JANUARY 2006

CREATING OPPORTUNITY IN CRISES

By Tony Mulkern

              As the U.S. economy enters another year of apparently robust growth which is envied by most of the rest of the world, some industries are experiencing a slowdown in their sectors.  These include construction, homebuilding and remodeling, and mortgage lending.  News of 60,000 job cuts at Ford and GM also indicate trouble for U.S. brand automobiles.

              Ernest Hemingway, one of the great writers of the 20th century, once remarked that people are similar to tea bags: you discover what they are made of only when they are in hot water.  How do you as a leader believe those that work with you would describe how you act when in hot water?

              One thing that can be predicted with near certainty about every industry is that it will experience cycles of expansion and contraction.  Sometimes these phases of particular industries track with the general macro economic cycles of expansion and recession, and sometimes they do not.

              Yet the reaction of CEOs and executives to down cycles, unless carefully planned, can appear to their employees as virtual panic, as though an unforeseen disaster has befallen their companies.  Of course, this would make about as much sense as being horror stricken by the end of summer or fall and the onset of winter!

              It is especially in the tougher times that your team needs to see that their leader is prepared to respond decisively and confidently, while being fully aware of the difficulties.  If not, they will look elsewhere for employment, and those whom you depend upon most to keep the ship from capsizing in the storm will be the first to find alternative employment.

              How does one make the most of a tough situation, as you inevitably must at some point?  The best way is to capitalize on the opportunities that accompany the crisis.

              All companies must grow or die, but there are many areas of growth besides revenues and profitability.  There is growth in quality, service, skills, value to the customer, and the enhancement of the team.  For example, in mortgage lending it is very difficult to recruit top notch loan officers during the boom times, since they have little incentive to leave their present positions.  When times are slower, this is the opportunity to cut the D players, add more A players, and be better poised than ever to take advantage of the next upturn.

              In the construction trades, training to keep current with new products and technology can be a significant challenge, leading to costly rework and less than desirable customer satisfaction.  The investment made in training during slower times can provide substantial competitive edge.

              Quality teams wherein employees analyze and brainstorm solutions to service, cost and quality problems have proved themselves in many industries, over nearly two decades, to have the potential for amazing results beyond managers’ expectations.  The biggest obstacle to their implementation is time.   Slowdowns eliminate that obstacle.

              None of this is to deny or minimize the painful decisions and dislocations that can accompany the down phase of the natural economic cycle of an industry.  Our job as leaders, however, is to provide more balanced perspective than once can expect to find in the somewhat sensationalist reporting of economic news. 

              The loss of 60,000 jobs at GM and Ford blared from headlines provides a good example.  One has to read at length to find that the job the losses will occur over a five year period and will occur mostly through attrition.  Meanwhile, the economy continues to create new jobs at the rate of about 200,000 per month net, after job losses.  Additionally, while Ford is closing some plants, it is also opening a new low-cost plant, and Toyota, which also produces “American-built” cars, is searching for new manufacturing locations in the U.S.

              The fact is that jobs are eliminated and new ones are created constantly in a growing, creative economy, and the two facts are related.  More regulated economies, as in Europe, make it more difficult to eliminate jobs, and consequently create fewer and have chronically higher rates of unemployment.

              As abstract as these facts may seem in the midst of crisis, my experience is that employees at all levels appreciate financial and economic education and the broader context that makes sense of their experience.  In the aerospace industry, it has been accepted for decades that jobs come and go, and workers migrate, as contracts are won—or not—and as contracts expires.  Workers and managers have been educated that this is the nature of the field they have chosen.

              As business leaders, we are not only the guardians of our own enterprises; we are also the joint guardians of our economy, the most effective and democratizing wealth producing system in history.  It is our joint responsibility to develop and maintain the support of all those who participate in this economy, without whose support it will not last.  This means keeping people informed, being prepared to meet both challenges and opportunities, dealing sensitively with painful changes, and conveying confidence that the best is yet to come.

(For those interested in more detail on how to manage difficult times, you may download pdf excerpts from the training manual I authored, “Transition and Recovery from Organizational Change,” published by International Training Consultants. Go to http://www.targetlearn.com. In the course search field, type “organizational change,” and scroll to the bottom of the new page that opens.)

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Copyright, Mulkern Associates, 2006