What is CEOs’ magic formula for correcting poor business results? Lay people off, close facilities, squeeze suppliers for lower prices. How smart is that?
Let’s face it, it’s not smart. It is tradition, one that most top leaders refuse to let go of. CEOs always refer to these actions as “difficult decisions.” No, it’s not. It is an easy, routine decision, often simply the result of a herd mentality — my competitor did it, so I will too (currently fashionable in the tech industry).
In the image below, you see an example of smart leadership. The CEO engaged employees to develop a contingency plan for business decline — something that all businesses will face due to economic cycles, poor leadership decision-making, shifts in customer needs, new competition entering into the market, etc.
The plan clearly embodies “Respect for People.” Notice that layoffs (Stage 4 Code Red) are the last resort, not the first thing to do when business results begin to fall below plan — on in some cases, business results meet or exceed the plan but the CEO calls for a layoff anyway.
What the plan lacks is a clear connection to kaizen when business declines. The business decline contingency plan could be greatly improved by specifying focus areas for kaizen in shop and office work, as well as closer integration with suppliers (in both good times and bad).
Do you have a standing plan like this for your business? Probably not. So create one!