South Africa's third quarter of 2008 GDP growth was a dismal 0,2%, announcing the arrival of the global economic slowdown on our shores. It is true that times are tough and that many issues are beyond the control of management. However, there are some operational strategies which can help to manage and contain the impact of the downturn.
The starting point is to:
1. Take a closer look at the business
Bear in mind that the goal posts have moved significantly and continue to do so. Get to grips with the reality of the business and the economic environment, as it is, and not as you would like to see it. Understand exactly what aspects of the downturn are impacting your business and what is presently keeping it going. Identify what you truly do best, and why.
2. The time for action is right now
Procrastination in these conditions will leave you way behind. Those who come out of this downturn intact are the ones who are right now relentlessly focusing on their key value drivers and risks, and are making decisions which will positively position themselves for the anticipated and eventual upturn.
3. Cash is king
Focus on that long-standing corner stone of good business: cash is king. Ensure your finances and working capital are in good order and protect liquidity. Manage your cash hands-on. Re-examine all treasury, financing, funding and retirement exposures and constantly monitor financial and non-financial performance.
You have to concentrate on what really matters and cannot afford to be distracted with peripheral and detracting issues. Evaluate which products, customers and channels are creating or destroying value and react accordingly. With long-term capital investment programmes, consider which ones should be deferred to a later time.
4. Cut costs and manage your cost base carefully
This does not mean across-the-board cost cutting but rather a more focused and targeted approach, simplifying structures when required and extracting better value from current expenditures.
5. Reliable and prompt management information is crucial in these times
Define and understand your key performance indicators clearly to ensure that any improvement initiatives add to customer and business value. Decisions must be based on accurate and timely information.
6. Plan for different scenarios
Anticipate a range of possibilities that could lie ahead. Winning companies are agile and flexible and prepare in advance for a number of operational, financial and workforce scenarios that could result from the downturn.
7. Recognise the value of people
It is now more important than ever to recognise the value of people. Keep open the communication channels with the workforce. Remuneration and incentivisation schemes remain important even when businesses are not generating exceptional profits, as a company needs to retain its key staff in a downturn.
Strategies involving outsourcing and partnerships should be re-evaluated, but innovatively used. Be open to the possibility of taking on exceptional talent should it suddenly become available -the opportunity may not present itself again.
But remember that employees are not a company's only stakeholders - all other relevant parties need to be engaged on how the downturn affects their specific interests. Once again, open, early and regular dialogue is vital.
An economic slowdown does not mean retreating and waiting until things get better. Companies need to get out there with some innovative strategies, investing in growth opportunities which present themselves when least expected. These conditions offer great opportunities, for those who are informed, to negotiate transactions and deals on extremely favourable terms.