vulnerability may be a first for these business owners and managers, other leaders have walked that same path before them and agilely stewarded their “near death” companies back onto a trajectory of viability. This week I’ll offer a few insights, strategies, and a healthy dose of hope garnered from the collective experience of well-known and well-respected global brands that have faced business collapse.
I think messages of hope and business recovery are particularly important today. For example, despite recent laws designed to make it more difficult to escape debt, there were in excess of 1,000,000 corporate and personal bankruptcy filings in 2008 (more than 4,100 per day) with estimates that the bankruptcy rate will climb further in 2009. Using the retail sector as an example, 148,000 stores shut down in 2008. That is the largest number since 2001, according to the International Council of Shopping Centers. Another 73,000 retail locations may shut their doors in the first half of 2009. Publicity swirls daily about high profile businesses such as General Motors and Chrysler which are on the brink of failure. Caitlin McDivitt, writing for Inc. Magazine in March, 2009 notes, “When big business giants fall, it’s usually loudly in a much-publicized frenzy. For smaller businesses ending their operations in recent months, it’s been a quieter storm – but a storm, nonetheless, as more owners short on cash must shutter their stores.” These high failure rates create problems for those businesses that are still viable. The recently passed economic stimulus plan attempts to reduce the rate of business failures through guarantees on Small Business Administration loans. Business lending analyst Robert Coleman views the relief as a much-needed lifeline. He says, “It might give those businesses that are still around a fighting chance to survive.”
Enough of the bad news! Let’s get on to some ideas for managers, owners and even employees who are looking to give their company the best “fighting chance to survive.” I am convinced that bad leadership practices go unnoticed in robust economic times and that the true test of leadership occurs in times of uncertainty and financial crisis. Unfortunately, when leadership is most needed a crisis mentality often results in defensive posturing and emotionally charged leadership decision-making. One of the key elements for effective leadership during a crisis, is a willingness to take a hard realistic assessment of strengths and weaknesses of your business. In good times, leaders may go through the steps of a SWOT analysis (strengths, weaknesses, opportunities and threats) but in times of crisis great businesses differentiate themselves artfully on the basis of their strengths/ weaknesses assessment. In the process, leaders of these companies clearly define their “business sweet spot” and understand that their survival and excellence emerges from a commitment to doing the things they do well and resisting the urge to “be all things to all people.” By playing to their strengths, these business leaders resist the panic that results in discounting strategies and as such their businesses are positioned to avoid the challenge of re-establishing price points or justifying value when economies rebound.
Recovery leaders understand that brand equity is nothing more than “the way people talk about their company when they are not around” and that customer perceptions are strengthened by a disciplined adherence to the business’s core competencies. By understanding your business strengths you can also avoid being lured into the approach which the competition wants you to engage.
So this week, it might be helpful to hold a large mirror up to your organization attending to your beauty marks and warts. What are your strengths? How can you accentuate your strengths? What business game do those strengths predict you should play to differentiate yourself in this tightened economy? What are your vulnerabilities? How might you be tempted to overextend your brand in areas of weakness in a desperate effort to drive more business? What impact will that overextension have on your brand equity? Finally, what game would your competition like to lure you into, so that you are playing away from your strengths and into theirs?
Business recovery is not only possible but likely, if we benchmark leadership behaviors that have proven to revitalize troubled organizations. I hold out great hope that most businesses will come out of this downturn stronger and more viable.
Joseph A. Michelli, Ph.D. is a professional speaker and chief experience officer at The Michelli Experience. A New York Times #1 bestselling author, Dr. Michelli and his team consult with some of the world’s best customer experience companies.
Follow on Twitter: @josephmichelli
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