Global economic crisis and internal gaps

by N. K. Silva

Vice Chairman - Business Development Centre

During turbulent periods, business performance declines and operational uneasiness is sensed by enterprises. Business survival takes precedence over business development during such periods despite the argument of some business management experts that the business development should take place more strongly during turbulence.

Weakening performance is caused not only by external tides; internal mismatching too can contribute. But, in most practical cases, external tides are offered as the only reasons for business deterioration even if a part of that is caused by internal viruses, knowingly or unknowingly depicting a primitive human characteristic of blaming the external factors for internally generated crises.

A man walks past a display showing stock prices in downtown Tokyo March 6, 2009. Asia stocks slid on Friday after a warning from General Motors that it may need to file for bankruptcy drove Wall Street shares to 12-year lows and highlighted the severe troubles of major U.S. companies and banks.                                                                (REUTERS)

However, we are currently experiencing a threatened environment when businesses are concerned probably aggravated by the impending global economic downturn. Large corporate bodies have started feeling the punch of strokes with reducing sales or income, drying up of financial reserves, reducing capability of facing the competition, demoralizing work teams, increasing insecure feelings among top management which is gradually trickling down and similar factors. Although the situation is externally not visible to the naked eye, many can sense that "something disastrous is happening" in terms of business operation. It is apparent that many business organizations have attributed these "difficult to breathe" signs solely to the impact of the global economic trend. As a result, they may approach the issue in different directions which may not be the best stance for the prevailing situation of the entity. This is the reactive response of organizations to crisis and it largely rests on emotional approach. What is more appropriate is the proactive response to get over the difficult situation minimizing the possible damage.

Internal gaps

It is true that the fact about the impact of global economic trend is a high probability. But, most of these organizations would have their "internal gaps" contributing to the organizational instability and this contribution could be considerable in its magnitude. Overlooking them and identifying the global and external issues as the cause can hide the possible initial recovery steps. In fact, such a crisis situation demands a precisely coordinated and synergized strength in terms of internal resources to face the challenge. What is more sensible, in such a situation is to analyze about the "internal gaps" which require corrective approaches and take necessary steps as early as possible. It will reduce the "organizational stress" in an appropriate proportion. Simultaneously, the top management can formulate and implement suitable strategies to face the external tide. It is worthwhile to draw attention to some of these "internal gaps" practically seen in many organizations today.

Precise valuation

Precise valuation of the impact is a "Good Practice" of the top management. Expressions on the magnitude of the crisis should be based on this good practice. Under-valuing and over-valuing can harm the organization in many ways. Especially over-valuing of the impact can penetrate "we-are-in-serious trouble" impression into the work teams demoralizing them and incapacitating them prematurely. Precautionary measures should be taken in communicating even the precise magnitude of the crisis to the lower layers of human resources of the organization. We have experience that some senior management members view the situation through magnifying glass and discuss about the ICU status of the company in the presence of the other employees instilling a heavy dose of frustration and insecure mentality in their minds. This information will traverse across the organization with the speed of light, turning on the frustration generated "Collapsing Mode" in almost all human minds of the entity. Comments on the collapsing situation, even if it is not happening at the rate emphasized, will take wings everywhere damaging the entity image, sales, stock market values, and dampening the stakeholder confidence. Therefore, applying a suitable mechanism to put the relevant good practice across the senior management minds is vital although it will not be precisely foolproof.

Sales efforts

Marketing and sales gaps should be identified consciously and treated with most suitable medicaments. Organizations can't find a better duration to unleash the full potential of sales efforts than such a crisis period. An organization can choose their approach either from maximizing the intelligent sales effort to arrest the situation to a possible extent or turning on the lethargic access to carry out sales operations with a "not-worth-struggling" attitude.

The latter takes precedence in the minds of marketing and sales teams of many business organizations during crisis periods. Its destructive effects are not of linear form. They have multiple consequences including the direct sales loss attributed to the pale effort, damaging the customer confidence that affect future sales, empowering the masculine competitors.

This issue should be sufficiently understood by all concerned in the organization and appropriate steps should be taken timely. Sales teams should utilize possible and suitable sales management techniques and tools. This is the period for the sales teams to activate their skills in full swing. In general, many "name-sake applications" of sales/ business promotional methods are visible.

The whole organization should focus its total approach to reap the maximum benefit from such promotional initiatives. If the receptionist is rude to the customers while the company spends millions of rupees on television advertisements to get more business, its promotional effort is diluted jeopardizing the cashflow of the company.

This is practically happening in Sri Lanka. In a large scale bank which spends money on TV commercials to attract customers for savings, the existing customers are simply facilitated to close their savings accounts when the customers want to withdraw their money to invest in another bank. Facilitation is good. It is a part of customer service. But, the officers should be intelligent enough to discuss with the departing customers at least to find out why they are moving towards the competitors. The bank should understand these reasons and take corrective action to retard the rate of customer outflow. Further, some customers withdraw their money without investigating into exact benefits of the new bank. A cordial discussion would change the minds of such customers. I can quote many practical experiences with our companies to justify the magnitude of this issue of spending money on business promotion while adhering to practices which dilute the promotional effort.

Organisation mentality

The organisational mentality of being happy with the visible weak areas of the company's major competitors is another inner gap. It is a "comfort zone" syndrome. Although what is appearing is a weakness to our perception, the competitor may be working smarter. It is safer to assume that they too are equally capable of penetrating into the company's market share.

Satisfying with mind- centred logical reasons for apparent sales drops is also a similar gap prevailing in many organizations. Reasons can not replace cash inflow and the survival of the company is not ensured by the reason -filled reports. Productivity of individual units along with the overall productivity should be maintained optimally.

Shift of focus is a common, but destructive habit of organizations, especially during turbulent times. In actual fact, the companies need more professional discipline during this period. Close monitoring is essential in respect of productivity. The companies should be vigilant about the responses of the customers on the service provided through enhanced customer service facilities.

Probably, the reason for installation of answering machines in many companies is to provide an enhanced service to their customers. But, a reasonable number of customers of such companies are unhappy about the service. Always, human-human relationship is more satisfying than human- machine relationship. It is a wise decision to examine the quality of customer service in an unbiased way. There are many practical gaps in customer service area in many companies. The negativity of these gaps is amplified and protruded during chaotic periods.

Competitive advantage specifics are the life blood of business generating activity of commercial organizations. When they become weak, competitors enter the territories of the market share of such commercial organizations, posing a threat to survival.

Therefore, during turbulence, the importance of maintaining the competitive advantage of a particular company should not be under-estimated. Shift of focus from the competitive advantage dilutes all business efforts allowing the competitors to be customers' options. If the technological superiority is the competitive advantage, maximum concentration is necessary to preserve the status of technological superiority.

Frequent complaints on unattended technical issues are a bad sign. It triggers an alarm on deteriorating competitive advantage.

Further, there can not be "missing links" in the competitive advantage maintenance. Sales team's ignorance about such complaints on technical issues speeds up the distillation of dissatisfaction of customers. Ongoing customer delight schemes will provide poor harvests in this context.