Right now, things seem pretty good from a business and economy standpoint. That’s what bothers me.
It is when things are going well that you should actually be thinking about what to do when they start to turn. By looking at lessons from the past, both from your own experience and from the experiences of others, a good leader can think about what to do if the operating environment changes unexpectedly.
Here are some of my lessons learned from the past that might help in the future.
When the Uber driver is doing it and telling you; it is a bubble. Get out fast. In the late 1990’s the cabbies were telling me what tech stocks they were buying and how they were going to retire on their wealth. In 2005 they were telling me how many houses they owned and how much money they were going to make flipping.
Beware apparent truths that are easily financed. “Owning your own home is the American Dream.” “You have to have a college education in order to be successful.” Each of these ideas became accepted truths in the US economy and was enabled by relatively easy-to-get financing. Both have turned into financial disasters for many.
If you don’t understand it, watch out and get out. It will probably end badly. None of us could understand how borrowers with no income could get approved for a mortgage with no documentation. Nobody could really explain CDOs and synthetics. Not knowing and understanding was a good clue to run. Are Unicorn company valuations today’s item?
Find reality and deal with it fast. Have a source of good and dependable numbers and act on them. Spend time walking around and talking with everyone in your company. Talk directly to your customers. From all of this, develop a viewpoint of the reality that is facing your business. Then, act quickly on that information. Those who acted quickly tended to do better than those who just waited and wished for a return to normal.
Cash is King. Businesses need cash just like humans need oxygen. If you are not managing cash and projecting cash regularly in good times and bad, you can get in danger quickly. Forget the GAAP stuff. If you run out of cash, you die.
No Sell, No Eat. Revenues from sales give you cash. When it gets tough, you have to focus the organization on selling and bringing cash into the business. There are always sales to be made, even in the worst of times. Having weak (or no) salespeople and de-motivating them is just plain stupid and ignorant.
Don’t be afraid to change the organization. Organizations tend to do the things they are organized to do. What needs to be done in troubled times and is critical to do is different than in good times. To think that the old organization can just shift to the new tasks without change flies in the face of Einstein’s observation that the definition of insanity is doing the same thing over and over and expecting to get a different result. You need different results, so you need fundamental change to make it happen.
Multiple perspectives are better than one. As the leader, you do not have all of the answers. Seeking out and considering the experiences of others and using those perspectives to come to better decisions is a key to navigating a downturn. Building the network of trusted people to provide a variety of perspectives takes a long time. Start when times are good.
The only thing you can truly control each day is your attitude. The attitude that you use to approach each day and its challenges and rewards is entirely within your control. The positive people seem to have better organizations around them, and that edge can be the difference in both good and bad times.
General Patton said he hated paying for the same real estate twice. You should feel the same about paying for the same business lessons again in the future.
It is a smart thing to do.
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GEORGE CASEY leverages 40+ years of experiences as a residential building and development CEO, consultant, board member and Vistage Chair to guide local business leaders through transformation. He can be reached at George.Casey@VistageChair.com, (207) 669-5491 or vistage.com.
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