Alliance Day – Surviving and Growing in Trying Times

August 11, 2009

On Alliance Day of NIWeek, Don Roberts, Principal of Exotek, a consulting company who focuses exclusively on system integration companies in our industry, gave a presentation entitled, Surviving and Growing in Trying Times. He discussed what actions integrators are taking or should be taking to protect their investments and position themselves for a solid future through strategies around customers, markets, employees, vendors, management, and cash. Here are some of his thoughts (mingled with my own):

Hope is not a strategy

92% of small business owners believe they can withstand financial difficulties, almost two-thirds were so confident that they had no contingency plan in place in the event of an economic downturn — Harris/Decima 2009

The reality of our current economic situation is that we have hit ‘reset’ button. The economy isn’t likely to come roaring back to 2008 levels, but rather build slowly from this new level. So, integrators would be better to view this as a permanent condition. Shutting your eyes will not make it go away and holding your breath could be fatal. You must be proactive in facing your challenges.

General Management

You should develop and stick to Key Performance Indicators (KPIs). If possible, reflect against prior periods to establish baseline for your business. Then, monitor your KPIs closely and establish triggers for required actions. You should develop and execute on contingency plans.  Assess your risks, not just on individual projects, but for your business as a whole. Be honest and deal with key parts of business plan that haven’t materialized. And, be careful about internal projects and R&D that could deplete cash reserves. Act in a timely and decisive manner. Putting off decisions just undermines the credibility of management. Not to mention, it is likely bad for the bottom line.

Marketing

Some markets are still showing life such as Energy, Green Energy, and Medical that continue to see investments. Stimulus money will fuel Government, Military, and Infrastructure projects. Food and beverage are still doing well (people still got to eat).  You can also be creative and look for adjacent markets. For instance, the ‘tin’ industry is strong as more people by canned foods to prepare from home. But, you should use exercise caution when moving to new market. This turf will be defended by existing players. So, know your limitations and be realistic about what you can go after. Also remember, this is a global issue. So, you may have the opportunity to broaden your business to new geographies, but expect the same from global competitors.

Sales

Capital spending of your customers is tight and manufacturing utilization is under capacity, so look for new angles to improve their bottom line. Emphasize energy/cost savings and efficiency/optimization. And, look for ways to prepare your customers for the recovery. Also, continue to look for R&D projects that may be more likely than manufacturing. It is also critical to sell your unique value. Make sure your customers know you have staying power and never underestimate the power of great customer service. Finally, it is important for your sales people to Always Be Closing.  Distinguish your ‘hunters’ from your ‘gatherers’. You need folks that will drive to decision and follow decision-making process up the chain.

Financial Management

Cash reserves are critical during this time period. History is littered with ‘good’ companies that ran out of cash. So take care that you don’t use up all your cash and negotiate for more every chance you get. You can look for ways to improve cash flow. For instance, don’t let your customers use your money. Define and stick to milestone payment terms and be persistent about getting them to pay you on time.  Make sure that you don’t over engineer your projects – just meet the defined system requirements. Project your cash flow for at least 12 weeks, so you can predict your situation. Your banking relationship more important than ever. Remember that bankers don’t like surprises, so avoid the temptation to avoid communication. Keep in mind that you don’t have to be perfect, just better than the rest of their portfolio.

Human Resources

In a service-oriented business, your people are your most critical asset, but they are also your biggest cost.  So, ultimately, you may be forced to make some difficult decisions including pay-cuts, furlows, and lay-offs. This is obviously a complex and personal issue. Be prepared – educate yourself and be ready to act if necessary. For instance, create a forced ranking of all your employees and implement ‘performance’ management where necessary. While being firm in these matters, you can still be compassionate. Communicate often and honestly. Now is not the time for spin. When people don’t know, they will think the worst. Encourage bi-directional communication. Listen to their concerns.

Leadership

Tough times require true leadership. The biggest mistake is failure to plan and act. So, work on your business, not in your business. The old adage applies – that which does not destroy us makes us stronger. NI is confident that we are still gaining market share and believe there may be a fundamental shift in the marketplace. When the economy does recovery, our system-level business will again be the fastest growing part of our business which correlates to our growing portion of business through our partners. So, for those that weather the storm will be in a stronger position on the other side.

Get in Touch with Exotek

If you are interested in getting a copy of the presentation slides or better yet seeking further assistance from the experts at Exotek, please contact them at exotek.com.


Performance Management

June 17, 2009

Since hiring doesn’t seem to be the biggest issue right now, I thought I’d jump to managing the performance of your existing employees.

Setting goals

In First Break all the Rules, the authors challenge some of the conventional wisdom with respect to management. General philosophy is that people don’t change much. So, don’t waste time trying to put in what is not present. Instead, try to leverage what is already in. That is hard enough

For instance, when selecting the ‘right person’ for a job, you might think that finding someone with the prior experience, the right level of intelligence, and the necessary willpower would be most important. But, the book asserts that talent is more important.

Based on this philosophy of hiring people for their talents then drives how you set their goals and objectives. You should focus on the right outcomes and let your talented people define their own path. But, this does not mean let them do anything that they want, still follow required steps.

Motivating people

Also based on the revelation that people don’t fundamentally change, you are better off finding out what motivates an employee rather than pestering them about their shortcomings. Position them to use their strength to their advantage and adjust, as necessary, to compensate for their weaknesses. This defies the ‘golden rule’ of treating everyone as you would have them treat you. The manager is challenges to customize their style to elicit the maximum performance from the individual employees. Also, a bit counter-intuitive is the strategy of spending time with your top performers rather than fixating your attention and time on others.

Climbing the ladderThis perspective also then shapes how you develop your organization. You can’t simply assume that it is best to promote people to the next rung of management. You’ll end up putting employees into roles that they don’t want and in which they won’t succeed. Instead, find positions in which individuals can be successful and ‘create heroes’ by recognizing them for excelling at what they are good at. Also, create ‘safety nets’ that allow people to try new responsibilities without fear of failure.


The People Advantage

June 15, 2009

First break all the rulesFrom First Break All the Rules, a required text in the NI Supervisory Development Series, the value of an organization lies in its people. So, the only way to generate enduring profits is to attract, focus, and keep talented employees.

At National Instruments, we say that our greatest and most sustainable long-term competitive advantage is our culture and our employees who directly influence the continued success of our stakeholders. It seem like our partners agree. When surveyed about the value of the NI relationship, the top response (42%)is that we have great people to work with.Alliance - NI People Greatest Value

If possible, having great people may even be more important in a labor-intensive business like consulting and integration. So, finding and developing good people is just as important as finding and developing good projects.

The People Process

Beyond, the administrative details of HR management, there are several key steps in effective people management.

  1.  Hiring the right people
  2. Providing the necessary training and skills development
  3. Setting expectations and goals
  4. Providing feedback and performing reviews
  5. Recognizing achievement and handling performance issues.
  6. Demonstrating leadership and establishing culture.

As with any other process in your company, you can work to define and improve each element. If you agree that your employees are your most important asset, then why wouldn’t you?