Financial survival

Leading and managing a business is never going to be smooth sailing all the time. All economies go through cycles as do most industry sectors. The state of the Pakistani economy currently is extremely distressing and worrying for all of us.
Have you noticed that despite the state of the economy, certain companies manage to perform exceptionally well even in difficult times. The reason is the vision and foresight of the leadership teams.
The critical success factor for leading in such times is being prepared for it. One of the key strategies corporate leaders need to adopt is to set aside enough capital when times are good, which in turn will help them deal with critical situations or a slowdown in business when it happens. Having a war chest or a pool of funds will ensure that while others are struggling during the downward turn of the business cycle, you will emerge stronger when the wheel begins its journey upwards again.
You may say, all that is good in theory, and we will do that next time but what is it that we can do here and now to ensure our company’s survival?
Many leaders and their organisations are found wanting in difficult situations. The immediate reaction in such circumstances is to turn their attention to the accounting and finance departments and ask for their recommendations on what needs to be done. Invariably, the recommendations that come back amount to a reduction in expenses. Accountants have a field day cutting expenditure in all areas. They believe that if it moves, surely it can be slowed down and so, falls the hatchet for the inevitable cutbacks.
Usually, the first things to go are discretionary expenditures such as training, consulting, HR initiatives, basic perks allotted to junior and middle management but the all-time favourite has to be a freeze on recruitment and salary increments. While such initiatives may be necessary to some extent, surely there must be a more strategic way for organisations to re-engineer or reinvent themselves than to simply go on an expense reduction program. This kind of rampage on expense comes with a price, for it shows a lack of regard for the impact these measures will have on the organisation in terms of the medium to long-term goals. It also shows a lack of empathy for what the employees are going through given the current inflationary scenario in the country.
Often the end result of such initiatives is not significant because areas such as the remuneration packages and other perks provided to the senior executives are left untouched. As a leader you must realise that the organisation will not respond well to these kinds of initiatives unless the right example is set at the top level. Expecting others to make sacrifices while the top executives remain unaffected is not exactly the best approach for inculcating loyalty and commitment in your team.
The key in expense rationalisation strategies is to focus on high-value items and then work through everything else systematically to ensure that your efforts provide a significant saving for the organisation. This delivers the best outcome in terms of potential savings. You need to look objectively and strategically at the drivers of the business. Take a good look at the business model and focus on the profit or cost drivers.
Look at all the areas where you can gain efficiencies, any improvement in internal processes and systems would surely help you make your business more efficient and make savings. At the same time, it is critical to keep the channels of communication open during tough times. It is all about managing the expectations of your team, the investors, and all other stakeholders.
Balancing the budget is indeed essential, but this should be done strategically, with one eye on the medium-term goals. - I strongly suggest you continue with as many of the HR related initiatives as you can. Training and other such projects should not be considered as something you can simply turn off without having a negative impact on the organisation.
As the leader you need to ensure that you and your executive management team are setting the right example. It is important to remain positive through challenging times, tough times don’t last forever. When times are tough, people and their emotions often get overlooked. Whatever needs to be done, do it by showing due respect to people, and their emotional wellbeing. Even if you need to make hard decisions such as layoffs or salary cuts - there is a compassionate way of going about it.
Sirajuddin Aziz a leading Pakistani banker shared his thoughts with me on steering the right course during difficult times.
“More than anything, trust of junior colleagues is an imperative leadership characteristic to have during difficult times. Staff members who have faith in you and trust you with the fate of the organization, along with their own, will invoke their best efforts to follow you through times of crisis. Also, the importance of optimism must not be downplayed – a positive and focused approach is needed.”

The writer is an Australian Chartered Accountant, International Author and Management Consultant. He can be reached at amer@amerq.com

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