Articles

Getting the Numbers Right

Benefits of Responding Well to a Downturn
by David C. Baker

The heady days of automatic success are long gone, and since late 2001, marketing firms we run across have achieved success the old fashioned way: they've earned it. I would even argue that the leanness many firms have experienced has been good for them.

Why, you say? Sometimes it's only the inevitability of your situation that provides the courage to make those tough choices. When you later look back on the decisions you are making now, you might realize that this period was a watershed that set you on a path of great prosperity. The vast majority of our clients have found that to be the case.

Not to get too philosophical here, but in my own experience the things I am most confident about now are the things that I struggled about earlier. Failing in the trenches has taught me invaluable lessons. In fact, I tend to coast when things are going well. It's pleasant and relaxing when there is no financial pressure, but my life does not typically improve any more than incrementally when that is the case. In your case, these good things that emerge from leanness might help you thrive... eventually. And here's what I mean.

Better Client Base. Your first tendency in a lean environment is to take any work you can get. You then might compound that first mistake by making another: keeping staff in order to lose money servicing clients who aren't a good match. Even though it seems counter intuitive, don't ignore profitability just for the sake of cashflow. That fallacy is partly how you got here in the first place. You've got to be choosier, and there is no better time to start. If you must cut staff, just for cash reasons alone, you will soon face capacity issues as your frantic marketing efforts pay off. When that happens, pare your client base back even further before adding staff. And that's the point. You'll be more careful about adding employees, choosing instead to cycle clients.

Better Employee Base. You probably grew up hearing the notion that last hired equals first fired. That might be integral to some union contracts, but it's not a good way to do business in a creative services environment. Dismiss people purely on the basis of what you need and how suited they are to meet that need, and in so doing you will raise the average competency level of your staff. In an environment where work is falling off the trucks you tend to overlook performance issues because you are struggling with getting the work done in the first place. Not so when things are lean.

Better Teamwork. Want to find out what people are made of? Go through tougher times when the difference between selfish and unselfish choices is more apparent. Some people will surprise you and some won't, but there will be no mystery about who is fair, hardworking, and committed for the long haul.

Better Prospective Employee Pool. When it does come time to add an employee, either through attrition or from your renewed growth, there will be more good choices than during a time of economic strength. Salaries will not be as high, "attitudes" will be less prevalent, and great candidates will be more common. This hasn't panned out quite like we've thought, but it's been true to some extent.

Comprehensible Financial Data. You have not been able to ignore financial data. You no longer tolerate late statements. Mistakes or misclassifications will annoy you. You'll want the data crunched any number of ways. You'll be amazed at the kinds of decisions that other people are making with your money. All of these changes are good, and you have never understand the financial pulse of your firm more than right now.

Trimmer Operations. You'll understand the difference between what you need and what you want. More important, you'll start rewarding employees for the right things instead of throwing money their way to keep them happy or artificially loyal.

Fewer Competitors. Many of your competitors will not make it, thinning out the competition and raising the likelihood of your snaring any given client relationship.

Greater Shareholder Control. Are you stuck under a burdensome partnership agreement? Are some partners less interested than others in fighting through the mess? If you have a variable valuation formula, now's the time to apply it and return to a smaller management group. The more "owners" there are, the more your decision making will be ponderous and unremarkable. Even if you don't have a partnership agreement, the present circumstances will tend to play into the hands of those who want to continue.

Renewed Personal Commitment. As opposed to letting momentum define your commitment to the firm, leaner times force you to reexamine your role, how you can contribute, and how much you really care. You'll emerge with a much clearer perspective on what the business provides to you and what you need to do to enhance its ability to keep providing that. It's like signing that five-year lease again for your facility, forcing you to examine the depth of your commitment.

Finally

Why even talk about these things? Two reasons. First, you need to balance any negative pressure you feel about the leanness you are working through with the knowledge that good things are happening. In addition, you need to embrace the opportunities that leanness provides. They are good. In fact, most firms are doing fairly well these days and are far more engaged as they run good firms.

This article has been provided by ReCourses. For more information, please visit their web site at www.recourses.com.