Stephen H Baum Leadership

Leadership in Difficult Times: A New View of ROI

This is the text from which an interview was conducted today on Jim Blasingame’s treasure of a radio show: Small Business Advocate. It will be posted soon on this website and on Forbes.com.

We are experiencing a selective recovery. Those who successfully battened down the hatches have a lower breakeven and have seen decent profits. Those whose value proposition has always been “more for less” have done well. But many others are struggling to survive. Indicators suggest that we will have either slow economic growth or more stunning setbacks are in our future.

How should business owners be thinking? What should business owners be doing?

Some observations from close range.

Most business owners have already worked through not only the low hanging fruit but the formerly inconceivable: renegotiation with suppliers and bankers, layoffs of senior long-term employees, outsourcing to their own new facility in India, pruning the customer list, process improvement for lower cycle time and cost, to name a few.

But I see the best leaders executing a new focus on three ideas: Reinforcement, Opportunism and Innovation. You might call it a new ROI.

Reinforcement

More than one of the CEOs whom I coach has become a sort of preacher, reminding the top managers – indeed, the entire workforce – of the keys to surviving and thriving, encouraging continued vigilance on service to customers and on cost. Celebrating wins, no matter how small. And holding mock press conferences in which the next level or two voice what the company offers and stands for, what the strategy is, what is its competitive advantage.

This is one form of reinforcement. It is playing the new music tape, getting all the people to sing the same song.

There is a second powerful form of reinforcement: engagement. Let me give you two examples. Employee of the month is a cliché’ but not when I saw it practiced at USAA. A few minutes before 10 am, a mob of fellow employees gathers out of sight and hearing of the winner. They are marshaled there by an email invitation to do so. At 10 am, they surround the winner’s cubicle and give a standing ovation. I can tell you it raised the hair on the back of my neck. The impact on the winner was even more palpable. Yes, a coupon good for a modest dinner for two comes with it. But the real impact is the experience of fellow employees gathered around.

And if you haven’t seen the “pink glove” video on Youtube, it is a must-see. St. Vincent’s Hospital in Portland engaged every employee in creating the video, one which raises breast cancer awareness. It also raised the awareness of St. Vincent as a wonderful care provider and in the process fired up the pride and purpose of its employees. It all began when a supplier offered pink rubber gloves to raise breast cancer awareness. A St. Vincent employee got an idea. Two days of recording and the rest is a legend.

Opportunism

One of my CEOs has been loath to restore investment in technology, product development and manpower (capacity) from the highly reduced levels that sustained the company through the worst of the storm so far. But when you find a dollar bill at your feet in the rain, you pick it up. That is his view of an acquisition opportunity that presented itself.

A company in his business in an underserved geography was a roll-up of smaller entities. Leadership was underwhelming. A financial firm bought the company and laid on a lot of debt. As the economy worsened, sales declined and profits disappeared. That is why it was available. Why was it available to my business owner? Probably because the bigger predators are preoccupied with bigger problems and otherwise focused elsewhere. After a due diligence process uniquely open and informative because of the desperate condition of the company in a terrible economy, my business owner screwed his courage to the sticking point and made what should be a winning offer. Since the deal is expected to close this month, I will say only that customers will continue to be served (and maybe better served), jobs will be saved and the buyer’s EBITDA has a handsome upside.

Opportunism in 2010 will be highly case-specific, not like in years past when the tide was rising. And it will present itself as a unique hire, a new product or license, an entire company to buy. But opportunity will be there for those willing to pick up the dollar on the sidewalk.

Innovation

Many of my CEOs believe that innovation will be the key to differentiation, competitive advantage and financial success. Not necessarily technology innovation, although that is an element.

What they are focusing on is innovation in products, services, value proposition and marketing by more active listening to the customer – learning more about a day in the life of the customer than they ever knew.

One great story is told by innovation consultants at Doblin. The Ford 150 pickup truck was achieving saturation in its market. What could Ford do to as a next act to stimulate F150 sales? Doblin observed customers’ daily use of the vehicle and discovered these crucial facts: many customers were contractors who used the truck as a mobile office between fixed base and job site; many experienced losses of costly tools in the process. Ford went on to make the truck more like an office (think: embedded printer for employee time records and invoices) and a way of tracking tools. It was all about the real value to the customer.

Innovation does not have to be this big. It can be in how service is offered (think Hertz Gold Card which broke ground in speeding renters to their cars),

But it all starts with a new understanding of the customer perceptions. And, as Jaynie Smith of Smart Advantage showed us in a workshop with our Vistage CEO Group, what the customer needs and perceives is a living condition that changes over time.

R.O.I.

So whether the recovery is slow or the road ahead has deep ruts, focus on R (Reinforcement), O (opportunism), I (Innovation). That’s my view. What’s yours.