Involve your team
Employers, more than ever, require a workforce motivated to overcome the current economic challenges. By contrast, employees currently fear job cuts, which is naturally demotivating.
So how can these opposing outlooks be reconciled?
Directors need to involve employees in discussions concerning potential restructuring issues
Wherever possible, directors need to involve employees in discussions concerning potential restructuring issues.
This can achieve two objectives.
Firstly, in difficult times, employee input is often the source of innovative ideas.
Secondly, employees know there is no easy solution to current difficulties.
Open communication lines may alleviate some of their concerns, and while not in itself motivational, it minimises the downside impact of forced changes.
Make overheads as variable as possible
Many companies feel that a cost-cutting strategy will make them incapable of taking advantage of the upturn when it arrives.
However, a strategy of trying to ride out the storm when the sales outlook remains uncertain and the banks inflexible is a high-risk strategy.
As an alternative strategy a move to variable or outsourced costs will provide a means of reacting quickly to further downturns, or driving growth during an upturn.
A review of overheads should identify: true fixed cost, which costs could be outsourced and which costs are critical to maintaining customer service levels.
The objective of this exercise is to move costs that have traditionally been fixed to a variable/outsourced category. This will provide companies with more flexibility to react to market needs.
Dealing with spare capacity
Expensive spare office or manufacturing capacity is often a symptom of trading in the current marketplace (although landlords may be prepared to consider a rescheduling of payments in the current climate).
However, is there another way of utilising this capacity?
It is highly likely that competitor companies in your region are also struggling in the current climate.
This may open an opportunity to merge the operations onto one site, thereby maintaining customer service levels, saving central overheads and utilising the capacity of one site.
Naturally this strategy poses significant problems, in particular the personal priorities of the respective owners.
For this reason such a strategy is often considered a last resort, and as such no approaches are made until it is too late.
However, if the alternative is the bank foreclosing then it should be an option placed higher up the list of priorities and considered earlier.
Financial planning and timing
Underlying any restructuring strategy should be a detailed financial forecast based on very conservative assumptions.
Associated with this forecast should be an action plan, which will trigger specific actions if certain forecast assumptions are not achieved.
It is essential to plan ahead so that strategies can be agreed well before a problem arises. By thinking ahead and using realistic assumptions, managed solutions can be implemented.
