(Published in the Manila Standard Today, under the Greenlight column,
Nowadays, one will often hears from businessmen and managers alike how difficult and tough it is to manage their companies and businesses. They complain of luckluster revenues, rising costs, or a plainly slow market. But what does it mean exactly when they say mahirap ang negosyo?
For managers and businessmen, “difficult times”, is a simplistic expression of what is happening in the external environment. Political instability, rising fuel costs resulting in inflation, implementation of EVAT, currency depreciation, dwindling foreign investments, and the prospect of an economic downturn are just some of the environmental factors that affect the way executives, businessmen, and entrepreneurs manage their organizations in these troubled times. Managers of small and medium enterprises are most especially affected due to their limited resources.
Oftentimes, when confronted with these situations, a manager’s knee-jerk reaction is to hold off investments and/or cut costs – at times at the expense of employees through lay-offs. The prospect of difficult times, understandably, is making managers nervous. And why not? These environmental factors are a threat to the attainment of a manager’s objectives – may it be revenue or market share.
Look for opportunity first
But managers can avoid such “impulsive” decisions by analyzing the environment in which their organizations operate. Managers can understand what is happening both inside and outside the organization, plan accordingly and formulate strategies for the organization to adapt to the environment. More importantly, an exhaustive environmental scan may unearth more opportunities than threat in these difficult times.
According to management authors, Robbins and Coulter, this is an area where corporate managers can learn from entrepreneurs – the latter’s “strategic emphasis is driven by perception of opportunity rather than availability of resources”. Moreover, according to the authors, the typical corporate manager asks strategic questions in the following order: What resources do I control? What structure determines our relationships to its market? How can I minimize the impact of others on my ability to perform? What opportunity is appropriate? On the other hand, the typical entrepreneur will ask: Where is the opportunity? How do I capitalize on it? What resources do I need? How do I gain control over them? What structure is best?
While many corporate managers take a back seat - hold off investments and trim down the workforce in troubled times - entrepreneurs are closely searching for opportunities and begin to look for ways to take advantage of it. “Only after the entrepreneur has identified an opportunity and a way to exploit it does he or she begin to feel concerned about resources”, the authors aver.
Plan on two levels
Apart from the monitoring the environment, managers need to plan on two levels- long term and short term. In the long-term, a manager needs to focus on being in a position of strength when the country is again poised for economic growth. Internal capabilities may be enhanced – may it be in people skills, research and development, and the like – to capitalize on opportunities or minimize the impact of threats put forward by the current environment.
Developing a strategy for an investment, an expansion for instance, should have multiple scenarios on what actions to take if interest rates increase, if prices decline, if input costs increase, and so on. Managers should be asking “what if” questions to address as many possible scenarios, and account for the potential changes in the environment.
In the short term, a manager should see to it that he or she has the resources to manage short-term fluctuations. Managing cash flows through tighter receivables management is requisite to ensure availability of funds.
Get cuts right
In difficult times, cost-cutting has become a convenient option, and often employees are the target of such cutbacks. Getting cuts right will be as great a management challenge as investing in the right growth areas. That is why investing and keeping key employees are important because they will help the organization, not only through these difficult times but more importantly when business picks up.
It becomes harder to attract new customers in difficult times. It is therefore more important than ever to take care of existing ones, while pursuing high-potential customers. A manager must keep communication lines with his or her customers open and should plan to develop and reward customer loyalty.
Clearly, the external environment is a primary constraint on a manager’s actions and decision-making, more so in these difficult times. That is why managers need to revisit their strategies to assess the threats and, more importantly, opportunities that lie ahead; and accordingly, plan ahead to prepare the organization for the coming economic upturn.
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