May/June 2001

An Ugly Duckling?

The economy’s been sluggish in recent months, but like a new brood of ducklings, maybe it just needs time to grow before it can take off. There have been signs of recovery - retail and auto sales for the month of April were up dramatically. But those positive signs seem to be outweighed by the negative - the nation experienced its weakest quarter of productivity in six years. At least we do know the economy will stabilize - it’s just a matter of when. Meanwhile, we’ve got to get on with the task of running a business. So the question is, how does the existing sluggish economy affect your job as a leader? This issue of Duck Tales™ attempts to answer that question and more. For the time being, though, we’ve got to be patient and wait for those little birds to grow.

Lessons From Silicon Valley
There’s a lot to be said for the slow and steady approach. Just look at how “old economy” companies are faring during this economic slowdown, compared to the once unstoppable technology ventures. Stalwarts like Toyota USA are doing just fine, thank you, while many high-tech companies have had to call it quits and sell their inventory to places like Overstock.com.

Overstock.com has liquidated some businesses that were spending $20 million to $30 million on warehouses equipped with the priciest shelving, racking systems, and conveyor belts; many that went under had inventories three times the size of regular retailers. Likewise, tech suppliers did business on the premise that “if we build it, they will come.” Toyota USA, on the other hand, recently took several months off to use up its stockpile of cars and has since resumed production. How did they do it? “We don’t get greedy in good times,” says the manager of the U.S. Toyota division. “We know the market’s going to be cyclical.” That means the company has only a five- or 10-day supply of top-selling cars in good times and its share of missed opportunities. In bad times, Toyota doesn’t have to lay off workers or close factories.

By contrast, the business model for many e-tailers called for big spending on marketing, capital equipment, and labor. The belief was that sales would increase once a company dominated its category (toys, books, vitamins, rubber duckies, etc.). In the end, the focus was on managing earnings, rather than managing the business. There is a silver lining for tech companies, however: They are developing a new appreciation for the art of managing a company in tough times. They have to. It’s either learn to cut costs and lower inventory or call Overstock.com.

Survivors
Executives today face a very demanding audience. A few tumbles, and they’re ousted. A drop in stock, and they’re out. Just the mention of Chapter 11 sends them flying. Yet three executives of major organizations have withstood the tests of the economy, changes in their businesses, and floundering stocks. How did they survive? Here’s a look at how Jerry Levin of Sunbeam Corp., Gary DiCamillo of Polaroid Corp., and L. Dennis Kozlowski of Tyco International weathered the storm and emerged relatively unscathed:

* Take care of angry customers. When Jerry Levin took over Sunbeam, major customers were already so angry at Sunbeam, they were ready to walk. Levin immediately called each customer personally, apologized, and asked for one year to prove he could turn things around. Most gave him a chance and were pleased with his enhanced customer approach.
* Bring in the troops. When Levin accepted the Sunbeam position, he immediately began recruiting his management team, many of whom had worked for him before. Knowing former colleagues were comfortable with his track record, he felt he could start his tenure on a positive note. During a difficult accounting controversy at Tyco, L. Dennis Kozlowski spoke to plant employees every day for two months. Because many of the workers were also shareholders, he knew their support was critical.
* Keep investors in the loop. Gary DiCamillo of Polaroid attended over two dozen investor sessions to enhance the company’s floundering stock outlook. Likewise, Kozlowski spent an extraordinary amount of time explaining Tyco’s business models to Wall Street analysts. As a result, none of the analysts downgraded their recommendations when the organization experienced an accounting-practices crisis.

Trends to Watch
What can working Americans expect with an economy in low gear? Experts point to these workplace trends:

A true focus on family. The demographics of the workforce continue to shift, with more women entering the job market. Along with men, who are placing more emphasis on family, women will drive the shift toward a more family-focused economy. In addition, aging baby boomers are shifting their priorities from 60-hour work weeks to more time with their families.

Get flexible. Employees are tired of lip service when it comes to flexible work schedules. Women, in particular, have assumed a defensive stand, saying old attitudes toward part-time work and work-at-home policies need to change. According to the Women’s Bar Association, ineffective work-life programs have driven 40 percent of women attorneys to leave their firms after just two years.

The young will rule. Employers should expect computer-literate, Internet-raised workers to set the tone of the workforce. These employees change jobs whenever it pleases them and expect immediate rewards for their performances. In addition, young women no longer set their sites on corporate careers, but, instead, envision themselves as successful entrepreneurs.

Good-bye trendy benefits. That on-site laundry service may have been convenient, but it’s soon to wash away. Basic benefits will come back to rule, as organizations take a hard look at benefits costs and what really entices employees.

Through Thick and Thin
During the robust economy, managers had some “good” problems to deal with—namely, determining how to manage growth and change. Today, however, layoffs and cutbacks are becoming more common. While most employees have come to accept that downsizing is a real possibility, managers must decide how best to let employees go. A few wrong turns, and the remaining employees lose motivation and exit quickly.

Experts say managers should involve employees themselves in decision making, particularly the most valuable workers whom they want to retain. In addition, they should continually praise good work to maintain momentum and morale. After multiple rounds of layoffs, one manager learned that a single cut is a better downsizing method. By laying off employees in rounds, the remaining workers were often filled with anxiety about their job security, which adversely affected productivity and morale.

Honesty is equally important when instituting cutbacks. While executives often claim “economic pressures” as the reason for layoffs, employees may perceive the cutbacks as a sign of poor management or planning. As a result, retention and recruitment become new problems in addition to the challenges of downsizing.

Back in the Lead Position
Not long ago, employees were doing the navigating when it came to salaries and benefits. Now, of course, employers are back in the lead Duck® position. While managers had to beg and borrow to find talented employees during the booming economy, workers were demanding and getting record salaries and bushels of benefits. Enough, say managers today.

More and more businesses are foregoing large bonuses and frequent raises as retention tools. Employees, fearful of downsizing, are staying put and asking for little while they remain in their jobs. For job seekers, that’s not encouraging news. Managers who once gave in to high compensation demands are now turning to the next candidate whose demands are not sky high.

However, employers shouldn’t become too complacent in their offerings, say workplace experts. In a slower economy, employees still need performance incentives. And if employees aren’t performing at the necessary levels, services and products drop quickly in quality. So whether it’s a modest increase in salaries, or a small boost in benefits, all employees, say experts, need some type of reward for performance.

What Drives the Future?
Sometimes we’re so intent on what we’re doing today, or planning for next week, that we don’t take time to look down the road. Three major factors will drive the challenges organizations face in coming years. Here’s a look at their impact on organizations and society as a whole:
(1) Faster than ever. Change is no longer just fast; it’s moving at breakneck speed. Change today is often permanent, all encompassing, and leaving an indelible impact on business, society, and the planet as a whole. That means individuals, as well as organizations, must be prepared to analyze their values and goals on a continual basis.
(2) Equality across the board. Success comes from partnerships today. No one individual, department, or organization can be truly successful by itself. Partnerships provide organizations with easy and accurate access to all of the resources they need when they need it. Alliances also provide individuals with opportunities to make equally important contributions to a company’s value-added services.
(3) It’s all about customers. The satisfied customer will remain an organization’s true measure of success. Customer focus will center on one-on-one relations with customers, successful sales and retention efforts, and simply doing the job well. As your buddy Manco Duck® has said time and time again, the focus must be on the customer. And that’s one reality that will never be affected by economic