Cut or Run?

Cut or run? That sounds like the kind of question you might hear during a Presidential debate. But this has nothing to do with “staying the course” or “raising the white flag of surrender.”

It has to do with managing your business, particularly in tough economic times. What I’m getting at is whether it’s better to focus your efforts on cutting expenses or on running after every bit of new business that’s out there.

Should You Cut or Run?

The predictions are frightening, the reality is sickening. A tracking graph of the recent performance of the world’s stock markets looks like a real-time image of your kid playing with a yo-yo.

The bankruptcy of Lehman Brothers, the collapse of Bear Stearns, the near collapse of AIG, the failure of Washington Mutual, the $700 billion bailout package, the automakers' bailout: well, you’ve been reading the headlines. Maybe you’ve been living the headlines. Even if you’ve done nothing but glance at the quarterly statement on your retirement accounts, you’ve shared in the experience. It's difficult to find credit, venture capital is scarce, and many businesses—perhaps your customers’ businesses—are about to start cutting back on discretionary spending. It’s enough to make you want to collect firewood and hunker down behind the desk in your cozy corner office for a long, cold winter.

What to do, what to do? Should we focus on cutting costs as much as possible, driving every shred of waste out of the operation? Or should we focus on winning as many new deals as possible, throwing ourselves into business development with all the energy we can muster?

As you can probably tell from my picture, I’m old enough to have lived through a couple of recessions in the past. In each of those downturns, the money people took over and started cutting—payroll, benefits, capital projects, energy consumption, raw materials, anything and everything that might show up on the balance sheet as a cost of doing business. Wall Street tends to like cuts. Just ask Al Dunlap.

It was during one of those earlier recessions that the colorfully nicknamed Chainsaw Al Dunlap first gained notoriety as a uniquely enthusiastic and ruthless job cutter. Stock prices soared as he slashed jobs and shuttered whole operations. It turned out, though, that Chainsaw Al’s cuts really weren’t as effective as they appeared, at least at Sunbeam, his last stop. It turned out he had also engaged in more than a little hanky-panky with the books to inflate earnings reports. As a result, he agreed to pay $500,000 to settle SEC charges he had defrauded investors, agreed to pay $15 million to settle a class-action lawsuit from shareholders, and agreed never to work as an executive at a public company again. Oh, and Sunbeam went bankrupt.

Admittedly, Chainsaw Al is the worst example of dealing with a crisis by mindlessly cutting jobs. But even without the whiff of fraud in the air, cost cutting alone seldom produces positive results. During the recession of the early 1990s, the Kepner-Tregoe consulting firm analyzed the cost-cutting behavior of more than 300 executives. Among other findings, the study found that executives who implement aggressive cost-cutting programs were four times more likely to cut costs again, but even after the second round of cuts still didn’t rate their attempts as successful.

The problem was that they were making blanket cuts—“Ten percent of the total workforce, no exceptions, Bumstead!”—rather than looking for ways to drive waste out of the system. Across-the-board cuts neglect to look for opportunities to achieve growth or at least lay the foundations for fast growth when conditions improve. Customer service, R&D, and sales are particularly damaged by that kind of an approach—the very areas that are likely to yield big dividends downstream.

An economic downturn is frightening, but it can also be an opportunity. People are eager for hope and open to change. As a result, a recession is a great time to begin initiatives that would have provoked fierce resistance in better times.

We’ve talked for years about proposal automation’s value in driving waste out of sales. Just last week I spoke with a senior manager at a major IT firm who admitted that his sales force had very few tools to help them manage deals and write good proposals. In fact, he thought they could probably handle a much larger number of accounts if he could take away a lot of the time-wasting administration that they had to do. So isn’t it possible that investing in the tools that make them more productive and eliminate a major source of waste be as smart as cutting jobs?

Cut if you must, but also invest in the tools necessary to run after more business and close it faster. Focus not merely on reducing headcount, but on reducing complexity and waste. If you’re interested in not merely surviving the current economic downturn, but actually thriving, take a look at your operations. Cut the waste, not just the people and resources.

If you’d like to explore how you can cut waste and increase productivity in your sales organization, call us. We have proof that, on average, Sant Suite customers realize a 29% win rate improvement and create sales documents 36% faster. See a demo of Sant Suite at www.santcorp.com/demo.

Are You a Shark?

So, are you a shark?

No, I don’t mean a lawyer. And I don’t mean a member of a gang in West Side Story.

I mean are you like the shark in that you (or your business) must keep moving forward or you’ll die? And if that does describe you, what do you do when everything around you is paralyzed into immobility?

That’s our topic this time.


Somebody once said that a business is like a shark. It has to keep moving forward or it will die. The analogy is less than perfect, but it seems to make a point. If we don’t continue to grow, to innovate, to close deals and invest in the future, we’re not likely to make it.

But what do you do when everything around you has fallen into narcoleptic immobility? Nothing is moving. Nobody is buying. Money has dried up, funding is limited, and decisions are being postponed indefinitely. How do you keep moving forward in that kind of environment?

It’s a big problem, one of the reasons that economies get stuck. Recessions become self-perpetuating because so much of economic behavior is predicated on economic attitudes.

Well, here’s a little known fact: Sharks don’t have to keep moving all the time. That’s a myth. People believed it for a long time, but scientists discovered not too many years ago that many species of shark can stop swimming, resting quietly on the ocean floor, and still breathe. Apparently they choose spots where the ocean currents are strong enough to pump water over their gills so they stay alive. Think of it as a Blue Ocean strategy for sharks.

The equivalent behavior for our business might be to remove ourselves as much as possible from the economic turmoil and allow the natural waves of economic activity to help keep us afloat? How do we do that?

Carter Schelling, a consultant and economic advisor, recommends taking specific steps to protect your business during a recession. Here are a few of his ideas:

First, fire some of your customers. Which ones? The customers who are most likely to struggle themselves during the recession. Identify the customers (it’s usually a pretty small list) who provide you with 80 percent of your gross profit. Which ones are likely to survive or even thrive during a recession? Focus on doing business with them. Which ones are likely to see their sales or cash take a precipitous drop? Which ones are too far in debt, too leveraged, too dependent on the bubble? Drop them. They’re not going to make it anyway, so don’t tie your fate to theirs.

Second, take a look at the products and services you offer. Now is the time to focus more than ever on making your customers successful. Mack Hanna, author of Consultative Selling Skills, has argued for years that if we are going to run a successful sales organization we need to understand what our customers do, how their customers benefit from what they do, and how we can strengthen the relationship between them. If we can give our customers a competitive advantage in a recession, they will give us their business.

Third, thin the herd. During prosperous times it’s hard to find good people. As a result, we sometimes put up with poor performers, including sales people who never make their numbers. Now is the time to make changes. Drop the ones who don’t produce and enlarge the territories of those who do.

Fourth, look for opportunities to drive waste out of the organization. Schelling recommends implementing Lean Principles so that you can lower your price without lowering your profit. I recommend looking at the waste in your sales organization and getting rid of non-value adding activities. A decade ago, George A. Smith published Sales Productivity Measurement through the American Society of Quality Control. He found that on average sales people spent about half of their work week in activities that kept them from talking with clients or prospects! Mostly they wasted time traveling, doing price checks, handling correspondence, and preparing proposals. Does anybody think that travel is less time-consuming today? That our e-mail is less burdensome? Or that creating a winning proposal is easier?

Well, actually, proposals are a lot easier if you’re using Sant Suite, which automates the creation of client-centered persuasive proposals, presentations, and other sales documents. And that’s a great example of how you can drive waste out of the organization.

So be a shark! Keep moving. Or slow down if you must and take advantage of the ripples of change washing over us during the current economic slowdown. But do it in a way that assures you can flash into action instantly and become the mighty predator of the deep waters of business that you were always meant to be.

Take a look at our proposal and presentation automation tools. If you’re not using them already, you’ll be amazed at how they can drive waste out of your operation. In fact—dare we say it—once you see them in action, we’re sure you’ll be in a “feeding frenzy” to implement them for your team.