Batten down the hatches
Here comes the crisis! Which one, you ask? It doesn't matter, does it? Whether it is the second leg of a double dip recession, a precipitous drop in corporate earnings, reduced consumer consumption - in the end the reaction is the same. Cut and slash.
Companies did so wiht some positive effect in 2008 - somewhat thinning their herds and eliminating redundancy and excess. But.....
- There is much less fat to cut now
- The reflexive quarterly results driven reaction is rarely the best one
Sensible analysis and creative approaches will certainly yield a preferable outcome.
Looking forward or glancing back
The perennial downturn cost management debate - slash sales and marketing costs OR invest in business development preemptively. Which is right? Like so many questions the simple either or results in a simplistic and sub-par outcome.
Obviously you must invest prudently and cut excess (topic for another forum has to be "Why is adversity required to trim excess?") but the optimal answer is a hybrid approach.
Vistage's recent The Future of Work report describes a strong trend toward reduced costs and improved results using "contingent" professionals. Of course recessions are a great time to pick up amazing talent at bargain prices - but salaries are only one component of the huge cost of employees. Instead, how about a "new business model, individuals compete in a global market for project opportunities and work on multiple projects at any given time."
Of course we have a name for that....consulting.
Vistage's report outlines a number of direct and indirect savings which accrue to companies which use more creative and decentralized models. The corollary is that firms which boldly ramp up investments in those areas which can help them weather difficult economic times can reduce the magnitude of that ramp up using contracted resources. Everything from reduced floor space and power consumption to health insurance and comp insurance are minimized - and the caliber of results can be superb.
Strength of Convictions and Nuanced Analysis
Many leaders, though, immediately look to consultant and contractor costs as an easy area to trim as pressure develops on profits. Understandable, but sensible? And is a single line item for "Professional Services" really a homogeneous or monolithic entity with a single cost/value proposition? Certainly not.
Broad brush strategy consulting will certainly be pressured as The Economist predicts in it's June 2nd article Advice for Consultants specifically arguing that "Strategy consulting, the most famous variety, is also the most controversial." Certainly some CYA projects or low return incremental efficiency studies may also suffer. Conversely, however, companies will be well served to use consultants to economically and efficiently develop areas which will generate revenue and position the company to withstand difficult times. Against the pressure to slash, CEOs and other leaders will need to discriminate relentlessly against fluff and in favor of action.
Diversification and Growth
Global business is exactly that sort of area offering huge potential benefits:
- diversification of revenue streams
- interest in regions/countries at different stages of recovery/distress
- participation in markets which are surging despite global trends
- pipeline and revenue growth during difficult times
- excitement and proactivity to share with employees who are concerned and subject to a barrage of negativity
- a variety of indirect advantages (many of which can also help reduce costs)
Strategic global business development will increase revenue, allow you to capitalize on markets which exit the downturn first (or avoid it) and insulate you from excessively dire conditions in any specific market. A properly structured program can be initiated with a modest investment and structured using local distribution - it need not be employee intensive.
Lemonade from Lemons
To explore how Consilium can help your business seize this opportunity, call me BEFORE you slash all programs and cut all consulting!