Stephen H Baum Leadership

Our NYC group of CEOs acted on leading indicators in mid-2007 and prepared for the recession. Brainstorming each month, they progressed through low hanging fruit to really difficult choices to the previously unthinkable survival measures. The chant a year ago was “survival is victory.” That is why the discussion yesterday was so startling to this still pessimistic coach.The June meeting was cautiously optimistic. The July meeting was one notch up.

Almost all the businesses are experiencing restoration of margins at markedly lower volumes to the point that EBITDA is approaching or exceeding the levels at this time in 2008. Very few leaders run truly lean all the time when things are good, constantly decimating the work force and upgrading the talent bench.  Those who serve manufacturing are seeing significant increases in capacity utilization rates of their clients and efforts to fill starved product pipelines; service businesses are seeing demand returning and some opportunities for expanded scope of services, albeit with a much higher standard of performance. Some are off the dime in pursuing acquisitions or other investments. We learned to weather a terrible storm. But more than that, not only is the floor not falling, it is rising some.

That is why I am puzzled. There is a lot of bad news yet to come — more bank failures, more foreclosures, more credit card losses, a continuation of low levels of business lending leading to company failures and rising job losses. There are plenty more factories that will never return to economic utilization rates and will be shuttered. Health care legislation may squeeze more out of the wealthy, but is unlikely to reduce costs to the small businesses that create jobs. We are still winnowing out the strong from the weak in what one friend calls “destructive capitalism” and the government may be adding to the destruction soon.  And the situation in global markets is not any better. Only selectively are companies finding Asia’s markets as sales offsets to domestic shortfalls.

My counsel would be to seize opportunities that do not require putting on much “weight,” drawing down much capital or requiring major management attention. Sure there are unique opportunities to gain competitive advantage. But they had better be unique and perishable. We need to keep our eye on survival and add some actions that position us to harvest a real recovery next year.

That’s my view. What’s yours?