First, studies show that layoffs tend to result in an exodus of valuable employees. Second, making cuts across the board compromises your organization’s competitiveness in the longer run. And third, abandoning your growth strategy will leave you unable to take advantage of the inevitable upturn when it comes.

So, what are we to do? Difficult times require extra effort and creativity devoted to strategy. Your strategy needs to be much more than a plan for growth. It needs to address all the issues that a downturn brings, be robust against a range of possible downturn scenarios, and prepare the organization for growth as the economy recovers. Here is a top 10 list of guidelines to consider:

1. Explicitly address economic scenarios. Look at a wide variety of economic scenarios (demand, growth rates, interest rates, competitors, etc.) and map them out. Determine the likelihood of each scenario occurring. Consider what would happen when multiple scenarios interact. Test out what will happen to your business in each scenario. Finally, devise strategies that will work best in each scenario.

2. Take measures to cut costs and improve efficiency. Take this opportunity to weed out less successful products from your product lines. Cut corporate “luxury” items, like entertainment, travel, and conferences. Be careful not to cut costs that are core to the business and might compromise its competitiveness. And be careful not to over-react to the downturn as well. Rather than cut costs across the board, perform “surgical” cost cutting that removes the expenses that are the least productive.

3. Generate and conserve as much cash as possible. Balance sheet flexibility is critical in an environment like we have today. Prioritize projects and investments for their ability to generate cash in the near term. Extend payment terms where possible. Get accounts receivable up to date. Think about ways to turn assets into cash, such as selling plants or equipment and lease them back.

4. Identify risks and develop mitigation plans. Create a catalog of all the risks your business faces. Identify what could happen and the likelihood of it happening. Pay special attention to risks that are more likely in a recession. Then develop actions that would help mitigate each risk. Also think about ways to track each risk so that you are not blind-sided by a downside case.

5. Monitor the financial health of partners and vendors. Businesses can be badly disrupted if a key supplier or partner goes under. Develop a system for monitoring these companies and have backup plans or multiple sources for business-critical parts, systems, and services.

6. Evaluate potential mergers and acquisitions. Some of your competitors and suppliers may be hurting worse than your company. This could be a good opportunity to grow through M&A at fire sale prices if you have the resources to pull it off.

7. Maintain long-term planning. Create a team or steering committee to plan for future growth when the economy turns around. It’s important to integrate the long term and short strategic needs, and be able to hit the ground running when the inevitable upturn happens. It’s also important to stay clear on what your competitive advantages and strategies for growth are, so you don’t compromise them in the interest of managing for the quarter.

8. Manage culture and motivate staff. In a downturn, it can be increasingly difficult to motivate employees, especially if there are layoffs. Work to improve communication as much as possible, create forums for employees to air their concerns, and sell them on the benefits of working for your company. A downturn may also represent an opportunity to recruit valuable staff from struggling competitors.

9. Build (or at least maintain) market share. Despite the temptation to do otherwise, keep spending on marketing. Develop a strategy for growing market share even as the market temporarily shrinks. If competitors are struggling, you can grab customers from them. Understand what you are good at relative to your competitors and how that can help you in a downturn. Make sure you don’t lose your competitive edge through cost cutting.

10. Pay attention to where the opportunities are. Some divisions and businesses may be impacted by the downturn differently than others. Be prepared to shift resources and focus. Have a clear strategy of how to manage your portfolio of businesses or products — some may need extra resources while others can be “milked” or grown.

There is much more that could be said about this topic, but I wanted to keep it concise and limited to a “top 10″ list. If you’re interested in working on any of these in your organization, give us a call!

• The quality and completeness of your existing vision and strategy
• The robustness of your existing strategy to various recession scenarios
• How well you are on track to achieve your desired goals

We then work with you to explore options for filling the gaps to improve your vision and strategy, and be better prepared for whatever this recession has in store.

For more information or to schedule an appointment, contact Konrad at 415-927-8070 or via the Contact Us page.

One thing that seems clear about recessions is that they cause significant industry shakeups. Some companies that were leaders in their industry fall from their heights, and others rise to take their places. McKinsey compiled a data set on the last recession (2000-01), and found that nearly 40% of leading U.S. industrial companies toppled from the first quartile in their sectors during that recession. About a third of leading U.S. banks fell as well. During the same period, 15% of companies that had not been industry leaders prior to the recession vaulted into the top quartile during it.

The are many reasons why some companies lose leadership positions during recessions and others gain them, but it generally comes down to smart planning and decision-making. See my article Strategy in a Downturn for best practices companies can use to maintain or grab leadership positions in their industries.

I find that many leaders use mission and vision interchangeably, or think that the difference between them doesn’t matter much. Another related problem is mission and vision statements that are vague, lofty, or have little connection with the real work of the organization.

Let me suggest some definitions that have worked well and solve these problems. They are based on decades of strategy work with clients, as well as authors such as Collins & Porras (Built to Last), Steven Covey (Principle Centered Leadership), Peter Senge (The Fifth Discipline), and Kaplan & Norton (Strategy Maps). Even a dictionary can be amazingly helpful.

Mission: Enduring purpose. The fundamental reason for the organization’s existence beyond just making money. It is a direction, a general heading, a perpetual guiding star on the horizon. It does not change over time. It is generally abstract and can never be achieved, only pursued. For example, for NASA: “advancing man’s capability to explore the heavens”.

Vision: A picture of a desired future that supports the mission, or an image of the future we seek to create. It is a specific destination that is concrete and achievable. A good one engages people–it reaches out and grabs them in the gut. It should be tangible, energizing, highly focused. There can be many visions over time that support the mission. The time scale is usually around 1 to 5 years. For example: “a man on the moon by the end of the ’60s”.

Strategy: A set of actions or objectives around a unifying theme that work to accomplish a vision. It is broad and action-oriented. If vision is the what, strategy is the how. The time scale of the strategy is equal to or shorter than that of the vision it supports.

Objective: The object of a course of action, something specific that is worked toward. Good objectives should be SMART (Specific, Measurable, Actionable, Realistic, and Time-bound). The time scale is usually less than one year.

Goal: This term is probably the least consistently used of them all. Usually it is either used interchangeably with objectives, or denotes a lower-order or more specific objective. Sometimes it can be on the level of vision, as in a BHAG (Big Hairy Audacious Goal).

Value: What’s really important to an organization. They are the essential and enduring tenets–a small set of general guiding principles, not to be compromised for financial gain or short-term expediency. Each value should be a piercing simplicity that provides substantial guidance to the members of the organization. They cannot be copied or dictated; they are what is authentically believed by the leaders of the organization. There should only be a few, between 3 and 6.

I think of Mission-Vision-Strategy-Objectives as a hierarchy from broadest to most specific. Values underlie them all.

Taken together, Mission, Vision, Strategy, and Values create a system of ideas forming the foundation of real leadership. They can become tools that allow people and organizations to shape their future. Setting direction and clearly communicating are core capacities for leaders.

In an organizational setting, we are impassioned by a goal that comes from a group of people working together to accomplish something that makes a positive difference in the world. On some level, we all know that there is something more important than money and what we can acquire or get for ourselves. When we look closely, we see that we all have a deep desire to contribute, to make a difference, and have an impact. When we acknowledge and define these desires, we create an opportunity to work from our passion to contribute rather than our desire to get for ourselves.

To be effective, Mission, Vision, Strategy, and Values need to be developed with large doses of dialog, communication, and collaboration to get the involvement and buy-in of people. Otherwise, they run the risk of being more management statements that don’t amount to much.

How does your organization define these terms?

I hope these suggestions help in your quest to define and communicate these critically important business ideas.

Our first Practice of the Month is all about looking at the state of alignment in your team or organization with a curious and open mind. As you talk to people you work with this month, engage them in conversation on these topics:

• How would you define Mission, Vision, Strategy, and Values?
• How confident do you feel that you understand and can articulate the Mission, Vision, Strategy, and Values of your team or organization?
• What do you think the Mission, Vision, Strategy, and Values of your team or organization are?

Take notes as you discuss these question with people. When you get to the end of the month, look through your notes and see what themes you can identify. Are there basic differences in how people define these terms? How much variation is there in what people describe as the plans of the team or organization? How confident do people feel in their understanding?

You might consider sending out an email or memo summarizing your findings. It could be a valuable contribution to your organization to reflect the level of alignment that honestly exists today.

I’d love to hear your stories of what you learn!