Riding out the storm

When the economy gets stormy, many business owners find themselves having to make some big decisions. Do you cut or increase market? Lay off or retrain your work force? Cut production or re-evaluate your systems? The answers are not alway easy.

In the first of what will be a regular feature focused on sharing opinions on current issues from a variety of business sectors, SBN Magazine took to the streets, or shall we say, the executive offices, to find out what Greater Cleveland’s business leaders believe is the first organizational function to feel the pinch when the economy takes a turn for the worse.

Keith Maybee, president, Dix & Eaton

About half of what we do is in the investor relations area, which isn’t directly related to economic downturns. On the pubic relations side, although some companies defer budgets, we do not cut back on staff because that’s a commitment that we’ve made to our employees. We manage through it.

We pour our energies into internal initiatives such as our task force dedicated to accelerating our development of the next wave of interactive communication tools and programs. We also accelerated some of our professional development and training programs internally because we have a little bit more time.

Your people are your assets in the service sector so you have to help people kind of reinvent themselves along with the growth of the firm.

Cynthia Dunn, president, CCAD

The first things that get cut are nonessentials. I know companies that have cancelled their company picnics, Christmas parties and those kinds of things.

I’ve actually worked harder at marketing and getting our name out. If you’re not in front of people, then you’re not going to get the business and it’s going to be a spiraling effect.

Tom Lash, COO, Trivium Technologies

At Trivium Technologies, which is a technology start-up company, we needed to realign some of our expectations regarding potential fund-raising. And like any other company, we took a serious look at expenditures and curtailed any that were unnecessary.

For a company in a start-up mode, there are some very business-critical things that need to go on whether the market is up or down, so set your expectations accordingly.

Edward Hartzel, CEO, Antares Management Solutions

Because we’re a service organization that helps reduce other people’s costs, we gear our marketing up. Our pitch is we can do it better and cheaper than you are doing it yourself. So a down cycle is a little bit of good news to us.

We have one more way to approach a customer and say, ‘Instead of you spending $2 million a year on your systems and your systems support internally, we may be very well able to save you some money. Why don’t you just outsource that service to us because we think we can do it for 70 percent of what you’re doing it for.

Chris Mather, president and CEO, APSCO International

If you’re a product-focused business, you often have backlog you can work with. Problems occur with service industries, such as hotel chains. You have to make moves very quickly or the cost will kill you.

In the manufacturing industry, becoming more efficient is a short-term fix with a long-term payback. Adjustments such as no capital spending, elimination of entertainment and other typical moves will help you ride it out.

If you’re looking at a long-term problem, you make long-term solutions, but with a truly short-lived economic drop, the worst thing you can do is lose your work force. Then your organizational IQ walks out the door with it.

Richard Hanscom Jr., senior consultant, Patrick Douglas

Something you don’t want to do but that a lot of people do is cut deeply into the sales and marketing departments. If things were going poorly in the markets, you would want to increase your sales efforts for a greater percentage of the business out there and actually reinforce to go more heavily into advertising.

Consumers and buyers all have very short memories. If they don’t see your name, they will just forget about you. They have to keep being reminded of what you do and that you do it better than other people can.

But if there isn’t a market out there and you’re turning out goods, inventories have built up and demand is down. The only thing you can do is eliminate a shift or shut down a line.

A good percentage of our clients come from manufacturing areas like quality control, inspectors and production managers. They were trying to keep people busy painting or doing repair work, but eventually they ended up having to downsize.

Donna Luby, president, Self Funded Plans Inc.

In the current economic climate, companies are clearly focused on reducing costs. Next to payroll, employee benefits are the second greatest cost for most employers, so they are looking at that.

The people I talk to don’t want to cut health care and other employee benefits because they feel the economy will pick up again. They want to keep their compensation packages competitive, so companies that would not consider self-funding their insurance during good economic times look to self-funding during a downturn as a way to reduce costs without slashing benefits.

David Enzerra, general manager, The Lubrizol Corp.

When things slow down, we tighten our belts and rely heavily on the versatility of our work force to remain competitive. We cut back on overtime and reduce the need for temporary labor and outside contractors. We value diversification of skills among our employees; therefore, we are able to fill in the gaps with our smaller work force.

When business picks up, we move our own people back across the core process areas as needed. This helps retain work experience and skill sets for protecting our customer service capabilities as well as reducing our costs during swings in the economy.

Dan Kleps, president, BiznessUSA

The obvious, quick answer is to reduce and control costs. But in our case, we pay special attention to how we can take advantage of the downturn to close more business. In fact, we actually have a secondary marketing concept that is launched when a downturn hits.

We sent out the first wave of letters with the following bad times message: ”Cut costs, slash, right-size, down-size, consolidate, pare to the bone.” When you’ve done all that you can to reduce costs, it’s time to get out there and sell something. How to reach: Dix & Eaton, (216) 241-0405; CCAD, (440) 951-8070; Trivium Technologies, (216) 774-1602; Antares Management Solutions, (440) 414-2000; APSCO International, (440) 352-8961; Patrick Douglas, 216 692 6600; Self Funding Plans Inc., (216) 566-1455; The Lubrizol Corp., (440) 943-1200; BiznessUSA, (440) 824-2000

Deborah Garofalo ([email protected]) is associate editor of SBN Magazine.