Does looking at the economy and then back at your financials make you grim? You might not be as bad off as you thought you were. Since the economy shifted, the DOW and Nasdaq have hit new lows, droves have walked the unemployment plank, and now the threat of war is looming. No wonder executives and business owners are feeling the strain, especially when a lot of them aren't hitting previous years' numbers. But what if the next step in the battle against the economy is as simple as readjusting the baseline you use to measure your firm's successes?
The baseline for most businesses traditionally involves last year's financial figures. For example, for sales managers to deem a current year a success, total sales might have to increase by "X" amount over last year's numbers. For production managers, the baseline might include quality control figures, per-unit output numbers, or on-time delivery stats. Regardless of your job title, the baseline you use also determines whether you're getting an accurate status of your company. Unfortunately, too many people use the wrong baseline, forcing their companies in counterproductive directions.
A sales drop is not only discouraging, it could mean the end if changes aren't made quickly. Don't assume the right change is to aim for a sales rebound; it may be close to impossible to do so. Shooting for the impossible puts pressure on everyone, and that's not healthy either. As a decision maker, people look to you for hope and inspiration. To pull your company up and keep it going even when the economy doesn't cooperate, you have to look at how your business is improving, not just at how it compares to easier times.
Accept the reality that the gains from the great boom of the nineties may not be achievable today. However, the good news is that your company may be better than it was before. Compared to a decade ago, does your company have new equipment, better-trained employees, and more efficient computerized systems? Are you able to achieve greater productivity per employee than in the past? Are your products of greater quality and positioned better in the marketplace? Maybe you have stronger working relationships with your vendors and your customers as a result of the improvements funded by the bull market. These are the areas you need to be searching to get a picture of your firm's overall health.
There are other places to look, too. Product mix plays a big role. Do you subscribe to an industry-specific publication that publishes average annual statistics? What you're reading could be giving you a skewed picture of your organization's position. For example, you're a million-dollar company in the spring-manufacturing industry, and you're reading income figures stating the average net is $8 million. Falling below the $8-million line doesn't mark you as weak. Figures don't show us specific product-mix information. Are you accounting for the fact that you produce small springs found in pens, but that you're comparing yourself to manufacturers who produce springs for mattresses or large equipment?
Be sure to consider your firm's demographic position when comparing your company to others. A small-town bakery earning its keep from a limited number of citizens is not likely to gross what a bakery in a large metro area will. First, your per-unit prices will be lower. Second, the number of customers entering the shop is likely to be less, because the population is smaller. However, the small-town bakery may net much more than the big-city bakery, because overhead expenses are lower. Where you fall demographically must be taken in to consideration, as well.
Statistics are not always trustworthy. Look at Enron or WorldCom. How accurate are the numbers you work with? More companies than you'd care to know about don't have the most efficient standards for collecting and tracking financial data. You could be making assumptions based on inaccurate data, whether from your own firm or from someone else's.
Here's what you can do to redefine your baseline:
1. Make a goal to increase efficiency. Dell desktop computers are now as low as $495 versus the $2000 of just years ago. You can probably afford more than you think. You might not be able to afford not to improve, anyway.
2. Put more into marketing, but challenge the results. We all know that those who market when times are rough come out stronger on the economic upside, but only if it's the right marketing.
3. Assess based on improvement, not always by the numbers. Unrealistic demands that force a company to fall short demoralizes employees and counters efforts to improve.
4. Beware the value curve. Dropping prices can backfire; the strategy may be seen as dropping value. When you drop prices, a competitor might be raising them. Work to improve value, and not only don't you have to drop prices, you might even be able to raise them.
5. View long-term prospects strategically. Look at market trends, new technologies, and world changes that may change the face of your products and services in the marketplace or that could force your wares to be obsolete.
6. Stand out in the crowd. The camera always finds the goofs who paint themselves up at a football game. Want uniqueness? Look at a Las Vegas tourism ad. Everyone's got their own game, their own niche. What about you?
The message here is that your role as a business leader is to examine ways in which your company can improve and can continue to improve. Though trying to hit target numbers can be a good thing for your firm, be sure that you aren't too narrowly focused on that one baseline. To do so is to lose sight of the vast number of ways you can hold steadfast, weather the storms ahead, and come out stronger in the future.
