Crisis; the best excuse for corporations

The past years opinions were shared about the crisis, what to do about it (always after wards) and who to blame. Countries, people and companies were accused but nothing changed while most likely a new crisis is already under way with new and old victims. Will corporations be better prepared or are they still in remote-sessions?

Announcing a new crisis is not shocking and please do not be alarmed. Perhaps this time the crisis will also hit China. Impossible? Maybe in words because that is another phenomenon seen the past years. China, where the stories are true but the data not, is not immune.

Now when and how is the future. Sure, there are global doom scenarios but also many still believe trees will continuing growing in heaven. Not in Brazil because too many are getting cut to remain competitive while the US will be back on track thanks to greed.

Well, this is all nice to know and you can disagree but what will hit you economically, financially or what makes you (more) happy? Can you influence a crisis or can a crisis only influence you? What about your work? Are you less open minded in a crisis? Less willing to take risks or make efforts for the firm?

That is the point here. Happiness in work through economic prosperity or loosing all interest and connection. Most of us are all guilty of it, some even exaggerate.

Corporations world wide, some suffer more of typical bad management, others suffer less because of better managers, products, strategies etc, have one excuse; the crisis.

The perfect excuse of stop spending and cost cutting. Not a new strategy but old fashion lay offs, budget restrictions and no more Christmas gifts for the employees.

The last is really true. One of the largest insurance companies (French, so know you now) last year at the last moment withdraw the X-mas gifts for all employees but not for the upper management. Probably they will repeat this soon. What a hoax!

Always excluded are the board, top management and shareholders because the show must go on. When not excluded your company is under-performing and someone has to be blamed (to pay the price).

This is exactly the reason of a new crisis because leaving is not without a bonus (for bad behavior), not without loosing market value and not without loosing stakeholders.

The new wonder boy or girl will mark the new place and to create space costs will be cut. The new boy / girl wonder needs full access to succeed but oops....there it happened again. A crisis disturbed all plans and the only way out is getting out.

Being exceptional is more luck than constantly outperforming others. Companies that survived the last crisis or do that now could do that because of better measurements during good times. Changing management will not do the same or can even be worse.

It is a combination of who hired who, what the person upfront is promised (bonus), can he or she manage people or are they just bonus hoppers? In fact there are too many who cannot be successful and they need to be paid too.

When the new crisis appears or even like now slowly evaluates, business leaders have the perfect excuse to secure their positions and that of their network. They tell their staff to cut costs but continue with their dinners, meetings and traveling.

It is all a visual circle where we (the staff) have to find our deals, our customers, our new jobs, our income and our future. This is colored by new technologies, inventions, medicines, leaders and social unrest & development. Where some loose, others (can) gain.

As this goes and goes for decades, even centuries, what is a crisis really? That you lost your job? That your house is not save or can be saved? That your firm is not making profit? That China is growing and the US not? Can that only happen in a crisis?

I believe that is not new at all or can really called a crisis. Perhaps a personal one but look at the stock markets. Some must make a lot of money there and those affected are watching while most others are cashing in.

It is finally the people´s attitude and not the crisis that create your situation. Unfortunately there are a lot of a-holes you cannot always avoid. Some you cannot even touch and you know they will cause the next (your) crisis.

Others find themselves the corporate dream team. Look at me! I saved the company millions said the new CFO (by destroying, not creating, what a hero!). Too bad six months or one year later these millions disappear in the accounts of the management or new manpower is needed.

The crisis creates sometimes hysterical calls for savings with really bad management. "Our budgets were cut. We cannot use your service". I do not know if this is the same for all products and services but when not using an external service that is needed the alternatives will always cost more. Great decision!

The best is to accept how it is, stay out of the way of a-holes and try to make the best of it. So, when you have the chance to make a difference, please do. Go with the flow and try to be like water more often. It is not about what you want but about what you get and do with it. Even when you or your firm is in a real crisis.

Why the economy can be blamed instead of bad management.

Why the economy can be blamed instead of bad management.

The past twenty months or so and in current corporate reporting the executive branch uses the economic downturn and some pickups in regional economies as arguments for not being able to give full year or quarterly guidance to share and stakeholders.

First of all there is not much they can do about it. These recoveries are fresh and in many countries too small to even call it a recovery. Some countries are excluded but exceptional companies when it comes to avoiding economic risks are hard to find.

So far understandable and the guidance from executives will remain without a clear vision for the time being. This might slightly improve but as limited is this outlook is also the ability to predict corporate results for 2010 and even beyond.

Secondly it seems when it comes to economic risks for many this is still not related to the real economy but only an easy phrase or excuse. Based on first hand communication with several business leaders world wide, especially those with a focus on emerging markets and BRIC markets, improvements or needs of more quality data / information are not a priority (of their management).

Too often professionals using macro for completing market analyzes, for making business decisions, supporting management meetings, doing internal reporting or using the data as a strategic or financial planning tool they rather rely on one source only. In most cases the same source used for industry specific data.

This is very strange and also kind of worrisome. Imagine this is also done for Pension Funds or IT Security. Billions invested in only one stock, for example Walt Disney, a good example when discussing fairy tales or economic forecasts of one source. Using one provider for IT Security will give them a lot of power.

Companies are crowded by advisers, especially coming from banks and other financial institutions. Mostly external ones get paid heavily for sharing an opinion that is different from any other. Does this not look familiar when talking about economic opinions? All these opinions from IMF, World Bank, OECD, central banks, governments, corporate economists, experts, gurus etc?

We all know they are all wrong but these same advisers work with institutions which have their own economists. Again each divided about any economic country trend. No one can really outperform because all face the same interference from political, social, demo-graphical or other kind of instability, disturbance or equal phenomenon.

So, why then relying on one source? Or is economic guidance no longer helping the company? Why mentioning economic reasons of slowing down your results or using recovery signals as hope for a short term revival?

A third argument that contributes to blaming the economy, and not taken economic risks (more) serious, instead of blaming management are the claims of having sufficient information or teams doing already economic analyzes.

Does sufficient indicate no other data can be better and therefore ruling out economic risks? Does sufficient cover for bad management decisions? Since when next to your global leadership in the food sector your core business involves macroeconomic research?

And when internal teams do these analyzes should that justify no other analyzes can be better? Justified how? In costs? Savings? Better guidance?

Unfortunately when looking at the above many companies still seem not to worry about economic risks and find it an easy way to blame their bad management. They keep on relying on one provider, they do not care about the quality of available information and do not consider non core business corporate time as a problem for cutting core business time (including labor expenses rising).

The worst of worst is the decision of budget restrictions. No, we are not interested in cutting costs by 90%. Sorry, our management blames the economy, not me.

Too simple would also be the explanation of missing realistic forecasts. Like as no one can make them, why arguing about them? While it is true this pure outlook cannot be given it does not exclude improvements. Especially not when paying too much, spending too much or not benefiting from synergies.

What will these companies do the coming years?

They will keep on blaming the economy for the bad results instead of bad management. They will continue cutting costs but only the easy core ones. Oeps, another restructuring charge. They will reorganize in the hope to attract better managers instead of better instructions. But as budgets will remain under restriction, good people will leave the company, competition benefits etc.

But they mostly will fail because those who do not take economic risks serious by focusing only on core business or do not demand full concentration of its employees on core business and those who believe one source is enough to guide them through rough times will miss a lot of opportunities for improvements.

These opportunities can only be discussed when the decision maker is truly identified, is open minded and is interested in business deals. Not someone who is only interested in his or her own position. Because then we only hear and see the same excuses over and over again, the economy is again blamed for not being able to make a corporate change.

This can easily be measured in labor costs. For every manager, analyst, director or corporate leader monitoring the underlying economic trends of countries of interest a process is needed. Either someone delivers them internally a report or this report is purchased directly.

People do not like reading but most reporting is useless when not using the best tools. Lots of corporate value time is lost when stopping searching for these tools. Every process of macro data is therefore an underestimated cost and time inefficient process when using one source or counting on own research.

On an average at least one hour per week people read about economies. Not to study but just a number or country report. Based on an average corporate salary per year this reaches easily 2,000 US$. Multiplied with an average of 10, 20, 50, 100 or more people, depending on company size, these costs are a waste of assets and valuable time. Big companies loose 100/200K while for smaller 10/20K is acceptable.

Excluded here from better data and cost / time efficient tools are the positive effects on eliminating risks, recognizing better economic trends, better prepared for internal and external meetings, more core corporate business time available and more core corporate budgets available.

Including these last items for missing revenues or miscalculations losses can reach millions.

When that is not of an interest, it is clear why economic risks are not taken (more) serious and why the economy is only used to cover up mismanagement.