One of the challenges facing businesses today is the execution gap. Even when the economy is roaring, many companies find it difficult to put their strategy into play. The internal issues that often lead to this problem are likely to be exacerbated during an economic downturn or softening. When this happens, how can businesses close their execution gap while keeping their business afloat?
It’s a tough question, which is why we reached out to Leigh Paulden, Director &Business Growth Consultant at Scalable Sustainable Business Growth in New Zealand. Aside from bringing an international perspective to the table, Paulden excels in coaching companies through difficult times. He was a C-suit manager during the 1987 crash and a General Manager (CEO) during the 1997 Asia Crisis and the 2003 – 2004 economic downturn.
For this discussion, Paulden laid out a detailed roadmap that every coach and CEO needs to see. Here’s how that map is drawn.
Honing Your Strategy
Downturns and recessions bring big changes to the market – affecting buyers, vendors, and businesses from the top down. With this reality in mind, Paulden says the first step is honing the strategy.
“When a company sees a potential softening or downturn, it needs to first readdress the company strategy,” Paulden said. “It needs to understand –clearly and with empirical data – the drivers and causes for the downturn. The company also needs to address relevant trends involved with the downturn, as well as those that could affect the business and core customers.”
From there, Paulden says the company should be able to see what tweaks need to be made to the overall strategy. He also stresses the importance of comparing that strategy to the economic climate in every country or region where the company does business.
“The effects can be different across various countries or regions,” he said. “Just because one market is softening does not mean others are. Additionally, a company may have short-term strategies for different areas that will need to align with the overall company strategy.”
In fact, Paulden suggests that other markets outside your base could offer opportunities for growth in a downturn, saying:
“It is not uncommon for companies with seasonal products and services to trade in different geographic locations around the globe. This offsets the seasonal downturns each year (example: northern hemisphere summer versus southern hemisphere summer). We can look at a market downturn in a similar way. It should not automatically be regarded as a negative, and we should not react until we clearly understand the full situation. Many companies grow in market downturns because they see and seize those strategic opportunities.”
Protecting Your People
When all the necessary strategic questions have been answered and the details are clear, Paulden says that the company must then ensure that they have the right structure in place and the right people on the bus as they move forward.
“In a time of a softening or declining market, your people are crucial,” Paulden said. “Communication is key. Your team must be clear on where the company is going and how you’re getting there. Keep them engaged and inspired, and do not let the downturn overtake development opportunities for team members.”
The People Decision is an area where Paulden has seen a lot of companies fail during a downturn, and it’s something that is guaranteed to affect execution. He cites some specific mistakes, such as communicating poorly, overreacting and making the wrong cuts to staff.
“Cutting the wrong people just because of salary level is very short-term thinking,” he said. “This will impact the experience the customers have, which will cause the company to lose even more sales. Plus, when the market does improve, that company will not have the great people they need to capitalize on new opportunity. Instead, they’ll have to gradually restructure. The lost opportunity for revenue growth is huge during that period of time.”
Rather than swift cuts, Paulden says companies should get serious about evaluating their people. Recalling Tom Peters, author of People First, Paulden says effective evaluation is the number 1 differentiator.
“This is really important for companies and their management teams at any time,” he said. “However, I would say it is even more so in a downturn.”
With the right people and the appropriate strategy on hand, execution comes down to focus, determination, and accountability. Leaders need to ensure that all execution priorities align with the downturn strategy. If they do not, Paulden says not to waste resources on them. Instead, he encourages companies to “keep it simple” and limit their annual priorities to 5 or fewer – warning that companies who take on too many priorities during a downturn may find themselves unable to deliver.
Paulden also emphasizes the importance of measuring leading indicators.
“These are crucial if you want to see where the company is going and whether or not it’s delivering the right results,” he said. “Too many companies in a downturn focus only on lagging indicators. Lagging indicators do not deliver results or tell you anything about the effectiveness of your decision making. Leading indicators are a big part of successful execution.”
Another critical area that can’t be overlooked is meeting structure and rhythm.
“It’s crucial that you develop and maintain good meeting rhythms,” Paulden said. “That includes everything from the daily huddle to annual planning.Meeting rhythms help keep everyone informed and on the same page. They ensure the team is aspired, aligned and headed in the right direction.