Marcia's Leadership Q and As: Leading Through Financial Uncertainty

Q. Sales are stable, but profits are declining. What can we do?

A. You need an assessment of your organization. There are probably multiple factors that are internally diminishing your profits. In short, waste and complexity are building; you need to find it and reduce it. You accomplish this by making a flow diagram of your work from the moment the order comes in from a customer until the time you deliver. Where are the bottlenecks? Where are the resources constrained? The challenges may be information flow, communication flow, or workflow, or all three. There may be supply chain issues. Or there might be cultural issues that need to be addressed. It’s time to look for root causes. To accelerate the discovery, bring an objective outside in to investigate what is happening. Some things that are not working in the system are producing the results you don’t want. See what you can learn. Then make plans to improve and innovate.

Q. The headlines are reporting inflation, slowdowns, and layoffs. How do we decide if we do layoffs or tighten our budget?

A. Your answer depends. What’s your cash flow position? How are changes you read about impacting your industry, community, and customers? Always during change, some companies decline while others boom. As a team, look at your short and long-term plans, goals, and resources. Sometimes it’s wise to be aware and stay the course. Or you may choose to modify your plans. The important point is, don’t react. Don’t lay off people to say a dollar. We are in times when finding experienced employees is challenging, so don’t layoff staff unnecessarily. Leaders who think long-term and value employees do not lead a company and lay off staff, especially if they are cash rich. That is a last resort because of the damage it does to morale, even for the people who don’t lose their jobs. Often, leaders put problems and issues out to workers to help get ideas, feedback, and to guide their decision-making.