March 1, 2009
Building a Business Model for Todayâ€™s New Realities
In today’s business climate, the scorecard for profitability at America’s largest corporations seems to be the number of workers they can trim from their payrolls. In 2008, corporate layoffs surged to its highest level in seven years. Before President Barack Obama was even sworn into office, some companies already announced plans to shed 30,000 workers. For instance, blue-chip giants such as Lenovo Group and Boeing reported that they will pink-slip about 2,000 and 4,500 workers, respectively. And Alcoa, the largest producer of aluminum products in the U.S., announced it would slash 13,500 employees, about 13% of its workforce. These figures represent the new realities of business: With consumer and business spending at an all-time low, major corporations have been forced to respond with massive cutbacks.
Tough times, indeed, call for tough decisions. But even though survival may require pruning payrolls, companies cannot use layoffs alone as the formula for boosting profits–especially small enterprises like yours. Let’s face it; you’re just not in the position to engage in wholesale layoffs. Not that you want to; for many businesses, reducing headcount would be like cutting into bone. The end result would compromise customer service and the integrity of your brand.
Instead, I suggest you perform a thorough diagnostic exam of your company. Too often, entrepreneurs don’t make necessary changes because their business practices–from deployment of their workforce to morale-building corporate rituals–have been institutionalized. But they haven’t been scrutinized. In an objective, unemotional manner, review every nook and cranny of your operation. After conducting this critical analysis, take a blank sheet and begin building a business model that efficiently allocates resources and seizes opportunities to maximize revenues.
To effectively do this, however, you’ll need to be proactive, transparent, and inclusive. I’m going to use Black Enterprise as an example. Like all media companies, we have faced the slings and arrows of an inhospitable environment. However, we’ve responded by evaluating our strengths and weaknesses and making necessary adjustments for our company’s survival and growth. First, I held a companywide meeting–my “State of the Companyâ€ address. It was a sober, no-holds-barred talk that not only illuminated the shifting dynamics of our business but also outlined a series of comprehensive measures to streamline costs and build revenues. I gained immediate feedback from our employees as well as a number of viable recommendations related to eliminating waste, increasing sales, and enhancing existing lines of business. Not only did our staff gain a full appreciation for our multifold challenges, they began to focus on the development of short-term solutions and long-term strategies. I shared with them that they would be rewarded for coming up with executable ideas. It reinforced the fact that they had a stake in the success of the company.
It’s true you may have to downsize your workforce to survive an economic downturn, but that approach shouldn’t be your first option. I, for one, don’t view employees as line items on a ledger. I prefer to challenge my managers to evaluate each employee based on their performance and