Well, it’s no secret that the economic falloff is bad – real bad. The challenge for management is to keep the company focused and moving forward. You have to be of two minds – watch the pennies at home, and spend the dollars to continue to build your business.
Sequoia Capital reportedly (see Gigaom, among others) called together their funded startups for what has been referred to as a “Holy Sh**t!” meetings – or, what in the South would be politely referred to as a “Come to Jesus” meeting. Om Malik of Gigaom wrote:
The message delivered to those in attendance was that things could get a lot worse than people think, and it will be a more protracted downturn. To give a historical perspective, Sequoia had a similar meeting back before the last bubble burst. We know how that turned out. They want the companies to cut costs, to figure out way to survive and emerge at the other end of this downturn, which could last years. The speakers went through each functional area of the business and told the companies how to cut costs. By holding this special meeting, Sequoia is telling its companies to put survival strategies in place and figure out ways to outlast the broader market troubles. One piece of advice is certainly interesting: zero-based budgeting, or “ZBB”. ZBB was popular in government agencies in the 1960s and 1970s – I actually studied this back in college. ZBB is a pretty simple concept – start your budget process at zero, and build a budget from scratch each year. Most budgeting processes start with the current spending and staffing, and adjust from there. ZBB starts from zero, and is supposed to build up to the spending and staffing that the organization needs for the scope of operations planned for the coming year. It is time consuming, and not at all easy to implement, and fell into disfavor.
If your company is on the small side, try working up a staffing model with a blank slate – stick to tasks rather than people. If you need to let people go, do it sooner rather than later. You can decide whether to ask people to continue working until either a final date, or until they get a new job – either way, I’d try to give them something to soften the blow. Watch the pennies – cut back on the variety of free food and drink, a filtered water fountain may be more cost-effective than bottled water, reduce the inventory level of office supplies, review cell phone plans and phones out there, use freelancers as opposed to new staff – there are many seemingly small items that can quickly add up to significant dollars.
The recession is likely to last a while – it could be 9-12 months, it could be longer. The heart of the problem is in the credit markets – everything else springs from there. The chain of responsibility is complex, and is not your focus here. Your focus is to keep moving forward, watching, evaluating, and adapting as events unfold – watch, listen and act.