The 90 Best Practices for Recession Survival (and Maybe Prosperity): Part 10 PDF Print E-mail

By Wayne Rivers

This article is Part 10 of a series outlining the 90 best practices of successful family and closely held businesses and the actions which allow companies to weather economic storms. The 90 best practices don’t necessarily appear in order of priority, and, due to your particular circumstances, some of the practices will be more or less valuable to your closely held company. They will not be presented as exhaustive analyses; rather, each article will touch on a few of the best practices with a very brief explanation. More depth on each of the topics is as close as doing internet research or making a phone call to The Family Business Institute. As you read the series of articles, please try to select the highest impact practices upon which to focus. Trying to get your mind around all 90 best practices simultaneously would be like trying to enjoy a drink of water through a fire hose.

The best practices will be concentrated in five distinct categories: 1. Cash flow, 2. Belt tightening & cost reduction, 3. Processes & systems, 4. Opportunities, and 5. What to avoid or of what to be wary. We hope this series is beneficial in helping you prosper in tough times.

44. Time utilization audits supplemented by coaching (Processes & systems)

In addition to the recommendations about employee accountability in Part 9, it may be wise during these challenging times to undertake a “time utilization audit” of your employees. This would simply mean having your employees keep a time log for all of their activities at work during a two week period. Having employees do so will allow you to evaluate how they are spending their minutes at work and give you a window of insight into who is doing what productive work – and who is not very productive at all. No doubt you’ll hear groaning when you request that employees maintain a time log, but there will be 2 immediate payoffs: 1. the very act of keeping a time log will make your employees more productive and efficient, and 2. the time logs will give you some objective data that you can utilize to coach and potentially even reshape how they spend their time for maximum payoff. Time utilization audits could be a big productivity enhancement in your closely held company.

45. Review incentive compensation plans (Belt tightening & cost reduction)

If your company is experiencing declining sales and margins, it’s imperative that you review incentive compensation plans to make sure you’re not faced with the entrepreneur’s nightmare of a company which is losing money while certain employees are enjoying large bonuses. Over the years many bonus plans have been structured to reward individual performance without regard to overall company performance. This makes sense on the surface; you want to properly reward your best employees. But digging deeper, it doesn’t make sense to be paying out hundreds of thousands of dollars in bonuses at a time when the company is losing money and potentially even facing ruin. The best incentive compensation plans reward individual performance, but they do it in a way that is congruent with the overall company’s performance. Review your incentive compensation plans now and run the numbers. See if you’re facing this potential rude shock.

46. Work on ownership succession plans (Opportunity)

One of the benefits of a recession is that it may actually be a better time for talking about transferring shares to a future generation of leaders and managers. Interest rates are down, company valuations are down, and the annual exclusion from gift taxes is up (now $13,000 per donee, per year). In terms of estate planning and reduction techniques, it’s actually a great time to consider pushing shares into future generations and avoiding estate taxation in the current generation.

47. Consider the use of a turnaround specialist (Opportunity)

Being brutally honest with ourselves, we’re emotionally involved with our people and the companies that we’ve built. The level of passion and emotion we’ve brought to the business over the years can blind us to certain realities of today. Bringing in a turnaround specialist could be a valid survival technique for family businesses facing declining sales and prospects. Turnaround specialists offer the one great business perspective that family business leaders often lack: OBJECTIVITY. They come in and dispassionately review a company’s current situation and future prospects. They then make rapid decisions and changes in order to stabilize company cash flows and turn things around so the company is not only valid in the short run, its chances for long term prosperity are much improved. Many family business owners would rather take a beating than bring in an outsider and give them control over important decisions but the concept of using turnaround specialists is quite valid, and it may be the only hope for some families in business together.

48. Do nothing, accept the status quo, and be complacent about current conditions (What to avoid or be wary of)

I can’t tell you over the years how many times I’ve heard the statement “that’s the way we’ve always done it here.” If in today’s economy family businesses are stuck in the status quo and TTWWADIH thinking, it could be a death sentence. Shake out of that do nothing thinking, and make sure that if you’re being challenged in the current environment you’re getting outside your comfort zones and doing the things necessary to assure the survival of your closely held company.

Be on the lookout for our eleventh installment of the “Family Business in Hard Times” series coming soon. In every downturn, some companies not only survive but prosper. We earnestly hope this series will help you reach your fullest potential.

 

To review Parts 1 thru 9 of The 90 Best Practices for Recession Survival article series, please visit our Article Archives

 

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
August 2009