GROW!

Consumer spending is up. Government spending is up. Inventories are low. Factory orders are surging. Money is cheap. And talent is available (at least if you know where to look).

Add it up and what do you get? A recovery! The resilience of the economy has defied expectations. According to a recent article in Business Week, a more exciting possibility is coming into view—stronger than expected growth! During this year’s first quarter, almost every economic report beat expectations. While we’re not out of the woods yet, a three to four percent growth spurt looks quite realistic.

If it happens, will you be ready?

Lessons Learned?

What’s the definition of insanity? It’s doing the same things over-and-over and expecting a different result. Throughout the past century, businesses have had a habit of becoming fat, dumb, and happy during boom times.

We get drunk on success and allow ourselves to over-spend and invest foolishly. Need an example? Look at the dot com fiasco. The investment community threw hundreds of millions of dollars into companies run by twenty-nothings whose ideas of wise spending included prestigious office locations, lavish furnishings, and the world’s most expensive and ineffective Superbowl advertising.

Want to ensure you’re ready for growth? Then keep following the lessons you’ve learned during the last 18 months:

1. Spend wisely.

   During a recession, businesses scrutinize every expense. Why stop when profits increase? While you shouldn’t be pennywise and pound foolish, you should continue to treat every expense as an investment. If the investment won’t yield improvement in your efficiency, cost structure, or ability to service customers, don’t make it! Some of the smartest places to put your money in the coming months include:

   • Technology enhancements to improve productivity
   • Infrastructure development to increase capacity or operational flexibility
   • Product developments to better satisfy customer needs
   • Process improvement to increase efficiency
   • Training and employee development
   • Sales and marketing

   Set a goal to become the lowest cost producer of the goods and services that best satisfy your customers’ needs. In manufacturing, they call this lean thinking—eliminating all waste from production processes. The goal is not to become the cheapest—it’s to become the most efficient producer at the level of quality your customers want. At the same time, focusing on process helps to drive improved consistency, which is one of the most important drivers of quality.

2. Avoid debt.

   Leverage can be essential for capital projects, but avoid having too much of a good thing. According to a story in the March 18^th issue of Business Week, five of the last seven recessions were "double dip" recessions—two periods of decline with a brief rebound in the middle. Protect yourself by borrowing no more than you can comfortably repay in three to five years assuming zero to moderate revenue growth.

3. Manage key indicators

   Profit is no excuse for poor performance. Key indicators are those metrics that predict future performance in your industry. Unlike financial statements, which are backward looking, key indicators allow you to forecast future results. While every business is different, key indicators to watch may include:

   • New Orders — the pace of orders can show the direction your business is heading
   • Inquiries — the volume of inquiries is a measure of future results as well as the effectiveness of sales and marketing activities
   • Conversion Rate — a measure of the market and the productivity of your sales efforts
   • Days to Pay — an indication of your clients’ financial health
   • Quick Ratio (A/R divided by A/P) — watch for trends to see how well you’re managing cash
   • Service Request / Customer Complaint Volume — an indicator of product and service quality
     
   
   

   Optimism is contagious—it gives customers more desire to work with you.

   
   
4. Be aggressive about sales and marketing.

   Want to know the dumbest statement ever made by a CEO—and this is an actual quote: "We’re so busy right now that we don’t want any more new customers." This comment was made by a CEO in 1999, and guess what, he got his wish—he’s now out of business.

   Every day your business is headed in one of two directions: up or down. It’s obvious, but it needs to be said—you always need new customers. While advertising traditionally increases during good times, sales efforts often get less aggressive as more time gets spent servicing existing clients. Avoid the temptation to turn sales people into service reps, and instead, increase quotas as the economy improves and invest the revenue into developing your capacity for service.

5. Deepen client relationships.

   It’s funny—and sad—how many businesses had to be reminded to focus on building client relationships during the recession. Strong client relationships are a critical asset in any economy. Why wait for a downturn to look for new ways to help your customers? Get out there and find out:

   • What you do well and where you can improve
   • The challenges your clients face and how you can help
   • The new products and services your customers are going to need
   • New contacts you can work with inside existing accounts
   • New applications for your products and services at each customer site
   • What you can do to win a 100% share of each customer’s business

6. Stay positive.

   No question, it’s tough to stay positive and optimistic during a slowdown. But, it’s essential. Negativity is a cancer—one that eats away at the core of your culture. Regardless of whether business goes up, down or sideways, find occasions to celebrate. Reward people for their results. Recognize them for their efforts. And constantly give them a reason to smile and feel good about the future. Optimism is contagious—it breeds excitement, a willingness to work hard, and it gives customers more desire to work with you.

Get Ready. Get Set...

On March 4^th, The Wall Street Journal ran a story outlining the reasons for the apparent rapid recovery of the economy. They credited the turnaround to the fact that our economy has become more flexible. The key drivers of this flexibility are:

• Manufacturers’ ability to quickly adjust inventories
• Strategic staffing (using temporaries to provide workforce flexibility)
• The financial market’s ability to parcel out risk
• Quick monetary policy decisions led by U.S. Federal Reserve interest rate cuts

Assuming the economists are right, and 2002 will turn out to be a banner year, now is the time to get prepared. What should you do? While you can’t control the financial markets or the decisions of the Federal Reserve, you can take action to maximize your organization’s ability to adapt to changing business cycles. Here are some ways to increase flexibility in your business:

1. Forecast personnel needs.
   • Evaluate staffing requirements based on best case and worst case scenarios.
   • Anticipate attrition.
   • Perform a gap analysis to determine where labor shortages and skill deficiencies will exist.
   • Determine "core" staffing needs (i.e., the personnel needed to keep critical operations running during slow periods) and estimates for peak workload requirements (i.e., the additional personnel required during busy times).
   • Look for opportunities to upgrade talent within your organization.

2. Develop a staffing system.
   • Create a detailed process defining your company’s methodology for when and how to hire and for how to fill in for peak workload periods.
   • Your plan could include well-defined processes for new hires, developing current staff, using temporaries, and outsourcing non-core functions.
   • A well-designed staffing system reduces time to hire, increases hiring quality, ensures consistency in hiring decisions, minimizes hiring costs, and reduces liability.

3. Select and train staffing partners.
   • Ideally, find one primary vendor who can help you plan your requirements.
   • Choose one to two supplemental vendors to handle overflow.
   • Train staffing partners’ service staff on your expected requirements.
   • Develop a proactive recruiting program to begin sourcing the people you will need.

4. Develop triggers and training.
   • Determine the milestones that will result in your need to add staff.
   • Train line managers on staffing system procedures and how to communicate needs to HR or directly to staffing partners.

Look into the Crystal Ball

Are today’s economists forecasters or fortune tellers? Only time will tell. Whether it’s going to be a boom year or a bust, now is the time to take the steps to ensure your success. Keep running your business with the same intelligence you used during the past 18 months, and as success occurs, invest in making your business even more competitive.

To prepare for growth, put your time and money into three areas:

Product — Make sure the products and services you offer best meet the needs and challenges your customers will be facing. Keep your pricing strategy in alignment with your positioning.

Process — Strive to become the low-cost producer.

People — Develop a plan to upgrade talent and provide the flexibility you need to meet market changes—no matter which way the market goes!