At one time or another, every business goes through a rough patch – I’m referring to aggravations that every leader and manager faces including missing annual budgets, cost overruns on major projects, delayed product launches, price wars, labor unrest, etc.

Before deciding on the course of action, leaders must determine whether the problem is a short-term blip, a chronic issue, or the beginning of a long-term shift to the company or industry. Using the coffee business as an example, a spike in coffee futures because of a frost in Brazil is going to raise prices and erode demand. This is a short-term aggravation, and though it may thrash earnings for the quarter or the year, it is not a restructuring of the marketplace. An experienced management team will likely have seen this problem before and know how to best navigate through the mine field. They may circle the wagons to some degree, but slashing programs that are in place to enhance the company/brand’s long term strategic health is a bad idea.

If your company is going through a similar challenge, don’t panic. Sure, it’s not business as usual; every CEO has to make some moves to help shore up sales and profits. Tighten the belt, but re-think the proverbial quick fixes:

  1. Don’t Make “Across the Board” Cuts. CEOs justify across-the-board cuts because they think it is fair. It may be fair, but it isn’t smart. When it comes to belt-tightening, the astute CEO will target those areas or projects that don’t detract from the vision/strategy or the company’s competitive differentiation. A delay (not cancellation) in capital expenditures of such initiatives as office upgrades or computer systems are examples of a good place to start. When I was a CEO, I managed to squirrel away a “rainy day” fund for nasty business blips. With that in place, I never had to compromise my strategic principles.
  2. Avoid Trashing Initiatives that Are Working. I’ve seen many a case of cuts to the advertising budget. Sure, there is a case to be made when a campaign isn’t working – it is better to stop that advertising, stop putting good media money into bad creative and start working on something better. In the social media world, massive budgets aren’t required to engage consumers. Yet, in cases where budgets are already small, there’s strategic risk to cutbacks. Sadly, the reward of the savings is a drop in the bucket – a minute sum in improving quarterly or annual earnings.
  3. Never do a Knee-Jerk Reaction on the Corporate Strategy. Only when the rough patch is game-changing should the company’s strategic intent be reviewed. A game-changer was Amazon’s impact on book publishers, and iPhone’s impact on the BlackBerry. A price squeeze from oversupply and weaker demand is not game-changing stuff. As difficult as the situation seems, don’t panic.
  4. Don’t Throw a “Hail Mary” Pass. This is panic. Understand the reason for the problem. Is the problem self-inflicted? Do you have the right people in place to minimize its impact or to lead you out of the short-term crisis? Seldom are people to blame. But, these blips have a way of separating leaders from followers.

When business sours, whether short or long-term, the organization’s most senior people must step up and offer innovative solutions to the issues hammering the top and bottom-line. Those who fail to do this are not leaders. At best, they are managers. At worst, they are expendable.

 

About John R. Bell

John R. Bell is a retired consumer packaged goods CEO, a former global strategy consultant, and the author of Do Less Better. The Power of Strategic Sacrifice in a Complex World. A prolific blogger, John’s musings on strategy, leadership, and branding appear in several online journals including Fortune and Forbes.

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