Monday, February 16, 2009

Management guru offers tough advice for troubling times

By Stefan Stern

What does a management guru have to tell us in the good times? Maybe not all that much. Keep doing what you are doing, they could say. Enjoy the proceeds of growth.

But today, in the depths of a crisis, how much more exciting the guru's task has become. And you can sense the glee of Ram Charan, the noted management writer, as he sets about his task in this new, slim book, "Leadership in the Era of Economic Uncertainty: The New Rules for Getting the Right Things Done in Difficult Times."

"This is more like it," he seems to be saying. "Now I have something to contribute." And what he contributes is some stark, pithy advice on what business leaders need to do now to avoid disaster and prepare for a better future.

"Management challenges don't come any bigger than this," Charan declares at the start. "The economic peace of the past generation is over. We're in a war for survival, beset by fear, uncertainty and doubt."

Yesterday has gone, and executives need to change their approach.

"Leaders must be prepared to make strategic, structural, financial and operational changes -- many of them drastic -- in a hurry, and with information that is at best incomplete," he writes.

This is all classic guru writing, stressing the extremity of the situation. But from Charan -- who has already brought us bestsellers such as "Execution" and "What the CEO Wants You to Know" -- it seems plausible. His forte is bold advice delivered with convincing rhetoric. And he has completed his new text just at the right time.

It is fuel-injected, back-to-basics stuff.

"You absolutely must have sufficient cash or credible access to it to weather the storm," he writes. "You can and should know your company's cash position every day. . . . Projects that once were evaluated on the basis of their return on investment now must be judged in terms of how much cash they consume and can generate, and how soon they can bring in cash."

This obsession with cash leads Charan to make a bold, counterintuitive suggestion: Give up increases in revenue and in market share. He refers to one unnamed chief executive who lost 8% of his sales volume after raising prices. "But the new prices stuck and the result was the security of improved cash flow."

If readers are still reeling from that, they will have to prepare themselves for further startling advice.

"The new reality is that, barring acquisitions, your company will be smaller two years from now than it is today," Charan writes. "You have to reduce your workforce and capacity . . . survival depends on cutting costs and raising cash . . . narrow your focus and concentrate on the core of your business."

"In the end," he says, "you will have fewer customers, fewer products, fewer facilities, fewer people, fewer suppliers -- and a stronger company."

The pace of business has to be stepped up, he argues. What use is an annual budget at a time like this? What is needed is intensive, "hands-on, head-in" management. And realism tempered with optimism.

He divides his advice into a series of short chapters that look at separate business disciplines: finance, operations, human resources, the supply chain, sales and marketing, and research and development.

Some of the best tips have to do with people: Stay on the lookout for talented potential recruits worried about their future with their current employer. Make sure you are providing employees with lots of accurate and up-to-date information on the state of the business to combat "a constant drumbeat of depressing coverage by newspapers, television and blogs."

This is a slightly breathless primer, unsurprisingly so given the speed with which Charan has responded to the crisis.

But it will provide encouragement and sharp ideas to any business leaders feeling overwhelmed by the sea of troubles that confront them.

And don't look now, but after this crisis is over, the next one may be on its way soon. "Actions generate reactions," Charan says, "and many business leaders and analysts expect the next phase to be inflationary since so much money has been pumped into the world financial system."

You have been warned.

Stefan Stern is a columnist for the Financial Times of London, in which this review first appeared.

(Los Angeles Times)

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