Recession: An Opportunity to Consolidate Gains of the ’80s
Will there be a recession? I'm no forecaster, but the odds are headed north. At the very least, thinking through the "what ifs" is a must.
While American business has neither melted all its post-World War II fat nor uniformly hoisted quality service and employee involvement to the top of its priority list, it has made strides. Our "management revolution" has roots 20 years old (GM, for one, had begun employee involvement by 1970), but momentum came only in the '80s. Thus the new-found passion for people, quality and service has flourished amid good times. It's far from certain that "quality first," "peerless service" and "self-managed work teams" will remain management's battle cries when (if) the yogurt hits the fan. I fear that panicky companies will put quality programs on hold, consider service excellence a frill, hesitate on work-team experiments and renege on supplier "partnerships." It'll be back to "ship the product," "crack the whip" and "circle the wagons."
Life is not fair. Credibility for new initiatives earned one painful millimeter at a time is readily lost in an instant, and by the kilometer. A few suggestions follow for organizations determined to cope with tough times without sacrificing the hard-won gains of recent years.
1. Use a recession or a pre-recession scare to demonstrate rather than repudiate your piously intoned "bone-deep commitment" to employee involvement (EI). Use EI to spearhead the attack on tough issues surrounding a recession. Involve everyone in strategic choices as well as tactics and implementation.
"Can we cut costs 15 percent without layoffs?" Ask the employees—you may be pleasantly surprised at the response. If layoffs or work-hour reductions are unavoidable, give employees lead in designing the program: Job reassignment, job sharing, and other alternatives may surface. Even layoffs can be accomplished creatively by tapping employee imagination and toughness. A little confusion, shouting, and delay now may buy more spirited (or at least less resentful) belt tightening and can strengthen a previously fragile EI process.
2. If you must cut, start at the top. If you reduce the work force by 10 percent, cut 15 percent of your vice presidents (yes, VPs) and middle managers. As for pay cuts, lopping 10 percent off a $150,000 salary looks a lot less drastic to those on the shop floor than trimming 10 percent off a $25,000 wage. This is especially so in the U.S., where the disparity between top pay and bottom pay makes us world leaders in wage inequity.
3. Speed up and intensify involvement with suppliers, distributors, customers, unions. Repeatedly and patiently (even if Rome is blazing) counsel with these stakeholders, whom you've so blithely called "my partners" during the good times. "War councils" with union leadership, continuous information bulletins, and weekly briefings, for instance, are a must—if you were serious about this stuff in the first place.
4. Take advantage of this golden opportunity to boost the quality message. If "world-class quality" is the prescription you've been selling, rough times are just what the doctor ordered. Experts agree that the notion of a quality "trade-off" is ridiculous; quality improvement, invariably the result of simplification, leads to enormous cost reductions. So to underscore quality now is to stoke the essential cost-cutting fires. Furthermore, if there is a recession, the worst seldom exceeds 24 months; in the long term, competitiveness amounts to "quality or else." Visibly staying the course with quality in hard times will give you a big boost in the post-recession environment.
5. Keep your mitts off the ad budget. Advertising and training budgets historically receive the first and biggest blows in recessions. Talk about shortsighted! Training can best be conducted in slack times—especially economical, on-the-job skill acquisition. As to advertising, we've entered an age dominated by intangibles (perceived quality, design, service, etc.) and bare-knuckled competition. Maintaining or enhancing the "brand" has never been so important, for the small or large company, in consumer or commercial goods or service. Remembering this during a downturn gains you a long leg up when good times return.
6. Stretch out plant modernization if you must, but protect your strategic information-technology (IT) investments. IT will shape tomorrow. Lead and you thrive; lag and you wither. Sweeping new IT systems take forever to implement; lost time is irretrievable, recession or not.
Turning to employees, suppliers, and others—as wise firms have in past recessions—will almost surely yield deeper, speedier cuts than those mandated by blowhard "cut the fat" proclamations and quick-trigger layoffs. Which is not to say that this approach will be a lark. It won't. But recall how hard you've labored to build new compacts with workers, unions, suppliers, distributors, customers. Don't panic, fall back on traditional approaches and blow five years' goodwill in a fortnight. Take 100 deep breaths. Chant your quality mantra 100 times. Failure will ultimately claim those who deny the new competitive commandments during an economic downturn.
(C) 1990 TPG Communications.
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