Six Mistakes to Avoid in the Coming Recovery

While the Federal Reserve Chairman Ben Bernanke noted last week that the recession is “very likely over”, the recovery is just beginning. Many executives and business owners want to get through these changes and get back to ‘business as usual,’ and therein lies the problem. “Business as usual” has caused (or at least exacerbated) the issue, so going back may not be in the company’s long term interest.

Productivity normally rises during a downturn, since everyone is watching the books more and the organization works hard to do more with less. The normal increase in productivity in past recessions (1970 – present) averages about .8 %. In a recent article, the Wall Street Journal reported that the productivity in America has risen in this downturn an average of 2.5%, or 3X the average of the prior six recessions. While part of this increase is the significant cuts to worker pay and benefits, part of this increased productivity may be from better utilization of your human capital and smarter business processes. Don’t sacrifice this gain by retrenching into past practices. Here are some pitfalls to avoid.

Repopulating the company 1 for 1.
The majority of companies have had to lay off a higher number of employees than in past downturns. And now that things are turning around, they want to bring them back as quickly as possible. One reason for that desire is loyalty to the individual, and that is highly commendable. Part of it is that the manager is using an old paradigm that if sales increase X%, I will need to restaff with Y number of people. That paradigm may have been shattered.
·The tasks we do in an organization can be divided into value added [VA] (those that service the customer) and non value added [NVA] (consume resources but do not add value). Capture what is being done right now. How are you able to get it all done with a skeleton crew? What isn’t getting done? Evaluate if it ever needs to come back.
·If it needs to be done, be creative on the how and the who. Who needs to do it? Typically we have highly skilled workers doing a mix of value added and non value added work. What if you pulled most of the NVA work from them and pooled it into a less skilled (and preferably temporary) person? And how does it need to be done? Instead of adding staff, could these NVA jobs be automated? Outsourced?
·Remember the bargaining agreement if you have one. Work within it or start setting the stage for changes. The goal is to get the bulk of the people back in productive work as needed while giving them some better assurance that they are on board for the long haul. The mechanisms to redistribute the NVA tasks are up to you. Think out of the box.
·What about those employees that you couldn’t move because they knew too much or had a special skill set that the organization couldn’t live without? Now is the time to correct that by getting them to put it in writing the magic that they do. Unless, of course, you want to be held hostage again sometime in the future.

Being too slow to add resources.
·Stay ahead of the curve when adding resources. This will allow you go after the NVA activities as you identify them. You will need the extra bandwidth to follow recommendations and use this recovery time to continuously improve the organization.
·Focus on servicing your current customers extremely well. Now is the chance to delight them – you need them more than ever. Make sure the front line customer support team has the resources to do the job right. This is particularly true since you are looking to attract new customers to replace ones you may have lost. First impressions are key and may be a major differentiator for your company against its competitors.
·Some resources will take a while to get due to lead time on equipment or locating the right skill set. Start those earlier than you might otherwise to make sure they are there when you need them and that they are the best available. (First movers here will probably get a great deal on critical resources, both human and physical.)
·As you replace lost personnel, hire for behaviors first, skill set second. If the individual has the right attitude and some expertise and ability in the area, the specific nuances of the job can be acquired. It is much harder to change a person’s behavior – what you hire is what you get. If you are a first mover to acquire these individuals, you will have a greater chance to find people with both the right behaviors and the right skill set.

Ignoring your suppliers.
·You may have had to add some in haste since your original ones went out of business. Now is the time to do due diligence to make sure they are the ones for the long haul.
·These suppliers helped you through the hard times. As the money returns, be sure to pay them closer to the original terms. They have probably earned it. But, if the new reality really is net 60 versus the old net 30, start that dialogue now.
·As you look at NVA activities, you may find a fit with suppliers. It may not be your core skills but it might one of theirs. It may not be a bad thing to select a few key suppliers and work to partner with them more.

Failing to reevaluate your customers.
·Stay close to your key customers. They kept you going. Continue to service them well through the recovery. The general tendency is to flock to the newest customers most often. Resist the temptation. Make all your customers priority customers.
·But take a good long look at them. Are they really the customers of your future? Some of them may need to get replaced, not today, but over time. Identifying them early will allow you the most flexibility in your future agreements.
·Work with them like your suppliers but in reverse. Is there a way that you can take some of their perceived NVA activities that fit your skill set? How can you integrate your company into their day to day activities more?
·Now is also the time to understand what is their view of the new reality. Your organization probably made concessions to keep the business. You need to understand what concessions are parts of their business model going forward, and which ones will return to normal and when. It is hard to do while you are still starving, but don’t wait too long or you may lose some bargaining room.

Being blind to potential infrastructure issues.
·Since you probably stripped your resources (lived off of inventory, stock, etc.), think before you bring it all back in kind. Take a snapshot of what you currently are using and what you didn’t use at all. During this recovery, some things may be difficult to get quickly. Be the first mover to replace what you will need eventually. On the flip side, you may have items that you don’t need and that may be in demand. Somewhere during this ramp up may be a great time to rid yourself of these at a profit if you have them identified and have that as part of your game plan.
·What corners did you cut that still got the job done? You may have stopped all preventive maintenance, for example, but you know that isn’t a sustainable answer. Evaluate what was done and not done, and do your VA/NVA analysis. If it falls into the NVA side, figure out how to get rid of it or automate it. If it is a VA activity, put it on your priority list to restart as soon as practical.
·That includes ERP/MRP protocols as well as what equipment to bring back on line. If you are getting along without it, think twice before bringing that practice back. Anne Mulchahy, Chairman of Xerox, noted in a recent interview that the company is evaluating the new ways that things are getting done as a result of the recession and making the ideas and process changes that make sense part of the company culture. Never waste a good idea!
·Take time to evaluate the overall impact of the recession on your infrastructure. Don’t be one of those companies that have to stutter-step their recovery because of infrastructure snafus. That especially goes for critical equipment, processes and people. As you regain bandwidth, make sure that either they are made robust or add some redundancy.

Maintaining a management mindset focused on returning to “business as usual”.
·Your management team just went through a graduate course on how to survive a significant downturn, so why wouldn’t you use that knowledge going forward? We did a straw poll on how managers are reacting to this downturn. The overwhelming response was, “I can’t wait to get this behind us to get back to business as usual.” So much for the diploma.
·If you followed the advice of most change guru’s, you got very close to your employees during this time and communicated a lot more than you have historically. Don’t throw this one aside as things start back up. Managing by Wandering Around, visible management and Going to Gemba work ALL the time. Make this part of the new management paradigm.
·You may have reduced your management headcount as well as the first line workers. Rethink how you restaff your support team. This is an opportunity to make some of the structural changes that you may have been considering. Also, decide what your company culture will look like going forward. Have you started to rely more on teams versus command and control? Make sure that you bring back only those individuals that will reinforce this new way of working.

This has been a challenging time for management at every level, and hard time for everyone in the organization. Now is the opportunity to turn the time, effort and money that the recession cost the company for a investment into a smarter and more solid future. What would you like your organization to look like and act like three years from now? Today is the day to start making that vision a reality.