Management decisions in the recession

When a company announces closures and lay-offs in the second worst of all modern economic disasters, much of the blame attaches to the downturn. But there is always a measure of blame attached to management itself.

Human nature, as usual in mismanagement, is the seat of the trouble. The urge to make much more money is immensely strong and quite common - and not easily satisfied. Having taken a wrong decision to invest, either as an investor or a manager, there is a further human fault to overcome - delay and denial.

Nobody likes to admit that they have taken and executed a very poor decision. If the prize is large enough, managers will deceive themselves into ignoring the fault. Convenient scapegoats always exist - with finance directors the nearest to hand when it comes to the CEO blame game.

But it's the manager's job to see that the finance function is indeed functioning.

Do you monitor expected cash inflows and outflows? Is there a weekly or monthly rolling cash report? Do you centralise or pool cash across units?

Without these simple checks, you can’t be sure of making sense of financial fundamentals. The checks both avoid traps and provide profit opportunities.

Managers should face themselves with some hard questions. Why did we ignore defects and defective attitudes in the past? What can we do to ensure that proper management policies are pursued, whatever the economic weather?

How can values and habits be changed so that the company as a whole aims to eliminate waste and maximise all efficiencies all the time?

Even brilliant housekeeping will not save the future unless crisis management includes effectiveness going above and beyond every manager's daily duty.

In an article in Business Week, Emily Thornton points out, wisely enough, that "In times of turmoil, opportunities abound. But taking advantage of them will require fast reflexes, an aggressive attitude, and serious changes to the status quo."

She cites IBM for 'aggressively' rolling out the first PC during the 1981 recession. However, the PC was notoriously under-budgeted, and IBM was swamped with orders it couldn't meet. The vital aggression was supplied by a dedicated team of managers and engineers seconded to the project, and given little more than a year to hit the PC market.

Surely, that story holds a vital clue. Management history has hosts of examples where success was created by teams, spawned by the parent organisation, led by charismatic independents, set free to apply their own ideas on products and processes.

Management has long been moving in this direction. 'Now' is always the time to liberate the power within.