Sometimes, an old stove can really help you weather an economic recession.
Not the stove itself, actually. It’s the money you save by not buying a new stove right away.
At MotorCity Casino Hotel, president and CEO Gregg Solomon has used a heavy dose of common-sense, cost-saving frugality to help his 2,800-employee facility to weather the toughest economic climate in 70 years.
“There is always a natural attention you pay to controlling your discretionary spending,” Solomon says. “Rather than schedule the replacement of a piece of kitchen equipment, we’re going to see if it makes it through the year. If not, we’ll have to replace it. Those sorts of things, when you’re planning capital expenditures, you can reasonably estimate that you’ll be replacing a certain amount of equipment. In this case, we decided that if it breaks, we’ll deal with it, otherwise we’re going to try to get another year out of it.”
But it’s not all about capping capital expenses. For Solomon to make it through the recession with his business positioned for future success, he has also needed to throw some strategy, opportunism and leadership into the mix. He’s needed to find opportunities to grow that are financially advantageous and build an organization of enabled, motivated people who can capitalize on those opportunities.
Like a lot of business leaders, Solomon has done some learning on the job as his business has progressed through the recession. What he has learned has driven home to him the importance of not just financial and strategic positioning, but the need of employees to have the support, direction and encouragement of management in uncertain times.
“Basically, a lot of it was not allowing us to fall into the negative mindset that a lot of companies get trapped in,” he says. “Without question, a major challenge has been keeping everyone’s attitude on track when things are not good.”
Watch your costs
When you need to keep a close eye on your cost structure, it’s about how you spend your money as much as the amount you spend. Often, you can’t simply take an organizational hedge trimmer and cut a nice, smooth line across all departments and areas. Some departments are going to need more investment than others.
At a large casino with many departments and areas all vying for budgetary support, Solomon needed to come up with a guiding principle that would help determine which areas got financing first.
The deciding fact for Solomon and his team was whether an expense or cost-cutting maneuver would adversely affect the customer experience. If a move could generate a negative impact for the customer, it was deemed a bad move. If it could help improve the customer experience, Solomon’s staff pursued the idea.
“We took a hard look at our labor component and tried to find more creative ways to do business,” he says. “One of the things we looked at was working with unions to implement four-day, 10-hour-shift workweeks. That allowed us to better appropriate labor than five-day, eight-hour-shift workweeks, which is the concept that is predominant in our industry.”
Solomon and his team looked at every discretionary expenditure, including electricity usage, facility maintenance and even magazine subscriptions, to see if there was a better way to arrive at a positive end result.
“It goes back to whether you need to replace that piece of kitchen equipment right now,” Solomon says. “The key is, you don’t budget to the maximum extent that you’re able to spend. We always have some discretion regarding additional expenses that weren’t in our original forecast. You try to project the reality of the situation beforehand. A department head sees that a piece of equipment is becoming more costly to maintain and we see that it really doesn’t have another year in it. Or maybe we lose a maintenance agreement on a piece of equipment and can’t be sure that we’ll get the replacement parts. You take it as it comes.”
Another strategic maneuver that Solomon helped facilitate was the use of MotorCity as a proving ground for new technology. The casino’s leaders formed alliances with gaming manufacturers, arranging partnerships that paved the way for new features, such as server-based gaming. The arrangement helped provide a large number of new attractions for the gaming floor at MotorCity on favorable financial terms.
“They would provide a huge amount of equipment to us on a trial basis, and we would either be able to defer payment or arrange other favorable terms,” Solomon says. “It allowed us to get a huge number of new games on the floor without an immediate financial impact.”
As a business leader, you need to take a proactive approach to leadership. You can’t wait for the market to boom or bust before you devise and carry out a plan of attack. When the economic outlook is anywhere between murky and gloomy, it can be difficult to be that bold. However, Solomon says the key is to remember what makes your business great and remember that you are still the one running your business, not the circumstances of the marketplace and not your competition.
“Stick to your game,” he says. “Don’t let other competitors run your business. Don’t get caught in a fact-and-react loop, where they tripled their offer so you’re going to quadruple it. You have to realize that the economy might be different, but it doesn’t change the fundamentals. It just makes sense to stick to what you know is right. Be mindful of your competition, but don’t let them run your business.”
