Managing in Challenging Times

The reality is that surviving challenging times is based on how well a company has been run during good times. Unfortunately, there are companies that should not survive challenging times because they bent or broken laws to have a strong balance sheet.

Companies that are well run can create a stronger balance sheet and most importantly a strong cash position. During challenging times as we have seen, assets can change value rapidly and only cash properly protected can be counted on. During these challenging times, companies with strong balance sheet can continue to build out their long term assets including new products and services while companies with weak balance sheet don't have the resources to compete and will most likely go out of business as they should. Think of it as "natural selection" in the business world. But it is ESSENTIAL that there be a level playing field including respect for laws and regulations and enforcement of laws and regulations for those companies that don't respect them. If not, companies obeying the laws and regulations will ended up having to bent and break laws to compete and then the "rule of law" becomes meaningless. By how should these companies spend (or save) their assets in challenging times?

The worst approach is to just cut 10% across the board because the CEO's golf buddy just did or just spend on short term and ignore long term investments for the future. Making an across the board cut may significantly damage profitable investments or leave holes in the organization that prevent any successful delivery to market. The appropriate strategy might be to cut deeper in some areas or redistribute workers to another project while making cuts to existing staff on the higher ROI projects. If the 10% cuts are left to the functional areas to make and not coordinated carefully across the company, you can end up in a situation where each functional area assumes that the other will pick up the slack for the same cross-functional people and end up with a huge gap in the company level processes.

For those companies that are well run, it means that they are just taking in their normal process the future economic changes . They would already take into account that sells of various products and services would be slowing and thus less positive income can be used to cover costs and be reinvested into the company. But the same process for prioritizing and balancing the investments between short and long term is still used. As previous works had stated, well run companies need a balance between short and long term investments.

Even long term investments may have "must have", "should have", or "nice to have" requirements. The "nice to have" investments can be postponed to make sure that the "must have" requirements get to market. Similarly, client/consumer investments must be balanced between "new", "related", and "exist" client/consumer investments. Having a good mix or balance is key regardless of the economic conditions for a company to survive long term.

Consideration should be given to the cost to completing a project but also need to consider how that cash could be used on other higher ROI projects. Consideration should also be given to the cost of shelving a project for possible later restart or the costs of debooking from a product line or business including debooking future revenues. This is all a part of good portfolio management [http://en.wikipedia.org/wiki/Project_Portfolio_Management]



This article is based on a discuss at a PMI PMO breakfast meeting with additional insights and references to previous work. The true job of a PMO is to provide proper, unslanted information for management to make well informed, good decisions from. http://www.pmi.org/