THREE KEY DRIVERS FOR A SUCCESSFUL 2011

As we reflect on the past decade and prepare for the next, what might we have learned from this unique decade that will make us a better leader? How will we intentionally and differently focus our time and resources as we lead / direct our respective organizations? How will we strategically drive our organization in the coming decade? What are the drivers for a successful 2011 and beyond? Have we fully comprehended what adjustments must be made moving forward? These are the questions we will be asking during this month’s CEO Forums.

The decade began with businesses posting revenue increases year after year reflecting strong percentage increases. Our customers also seemed to continue to prosper. Funding to finance our venture’s growth was relatively available as was consumer debt. The value of real estate also posted strong gains and in some markets leaped in value year over year. Even-easier financing became available to finance real estate purchases causing increasing speculation to take place. It certainly appeared to be an opportunity for many to build a relatively large organization and accumulate real estate assets. The degree of leverage had more to do with asset values and less to do with cash flow metrics. There was no buffer for a downturn for many. This period was abruptly interrupted by the Great Recession of 2008 and the painful two years that have followed.

The past 24 months have been a period for leaders that has been more reactionary than anything else. A leader’s mandate was pretty clear: 1. Try to establish at what level revenues had decreased and act to reduce costs to a point that the operation was more financially balanced and unfortunately, do it again if necessary. 2. Deal with the surprises within our cash flow cycles as an alarming number of our customers had difficulty or were unable to pay our accounts receivable balances 3. React to the problems caused by 1 and 2. What a challenging and demanding period for the leader of any organization! If you are still standing, congratulations!

As we reflect on this period and the year ahead of us, we offer to you as an initial draft, three recommendations. We will process these topics within our CEO Forums this month among the 35 CEO’s or Organizational Leaders that participate and from the members’ input, offer an updated version of these recommendations.

It is time to move forward differently as we lead in 2011. These are our recommendations.

1. Lead your organization in a way that is less about the negativity of the Great Recession and is more about how we plan to respond to the new realities of today and together advance the organization forward positively building for the opportunities to advance even further in the years that follow. At this point in the cycle, leaders must carry the burden of the negativity and not allow it to leak unduly into your organization. Yes, we must establish reality and have the understanding that our organizations may not be able to extend pay raises or bonuses as was once more common. And we can consider from their perspective, what we can do to help give their efforts and contributions more meaning. A genuine thank you can go a long way. We can even adjust to this downturn by asking for our co-worker’s input and suggestions on how we process our work better or differently given the new realities of the day. A leader must cushion his team from too much negativity and create a new environment that fits today’s new realities and leads your organization forward in positive ways. It may be a year where the financial gains are modest yet it may also be one of the best performances of your organization ever. As our mentor, Jim Myers, founder of the CEO Forum would say, “stay in the game, it will all come to you!”

2. Reassess who is your target market customer based on their overall financial strength, strength of their business model and their ability to grow. There continues to be a separation between the stronger customers and the rest of your market. The extended period of economic growth represented in the late 90′s and early 2000′s allowed many of us to forgo the time and effort to assess risk among customers and prospects before we took on exposure via extending credit or absorbing the time between purchase or services rendered and payment of the same. This may be a completely new exercise for younger leaders and will become an important new learned skill from this point forward.

3. Work closely with your best customers to make sure you know how they measure the value proposition of your product or service and inquire as to ways that you can increase your value proposition. Based on your best customers’ input, take actions that will increase your value proposition as viewed by them. By increasing your value proposition, you become more competitive in the marketplace and have reduced risk of losing your best customers. At the same time, instead of working with your lower quadrant customer base and risking loss on payment of accounts receivable, you can consider pursuing more boldly new business from that portion of the target market that you do not have as a customer and might have otherwise not been attainable. Parallel to this exercise is one of striving to simplify your “product or service offering” and discontinuing any offering that does not drive a higher value proposition as viewed by your target customers. Often in good times, we expand products and services that complicate our business and don’t produce financial results. Since we likely aren’t scaling them up, we should aggressively consider eliminating them. We then are able to devote time and resources needed to increase our value proposition relative to our core products or services.

May we visit this time next year where you have completed a solid strength building year and your experience of leading during the Great Recession begins to reflect its value of making you a better leader. May your organization be better prepared to respond to the challenges and opportunities that this world of economic uncertainty is sure to present.

As our mentor shared during our initial years of leadership and during a major economic downturn, “Until we have observed a leader operate against adversity, we know not what kind of leader he or she is or can be.”

And to you, we wish a Happy and Prosperous 2011!

If we can be of assistance to you, please contact us at tim@grayrockadvisory.com.