Change Management: Recessions reveal bad managers and bad investments to owners

Although governments have had to bailout more than a few incompetently run financial, automotive and airline institution's, most other businesses haven't been that lucky.

What is interesting though, is that now that the super-boom is over, many managers are finally being revealed for the charlatan's they truly are.
The old boy’s network and cronyism that was rampant during the boom is slowly coming to an end. In its place managers are finding they have to hire on merit, rather than risk hiring their friends and cronies.
The focus on profitability and the bottom line however, also shows how many managers were not focusing on these during the boom....and remember this was a 'long' boom.
For owners currently concerned about how their business's are being run, there are few things you can do right now:

• Accept your responsibility for not keeping an eye on them. Chances are you weren't intervening enough.


• Ask the question of senior managers at your next board meeting 'Cost cutting is a part of everyday business. The customer is always on the lookout for lower prices and we'll neeed all the cash we can during our startup and growths phases. If you are focusing on cost cutting now, what the hell were you doing for the last X years? Please explain.'


• Run a HR merit test. Ask for all the staff CV’s to be sent you and the board - YOU WILL GET A FEW SURPRISES! The resume's will tell you two things - a. is the company running on merit, b. who to speak to regarding the firm’s problems. (In one firm I found 2 PhD's and 3 MBA's all relegated to doing grunt work because they had 'rocked the boat'). Question your senior managment team on some of the staff and note how judgemental they are, and what standards they apply. If they are perhaps a bit slack for your liking - you have found a problem. If those standards are set too high for others, then apply the same standards to them. In short, apply the wisdom of King Solomon. That is, if the senior managers judge others harshly, apply the same unyeilding attitudes to them. If they are understanding, then likewise allow for this with them. As always it is the balance that counts, and listen carefully for excuses.


• Draw up a profit curve for each of your senior managers (if you don’t know what this is see the next blog) to compare what they cost in salary against what they deliver. This is the ultimate merit test.

From a turnaround and change management point of view, it is only when ‘hard’ competition returns to the market do the true colours of bad managers really get revealed.
Further research also indicates that the recession has revealed a bias of having too many CEO's from financial or management consulting backgrounds who didn't understand the operational aspects of their businesses (the banking sector being a case in point); and so built or added products that the firm didn't really have any competency in, let alone either build or to manage - CDO'S or Credit Default Swaps anyone?.....But that is for another time.

Restarting Startups - Startup spending problems

After consulting on a start-up that needed turning around or 'restarting'-up, I noticed that for some strange reason a few things keep turning up in start-up businesses.

Firstly the business loved to spend money like it was going out of fashion (and these days it is). This is a classic start up problem. The firms get all hot and sticky under the collar and to celebrate their own wonderful glorious success they decide to start shouting staff free cans of coke, pool tables and an xbox lounge with expensive coffee. As always - it's "someone else’s money" so let’s have a party. The most dangerous bit about this is that once the party gets rolling, it can get very hard to stop it. The few staff that are prudent are the first to find themselves sidelined, partly because they are a walking rebuke to everyone else. Another danger is that once people start spending, they stop thinking – literally. Business is about making the most out of limited resources – that's were innovation comes from. Once everyone starts signing off purchase orders, cash management starts to go out the windows and people stop thinking about the best way of doing things. Optimisation and resource management go by the way side.

After all it is easier to buy a second widget, than to figure out how you’re going to get by on one. Worse when the money starts to run out, management will spend more time on cost cutting, than they would have, had they done it all the way along; and this is at the very time when they should be looking for more customers.