It’s really clear that we are in a very unique time in our collective human journeys as we navigate between two zones – never the same and not yet. We are somewhat like a sailboat that has moved away from one shore and cannot yet see the destination emerging. These unsummoned moments challenge us to our roots as individuals, leaders, and organizations.
To get a sense of how firms were faring and framing the challenges, I recently invested time into listening to a dozen earnings calls of firms – several of which I’ve had a chance to work with over the last decade.
Patterns Recognized – Insights Discovered
Quarterly calls are carefully structured to have their own pattern (to not fall prey to SEC violations). Because of this, it was interesting to note a couple of fresh items.
These included:
- A preamble that forecasting is really foggy right now
- A shout out and thank you to the team
- A recognition that culture and mission are the real things pulling them through
- Operational results, that, for the most part, were quite strong, even in the face of topline reductions
- Cost reduction programs, synergistic reductions, and capital spending belt-tightening
- Special insight projects and how they are framing the op’s context going forward
- Some “scenarios” which represent the early stage of restoring guidance
- The usual lengthy Q&A with analysts where everyone dances to get just a bit more “color” and hopefully a bit more insight
As an adaptive strategy advisor and coach, I thought I’d share with you what I read from between the lines – and why it’s very important to do quality work on your portfolio of products and services at this critical moment.
1) The ghost of ‘08 gave us op’s leaders that know how to the right the ship. Is that enough?
Not a single firm was slow on the trigger to tuck in and get their operations house in order. They furloughed staff, got on top of inventory and supply chain, and ran to their customers. In all cases on a percentage basis, earnings did not degrade in step with sales, which was quite a feat.
2) Half of them are seeing a secular lift in sales. Can it be trusted?
The world governments have injected trillions of dollars into the economy, and it’s really hard to know if we are seeing an adrenaline rush or sustainable demand. In some cases, it’s clear that long-term secular trends are still in place.
3) One-quarter of them are moving toward offense. Is their value seeking on track?
These were not investor day presentations, but you could get a sense of those firms that are taking a strategic approach to investing their hard-won cash. These firms are viewing share repurchase as not as good a bet as an internal investment and M&A.
Strong Quarterly Results do Not Mean All is Well for Leaders
We have long been taught that “Cash Is King” in recessions, and that is partly true. Cash is life for organizations, and more importantly, cash provides optionality – it exposes a firm’s ability to diagnose, pivot, and reestablish its business model.
Even as the firms project a “we’ve got this” positive attitude, it does not mean the in-process work is complete. There is real tension as multiple narratives are active in firms, hampering the usual planning cycle. Many of my clients are senior leaders and I know from our conversations that there is a lot of anxiety – even in the best firms right now.
COVID has significantly altered the shape of economics and the markets that most firms are working in, and those that do the adaptive work most effectively are going to enjoy a significant differential advantage.
There are no ‘soft’ decisions right now. Operations leaders will need to size the firm for positive cash flow and client demand, and this will reduce investment in products and services in the short term.
Strategic leaders can help by setting aside emotion and both interpreting and framing information for the consumption of the senior leaders and those that report to them. By keeping communications authentic and clear, they can make the best of this current situation.
The Heavy Lifting + Three Key Steps
This mid-COVID period calls for strong analysis, dialogue, and decision making. The best firms are doing the hard work to make the internal environment as clean and distraction-free as possible. Here’s how:
#1: Analysis
Accept that strategic budgets need to come under some pressure and use this as a time to edit, simplify, and strengthen.
- Time: Segment the portfolio work into short, medium, and long-term impact on the business.
- Tip: Each time bucket is important. Don’t take the route of cutting investment by time frame.
- Rank: Next, rank each of the projects by the quality and freshness of their hypothesis.
- Tip: The first pass will look like the legacy list – be sure to review with an objective third party to remove history bias.
- Finding Time, Money, and Resources: Look for reductions in those programs that are long in the tooth and have relatively weaker hypotheses.
- Tip: There are typically one or two of these that can be set aside to allow for a fully-staffed acceleration of the remaining projects.
- Move with Dispatch: Queue up the remaining projects with an emphasis on completion.
- Tip: Getting to the financial impact the fastest is key. This is where a CFO can really help.
#2: Discuss
Set up a robust forum for discussion. Having solid discussions tips our hat to the fact that none of us sees the whole context and only with a high-quality process can we get to the right solution, for right now.
#3: Decide
Experience suggests that this is the hardest piece. Having a clear priority is key to regaining energy and momentum coming out of this reset. By establishing a clean process for cross-functional decision making, it sets the stage for richer customer insight discussions and allows your best resources to concentrate on projects that will move the firm forward.
Outside Insight
Getting the diagnosis, dialogue and context right is crucial, and it can be very challenging. I’d be happy to talk about how to get you the clear external insight to set the table for a powerful release of time, money, and resources.
If you’d like to talk about how fresh insight could help you create a plan to unlock the best of your team during a really challenging time, please reach out to scott@scottpropp.com or put a 20-minute appointment on the books using this link.
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